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When the global giants like Google, Apple, Uber, and The Times move to 5-star ratings, it sets the standard people use. With this ubiquity, Charity Intelligence’s 4-star rating led to confusion. Too often charities said “we’re rated 4 stars out of 5” by Charity Intelligence. Except Charity Intelligence did not have a 5-star category.
We do now. Today we shift our star ratings to the 5-star standard. The highest rating is 5-stars, and the lowest rating is 0-star. The ratings are based on objective measures covering results reporting, cost efficiency, need for funding, financial transparency, and demonstrated impact (see https://www.charityintelligence.ca/giving-with-impact/understanding-our-ratings Understanding our Ratings methodology).
The highest 5-star rating is reserved for the https://www.charityintelligence.ca/research-and-news/ci-views/33-donor-giving/643-top-100-rated-charities Top 100 highest-rated charities. This is the elite of charities analysed. It is important to know that different charity raters have different systems. In the US, Charity Navigator, gives the highest star ratings to 40% of the charities it rates. We give the highest star rating to 13% of charities. Our intent is for 5-stars to be a marker of excellence for donors.
With a 5-star rating being an exceptionally high mark, we hope donors will also review 4-star rated charities in making giving decisions.
 

5 stars, but 6 categories

The 5-star ratings have six categories: exceptional, good, acceptable, underperforming, poor, and very poor.

Charity Intelligence is reserving the lowest, 0-star rating only for charities that have a double failure; a failure to meet basic transparency and accountability.  This is a small (3%) proportion of charities. This is an area where Charity Intelligence has serious concerns.
To see all the star ratings on over 800 charities, https://www.charityintelligence.ca/component/osmembership/?Itemid=101 subscribe for $20 a year.

Positive skew to rating distribution 

As before, Charity Intelligence’s star rating is positively skewed. Our star rating distribution has twice as many 5-star and 4-star charities (33%) than 1-star and zero-star charities (16%).  Together, 5-star and 4-star charities represent a third of the charities analysed. Our middle ratings of 3 and 2 stars account for 50% of charities.
This positive skew is unchanged in the migration from the old 4-star rating to the new 5-star rating.

Charity ratings are desired by donors and disked by some charity professionals. We believe ratings are one useful tool for donors to see how a charity compares with other charities on objective measures.
For charities, these objective measures show areas for improvement. Since Charity Intelligence launched its ratings in 2014, there have been tangible improvements:

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Donors must independently figure out if a charity actually needs the money it is asking for. Charity Intelligence’s reports may help. This year, intelligent giving matters more than ever.
As featured in https://calgaryherald.com/opinion/columnists/opinion-excessive-fundraising-by-charities-is-not-a-joke Calgary Herald 
Nearly 20 years ago, Harvard Business Review published a startling finding. Some charities fundraise because they can, not because they need money. One would hope that charities would only fundraise when they need money. One would hope, especially now with an economic recession coupled with a global pandemic, campaigns to raise excessive funds would halt. Sadly, no.
Fundraising campaigns that bring in more money than needed create surpluses. These surpluses accumulate funding reserves. Charities need these reserves as a buffer against unexpected costs or market fluctuations. Yet today donors need to look extra hard at the appropriate amount of these funding reserves.
Here is one recent example, one of many: a moderately-sized Calgary charity has enough cash to run its charity programs for seven years. Seven years. It has enough money to operate at current levels for seven years without raising another penny. Yet now it is launching a new campaign to raise even more money.
I asked this charity’s management team “How much is enough? Is there a threshold when it will stop fundraising since it does not need money? Is 10 years of program coverage enough? Or 15 years?”
The answer was giggles. Perhaps nervous laughter. But going after scarce donations it does not need is not a joke.
It is also offside of regulatory guidelines. The Charities Directorate’s guidance against excessive fundraising states that “when a charity has sufficient income for its uses or needs, the need for new fundraising may be questionable.” Yet these are just guidelines without enforcement.
Maybe charity directors should consider the greater community needs before approving a new fundraising campaign? Many frontline charities are facing an unprecedented surge in demand, yet with small reserves to sustain their operations. Are charities that fundraise while holding large surpluses considering these sector-wide needs? Apparently not.
Without checks and balances, donors must independently figure out if a charity actually needs the money it is asking for.
Charity Intelligence’s reports may help. Every report on a charity has a financial review section that shows three numbers for the recent years: 1. a charity’s funding reserves, 2. its spending on charity programs and, 3. the percent that funding reserves cover annual program spending – the program coverage ratio. During COVID, Charity Intelligence recommends donors support charities with less than 150% coverage – that’s 1.5 years of funding.
Typically, donors hyper-focus on a charity’s cents to the cause – how much of every donation goes to charity programs after fundraising costs and administrative overhead. In these dire times donors need to pivot and also review a charity’s balance sheet. Donors need to ask how much money a charity already has in reserves to assess the real value of their donation.
This year, philanthropic giving matters more than ever. Imagine Canada estimates individual giving will decline by between $4.2 billion and $6.3 billion, a 25%-36% drop. Funding reserves are nice to have for unforeseen circumstances and rainy days. But well-off charities should now tap their reserves, rather than asking for more. And donors should consider whether their gifts will idle in investment accounts, or go to those most in need.
 
https://www.charityintelligence.ca/research-and-news/ci-views/31-disaster-response/657-covid-19-picks Charity Intelligence’s top-rated frontline charities in covid response
More Ci articles about excessive fundraising:
https://www.charityintelligence.ca/research-and-news/ci-views/31-disaster-response/650-like-toilet-paper-hoarders-some-charities-unnecessarily-filling-reserves Like toilet paper hoarders, some charities are fundraising despite having years of funding reserves to weather the coronavirus pandemic, March 24, 2020
Charity Intelligence’s https://www.charityintelligence.ca/component/charities/?k=calgary&start=0 reports on 64 of Calgary’s largest donor-supported charities
 
Comments added: Anne B: 

To watch the https://parlvu.parl.gc.ca/Harmony/en/PowerBrowser/PowerBrowserV2/20200806/-1/33657?Language=English&Stream=Video Finance Committee questioning of Charity Intelligence. (There is a break due to a server issue at 12:06 and the meeting resumes with final questions at 12:56.)
To watch Ci at https://parlvu.parl.gc.ca/Harmony/en/PowerBrowser/PowerBrowserV2/20200813/-1/33713?Language=English&Stream=Video Committee of Government Operations and Estimates on August 13, 2020 with Gail Picco of The Charity Report
 

” My name is Greg Thomson, Director of Research for Charity Intelligence. 
Charity Intelligence is itself a charity – one that analyzes Canadian charities to help donors be informed and give intelligently. Our https://www.charityintelligence.ca/ website hosts free reports on more than 780 Canadian charities, and provides insight into specified-giving areas such as the environment, cancer, and homelessness.
This last year, some 314,000 Canadian donors used our website for information on Canadian charities, reading over 1.3 million charity reports. We estimate that our research helped inform and influence $95 million in Canadian charitable giving last year alone.
Just as democracy depends upon informed citizens, the fundamental health of philanthropy rests on well-informed donors.
Our own research supports this case. In surveys of donors who have used our resources, 77% say that Charity Intelligence reports have improved their confidence in giving to charities and have inspired these donors to give 32% more money to charities.
It’s within this context that Ci presents to the Finance Committee today.
 
Since 2011, Ci has analyzed and reported on WE Charity. WE Charity Canada is a big piece – but only one piece – of what we now know is a highly complex international network of WE-related entities.
Starting in 2014, Ci rated WE Charity with our highest 4-star rating based on transparency, reporting, and overhead spending. WE Charity ticked all the boxes and performed well relative to other Canadian charities.
In September 2019, Ci analyzed WE Charity’s demonstrated impact – the measurable returns on its work – and found WE Charity’s impact to be Fair. Fair is below average. This reduced Ci’s rating on WE Charity to three stars.
Our major limitation as analysts is that we are only as effective as the data is reliable. We are analysts, not auditors.
 
Ci’s August 2019 report on WE Charity flagged this material information:

• a breach of financial covenants on its $13.7 M in bank debt that its bank has waived for the second year in a row. 

• the related party transactions with 8% of donations to WE Charity going to ME to WE, the private business controlled by Marc and Craig Kielburger, to purchase goods and services.

In August 2019 an outside party shared with us public records about WE Charity’s real estate transactions. These transactions were not disclosed as related party transactions in WE Charity’s audited financial statements.
Given this lack of disclosure, we reviewed research-and-news/ci-views/43-charity-news/661-we-charity-next-steps WE Charity’s auditor, which has a solid reputation for tax and business. However, the auditor’s website only advertised one charity client, WE Charity. In our database, no other charity used this auditor.
This contrasts with WE Charity hiring the most prestigious law firms and its stated commitment to the highest financial transparency. We questioned why WE Charity has not hired leading international auditors to prepare their financial statements, despite being one of Canada’s largest charities with global operations.
On learning of the resignation and replacement of WE Charity’s directors in March of this year, we arranged a 30-minute video call with WE Charity’s Chief Operating Officer. Subsequently, we learnt through the media that one of the newly-appointed directors had resigned. We were not assured by WE Charity’s comments or statement.
On July 17, 2020, Charity Intelligence issued its strongest alert, a donor advisory.
 
With more news coming to our notice, and after looking at other WE entities, we released our research-and-news/ci-views/43-charity-news/662-ci-s-top-10-questions-for-marc-and-craig-kielburger 10 questions. Primarily:

• Was the Cabinet aware that the CSSG was contracted through WE Charity Foundation, a new separate foundation with no employees or assets, rather than WE Charity? 

• Why are the Kielburgers not directors of any of the WE charities, but take the title “co-founders” which removes fiduciary responsibility and shields them from various disclosure requirements?

• Why has neither WE Charity Foundation in Canada or ME to WE Foundation (US) disclosed in their regulatory filings the non-arms-length relationships of their three directors? 

• Why does WE need such a complex organizational structure with multiple single-purpose entities to do its work? This is highly unusual for charities, even Canada’s largest international aid charities.

 
WE Charity is an outlier – normal metrics for assessing charities do not adequately reflect its suitability for donors. It is not similar to any of the vast majority of other Canadian charities.
We have flagged these issues because the more donors understand about the entirety of the WE network, the better informed they will be, and the better able to give intelligently.
With that, I will hand the floor to Kate Bahen, Managing Director.
 
 
Good morning. My name is Kate Bahen. As Managing Director of Charity Intelligence, I prepared the two most recent updates on WE Charity – on August 28, 2019 and July 10, 2020.
Before answering your questions, I would like to speak to some of the issues that have been raised during your proceedings and on social media about Charity Intelligence and the motives behind our reporting.
Let me address these in order.
Yes, Charity Intelligence is a small charity. Our annual revenues of $435,000 support a team of 3 full-time staff, supported by exceptional university students each summer. This April, we hired another charity impact analyst, so our full-time roster increased by 33% to 4 people.
Charity Intelligence’s (Ci) team answers Canadians’ questions about giving and we update our popular website. Despite our small size, we have demonstrated a significant impact on Canada’s charitable giving.
Yes, Ci lost its charitable registration status for one day in September 2012 because I was late in filing the annual return. I am solely to blame for falling behind in the essential paperwork. It was a hard lesson, learnt well. Ci has filed before the deadline in the last 8 years.
As to the motivation for our work, it is simply to give Canadian donors the best independent and objective advice we are capable of.
Charity Intelligence is non-partisan. I do not know the political affiliation of our staff. These matters simply don’t come up in our research and analysis of charities.
To keep comments within the 10-minute limit this section was cut from the opening statement: In the past, I personally contributed $950 to Chris Alexander’s campaign – a conservative, and a high school friend. I also contributed to Bryon Wilfert’s campaign, a Liberal and my history teacher. I believe in supporting people but I am not politically motivated in my work.
I find partisanship toxic. As you may notice from my accent, like many new Canadians, I came from away to Canada. I am deeply indebted to this amazing country.
To some, partisanship may be a sport or a game. Yet as a child, I saw the Troubles, I learned of the Orangemen’s march, I heard the bombs. I want no part of that. Ever again.
 

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