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November 6, 2014
Canadian donors give for impact yet 43% are not sure if a charity will wisely spend their donation.
BMO’s Philanthropy Report 2014 was released this morning. Firstly, Charity Intelligence extends a big “thank you” to BMO and its partners for doing this survey of Canadian donors and publically sharing the findings on changing donor attitudes. Research costs money. Data helps us all better understand the trends underway in Canada’s charitable sector. Good data helps all of us charities do better.
This 2014 BMO survey reports that Canadians are givers and giving remains strong. 91% of “rich” Canadians give to charities compared with 79% of all Canadians as reported in prior BMO surveys. It makes total sense that those with the most give the most. Across all income levels, Canada is a giving nation. Giving is part of the Canadian DNA. We cheer this aspect of what it means to be Canadian and should also, individually, do our part to ensure Canadian giving grows strong.
BMO’s Philanthropy survey reports that the highest motivation of donors is giving for impact. The other top motivations are a desire to give back to the community and feeling passionate about a cause. The survey reports that donors are least motivated to give out of obligation (that they should share their wealth with others) or to reduce taxes.
The largest hesitation is that 43% of donors said they fear a charity would not use the money wisely. Charity Intelligence is witnessing this trend. More Canadians are doing their homework before giving to a charity through getting research and being informed donors. Visitors to Charity Intelligence’s website have tripled since 2011 with more than 625,000 research reports downloaded.  Charity Intelligence hopes our independent research can address donors’ fears so they can give with greater confidence.
Donors want charities to show impact. As donors’ first priority is to have impact, it is increasingly important for charities to respond to this. Charities will need to improve their communications to donors. Donors are asking for more than “success” as measured by fundraising results or low administrative overhead, with a new focus on a charity’s “bottom line” results, namely the impact it achieves. This new emphasis on delivering impact will require charities to do better evaluation of the work they do, the people they serve, and the results they achieve. This higher level of information will be essential in providing donors greater certainty that their giving is making a difference. Charity Intelligence hopes BMO’s survey will raise the level of impact reporting among charities.
It will not be easy. Getting this information and doing these evaluations is difficult work, as Charity Intelligence has found in researching and analysing over 600 Canadian charities. But it’s work worth doing; it matters most to donors.
http://newsroom.bmo.com/press-releases/bmo-philanthropy-report-91-per-cent-of-affluent-c-tsx-bmo-201411050977128001″ target=”_blank” rel=”noopener noreferrer Link to the BMO 2014 Philanthropy survey

If you would like to request that Charity Intelligence rate a charity that is not on our a-z list of rated charities, please form” target=”_blank fill out this form.  We are working had to research more charities and are focussing our efforts on those charities that most donors are interested in.  If you are interested in more tailored analysis, please contact us at mailto:kbahen@charityintelligence.ca kbahen@charityintelligence.ca or 416-363-1555.

News reports on CRA auditing of advocacy undertaken by some Canadian environmental charities. Ci’s environmental analyst, John Grady’s views
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text-align: left; Facts refuting email blast “Charity and Greed”
Frequently donors forward us an email titled Charity and Greed. This email reports the salaries for some charities, with other claims that “only 5 cents on a dollar donated goes to the cause at Unicef”, “Goodwill doesn’t help anyone, so stop giving”. Donors ask us if these claims are true and want to know the salaries charities are paying.
Before answering these great questions, context is essential. The email names a charity but does not distinguish between Canadian, American or international offices. We suspect that these claims are about American charities. Charity Intelligence’s focus is Canadian donors and Canadian charities. As you will see, when you say “Salvation Army”, “United Way”, “the Legion”, similar to national franchisees, there are many hundreds of separate charities operating under this name in Canada. Furthermore, unlike American charities, Canadian charities do not report the exact amount paid. Canadian charities only report the salary ranges of the 10 highest paid staff.
High charity salaries are not rampant in Canada’s charity sector. Of the 600 charities we research, only 6.7% pay staff more than $350,000. Typically, universities and large hospital foundations pay these “high salaries”.

 
Kate Bahen 

Charity Intelligence’s mission is to help donors answer their key questions and to provide information to allow better informed giving decisions.  Donors have told us that they want a quick summary of the charities that they are interested in.  To provide this summary, we have created a star rating that ranges from 0 to 5 stars. All of the information that goes into a charity star rating is available to donors if they wish to dig into the details; however, these star ratings will give donors an initial place to start.

 
Results Reporting (35% of Star Rating)

Results reporting has the largest weighting in Charity Intelligence’s star rating. To us, this is an indicator of a charity’s accountability to donors.
Charities are graded based on the public reporting of their activities, outputs, and outcomes. We get many charity questions about this: the results
 
Financial Transparency (15% of Star Rating)
Charities are assessed a rating based on their transparency in providing complete audited financial statements, including the financial notes and accounting policies, to the public.  If the most recent statements are not available within 9 months of the charity’s year-end, the transparency score is reduced by 1.

Program Cost Coverage (15% of Star Rating)
Program cost coverage is a financial ratio tool for assessing a charity’s need for funding.  It compares funding reserves (liquid assets of cash, cash equivalents and investments, less interest-bearing liabilities) relative to program costs.  The program cost coverage ratio is calculated by dividing the year-end funding reserves (excluding donor-endowed funds) by the program costs for the most recent year less 5% of donor-endowed funds (or the disbursement rate disclosed by the charity), expressed as a percentage.
Charities receive full rating for their need for funding if their program cost coverage ratio is below 300%, meaning that they have less than 3 years’ worth of funds available to fund program costs. Charities with program cost coverage over 500% receive no points for this metric.
Ci’s definition of funding reserves includes all funds, whether general, restricted, or endowed. However, in the calculation of the program cost coverage ratio that is factored into the overall star rating, we exclude funds that have been explicitly reported as donor-endowed as well as funds that are explicitly reported for significant, unusual future capital expenditure projects (e.g., a new building) as long as the projected spending on these projects is outlined and dated in the financial statements.
 
Fundraising Costs (12.5% of Star Rating)
Ci presents all fundraising costs gross of fundraising expenses.  Lotteries and business expenses are not included in fundraising ratios.  Total fundraising costs are presented as a percent of donations plus special events revenue. Charities receive top points for fundraising costs below 15%.  Charities with fundraising ratios above the initial CRA cut-off of 35% receive no points for this metric.

Administrative Costs (2.5% of Star Rating)
The administrative cost ratio is calculated by taking the charity’s total administration costs divided by its total revenues less investment income. Charities require a basic level of administrative costs to operate effectively.  If these costs are not adequate, the charity risks being less effective.  Given this, charities with administrative cost ratios less than 2% lose 1 out of 5 available points for this metric.  Charities with administrative cost ratios between 2% and 12.5% (comprising roughly 2/3 of all charities examined by Ci) receive full points for this metric.  Charities with administrative costs above 22.5% receive no points for this metric.
Impact Rating (20% of Star Rating)
To assess impact, Charity Intelligence uses what is known as Social Return on Investment (SROI), which is a ratio that measures the amount of value created per dollar donated. Our Impact Rating assesses charities based on both their demonstrated impact as well as the quality of the data available to assess impact. social-impact-ratings  Additional details on our Impact Ratings can be found here.
Ratings fall into 5 categories based on the combination of demonstrated impact and data quality: High, Good, Average, Fair & Low impact.

Calculation of Star Ratings
Each of the above metrics is weighted to determine the overall charity score.  These final scores are assigned star ratings based on the distribution below.  In order to qualify for 3, 4 or 5-Star ratings, charities must also pass the following hurdles:

 
The current distribution of star ratings for all charities rated by Charity Intelligence has the majority at 2 and 3 stars.  Charity Intelligence https://www.charityintelligence.ca/research-and-news/ci-views/45-r-d/665-charity-intelligence-moves-to-5-star-charity-rating changed from a 4-star rating to 5-star rating in October 2020.

 

Charity salaries
Each Charity Intelligence profile shows salary information including how many full-time staff a charity has, the average compensation, and the Top 10 staff salary ranges. This information is not used in Charity Intelligence’s star ratings (to learn more, our April 2017 report https://www.charityintelligence.ca/images/viewsreports/Ci-position-on-Charity-Salaries-2015-data.pdf “Charity salaries: A donor hot topic but a useless metric in intelligent giving”.)

Charity Intelligence uses the words “salary” and “pay” interchangeably to represent compensation. Here’s the https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4033/t4033-completing-registered-charity-information-return.html#_Toc412013145 CRA definition of total compensation. It includes “all forms of salaries, wages, commissions, bonuses, fees, and honoraria, plus the value of taxable and non-taxable benefits paid by the charity to its employees. This includes the charity’s contribution to the employee’s pension, medical or insurance plan, employer Canada Pension Plan/Quebec Pension Plan and employment insurance contributions and workers’ compensation premiums.” Maybe we should change the profile page and replace “salaries” with “compensation” to be clearer. Please let us know your thoughts on this.