Karma & Cents is one… a charity evaluator… so when looking at the plethora of charity evaluation platforms out there we realize that, just like the number of charities doing similar work, there are so many different ways to evaluate how charities are performing.

In 2012 the NY Times published an article entitled, “Putting Charities to the Test”, it looked at the different types of evaluation platforms and what you will find when you go online to research charities.  In Canada, we don’t have nearly the breadth of charity evaluators, but there are a few.  In an effort to provide donors with relevant information to make informed charitable decisions, below is a description of those platforms that look at the Canadian Charitable Sector.  Whatever you are choosing as your way of evaluating charities, it is important to know what the underlying analysis is.

This came to the forefront of the Canadian philanthropic landscape this week when Charity Intelligence was interviewed by the CBC on the recent review of sports teams’ foundations and the amount of funds that they deploy to the community. Just like any consumer rating organization, looking at a single source of data should not be the way you invest in a stock, buy a product or donate to a charity. Understanding how data is collected and presented is important to know when considering what you are evaluating.

What is in a number?

  • Did you know that CRA data posted on the website can be up to 18 months old? This begs the question, does this dated snapshot present real time information?
  • If you are looking at an operating budget, not all charities put capital campaign expenditures in their program operations so the true cost of the program might not be fully laid out.
  • The corporate structure of an organization also dictates how they raise and deploy capital and what the rules are for that deployment. Foundations are required to donate out 3.5% to registered charities annually whereas front-line charities are measured against percentage of funds directed to the problem/issue they are mandated to address (unwritten rule is no more than 30% should go to admin).
  • Funders can also report on their financials differently one from the next.
  • Some foundations share the entire amount pledged for a project even if only a portion is going out in instalments. This means that you might see a reserve fund year-over-year in order to meet the pledge that was announced several years prior.
  • Other funders will only announce that which they disburse which might lead you think that they are not doing a lot, but in fact, they have a large donation on the books, but without understanding their giving strategy you wouldn’t know why there is this money set aside.

The context in which questions are asked is also important. Understanding the market in which the organization operates is just as important as the project that is being promoted. Most charity evaluators do not look at an individual charity’s market demographic because that kind of research is very hard and expensive to secure. Therefore, it is up to the donor to seek out information in addition to the recipient charity(ies). Resources like Employment and Social Development Canada can provide some analysis on social service related issues, such as poverty stats.

What to look for when choosing where to donate

Our evaluator “secret sauce” 😉

When evaluating organizations for our clients we look at both sides of the coin – charity’s mandate and donor motivations.  We evaluate charities the same way you would review a business before investing, or a car before buying… we check under the hood. We then add a layer of emotional connection, socialization and donor risk tolerance.  Our evaluation looks at:

  • Leadership & Governance
  • Program implementation
  • Corporate Structure
  • Financial Management
  • Competitive Analysis
  • Volunteerism/HR/Admin

Within these six categories we break things down to get a clear picture of:

  1. How funds are raised and allocated, specifically so we can understand how they are investing in their own operational effectiveness.
  2. What is required to achieve the mandate of the organization and who is fulfilling the mandate.  In shorthand – do they have the right people sitting in the right seats on the bus.
  3. What type of board is running the organization – how engaged is the volunteer leadership?  Do they have the policies in place to protect the rights of the donor and the interests of their strategic partners?
  4. Who else is offering similar services? What other funders are supporting the organization? Is there any way to create a long-term continuum of care/investment? Is there a role for the donor to act as a facilitator of social change by convening the different organizations and some other funders to develop a strategy around the social issue?
  5. What is the public perception of the organization?  What do their clients/end-users say about the agency? What have other donors said?

Our evaluation process takes time. We interview leadership, meet with stakeholders to get an understanding of the marketplace and provide feedback to both our client and the charity so that we can foster a strong relationship between the two.  We see our role, as Philanthropic Brokers, to connect the dots and then step back and let the “magic” happen.  Sometimes the magic occurs immediately, like when a child donates his birthday money to a cause.  Sometimes the magic takes time to materialize, it could even be after the initial funder has passed on, “The true meaning of life is to plant trees, under whose shade you do not expect to sit.” (Nelson Henderson)

Understand the context of the evaluation

However you choose to evaluate charities this year, just make sure you understand the context of the evaluation.  It has been our experience that charities want to disclose what they are working because it is in their best interests share their story.  We, as donors, need to be comfortable to ask the questions that will enable charities to share what we need to know to make an informed decision.

Of course, the best way to evaluate a charity is to go and volunteer.  See how the organization operates, who are involved and how they will engage you.  Do a “gut check”, do you feel welcomed? Do have a sense that things are operating smoothly?  Were you given access to relevant information to help you make an informed decision?

At the end of the day, it is up to you to make sure that the charities you support are meeting the requirements and standards that you have set out for yourself.  It is also up to you to articulate those expectations when you make your contribution.  Your donation is a financial transaction based on an emotional experience.  So honour that and HAVE FUN!!

The best way for people to learn is to hear how others are evaluating the charities that they support. We would love to hear from you! Please leave comments on how you decide where to donate.