Category: uncategorized

 


Summer interns doing charity analysis:





 

The following is a select number of news items and charitable giving insights:
http://www.cbc.ca/news/canada/manitoba/natural-disasters-donor-fatigue-1.4301467 CBC News “Faced with multiple natural disasters, charities broaden appeals”.  Sept.23.2017 “One disaster appeal can galvanize a community, multiple disaster appeals can
November 16, 2011 Toronto Star Editorial : 
 
2011-04-26
Cancer in Canada Media Release: Framing the Crisis and Previewing the Opportunity for Donors
 
2010-12-22
images/anonymous calgary donor.pdf” target=”_blank” rel=”noopener noreferrer Calgary Herald: Anonymous donor gives $1 million to charities
 
2010-09-22
CBC: http://www.cbc.ca/news/canada/charities-paid-762m-to-private-fundraisers-1.916829″ target=”_blank” rel=”alternate noopener noreferrer Charities paid $762M to private fundraisers
 
2010-01-25
images/news/charity village.pdf” target=”_blank” rel=”noopener noreferrer Charity Village Smart Giving Article
 
2009-11-19
images/ci_homeless_in_canada_press_release.pdf” target=”_blank” rel=”noopener noreferrer Media Release: New Research Uncovers Solutions for Ending Canada’s Homeless Tragedy

In each of our Top Picks reports the second page contains the charity’s numbers and ratios that Charity Intelligence uses in its analysis.  Ci has organized the data into three sections:
1. Program Data – This section presents information that is specific to the charity’s operations, the number of clients, volunteer hours, etc.
2. Charity Analysis – This section gives funders insight into a charity. It shows relevant ratios using the financial and operating numbers and makes vital adjustments. This section shows a charity’s cost efficiency, the scope of service, and sources of inputs (Charity Value).
3. Audited Financial Statements – This is the basis of transparency and accountability and contains the key aspects of each charity’s finances.  From a charity’s financial statements, these are the financial numbers that Ci uses.
 
Ratios That Matter
The following are the key concepts and ratios used in our analysis of charities.  These ratios focus on assessing a charity’s need for funding, cost efficiency, and scope of service.

Program Cost Coverage
The first question every funder should ask before making a charitable donation is: “does the charity need funding?” The answer is straight-forward. The ratio of funding reserves to annual program costs shows whether a charity has funds that exceed its annual needs.  Ci calls this ratio “program cost coverage.”
Every charity needs some financial assets as a cushion in case of unexpected events, but if this cushion is too big, donations will sit in an investment account rather than going to charitable work where they have social impact.  Ci typically looks for charities that have a program cost coverage ratio of between 25% and 100%.  This range means that your donation will be used to deliver charitable works within a year.  For charities whose ratio exceeds 100%, your donation will likely sit in a bank or investment account for the immediate future.  Here your “returns” will likely be the same as treasury bill returns or dependant on market fluctuations, with no social return over the year.
Where the program cost coverage ratio exceeds 100%, donors need to assess whether the charity is in a capital campaign, perhaps to build new facilities.  To prepare for this, a charity does need to fundraise and build its capital reserves.
Where a charity’s program cost coverage ratio is below 25%, donors need to separately consider financial risk.  A low ratio indicates that the charity is underfunded.  Donors need to be aware that this level of under-funding may present a higher investment risk.  This charity may not be able to continue operations.  Similar to a company with a weak balance sheet, this charity may fail.  Here funders should assess the different sources of revenues – is there core funding that will allow their programs to continue?
Donors should note that a low program cost coverage ratio does not mean that a charity is a poor performer.  To date, Ci has found an irrational disconnect in the charitable sector between results and a charity’s ability to fundraise.
 
Administrative Costs
Funders focus on administrative costs. Ci believes that administrative costs draw the attention of funders because they are seeking ratios. Administrative costs to revenue is the most familiar ratio, as it is identical to a business operating margin.  This attention to administrative costs draws criticism from charities and academics, who argue that a charity needs a base level of administration to grow, develop, and meet clients’ needs.  Ci believes that the debate should focus on what is the optimal level of administrative costs, rather than pressing charities to eliminate them entirely.  This optimal level will be found through analyzing a charity’s results.
In Ci’s analysis of administrative costs in 2006, in many cases we found administrative costs higher than expected.  Puzzled by this, we explored administrative costs through management interviews.  The charities typically use administrative staff to do all the necessary tasks of running the office, while the staff and an army of volunteers run the programs and provide the service.  Yet volunteer time was “off the books” and not recorded in the financial statements.  This needs to be addressed, so Ci introduces to funders the concept of Charity Value.
 
Charity Value
Charities are significantly different from companies in one key respect: a charity receives donations and companies do not.  A charity can receive three types of donations: money, time, and goods.  The financial statements record donated money.  Funders need to make adjustments in their analysis to also include donated time and goods. The combination of donated money, time, and goods is what we call Charity Value.
In doing charity analysis, it is vital to include the value of donated time and goods.  Charities often do not count volunteer hours or donated goods because their accountants do not demand them for reporting purposes.  However, from an operational perspective, many charities would grind to a halt without volunteers and donated goods.  These “inputs” are just as important as donations and should be recorded, accounted for, and managed.
Ci values each volunteer hour at $15.  This monetary value was suggested by Imagine Canada and we concur. Initially this dollar value seemed high, and we considered using the minimum wage, but on further analysis, volunteers are not minimum wage workers – they are typically trained, experienced professionals.  Another consideration is that minimum wage varies for each province and Ci needs a consistent measurement across Canada.  Funders can use whatever dollar value they feel is more appropriate, but volunteer hours need to be counted and given value.
 
Fundraising Costs
Charity Intelligence believes that funders need to pay greater attention to fundraising costs.  In 1999 in the US, 18% of every dollar donated went to fundraising costs. Recently in Canada, there have been some large fundraising campaigns with significantly higher fundraising costs which absorbed over 40% of donations.  This creates a vicious marketing cycle, prompting all charities to raise their profile in a crowded market and spend more on fundraising to attract a scarce resource.
From a charity’s perspective, it is rational to spend on fundraising as long as the marginal dollars raised are higher than the marginal dollars spent. It is worth spending $90 on fundraising to receive $100 in donations.
From a funder’s perspective, however, fundraising costs “dilute” donations. High fundraising costs lead to great dilution for funders, with less of their donations actually going to charitable work.
Ci calculates fundraising costs as a percent of donations and fundraising revenues, not as a percent of total revenues or charity value.  This is an important distinction.  The purpose of fundraising is to raise donations, rather than increase a charity’s other sources of revenue, such as fees for service, government funding, or interest and investment income.
As well, it is important to include gross rather than net fundraising revenues. Some charities report net fundraising revenues (net of the fees and expenses associated with generating those revenues) in their income statement, with the details in financial notes. This is an accepted accounting practice, but a funder is not interested in the marginal dollar that a charity has received, but rather the total dollars donated by funders.
 
Local Ownership
At Ci, we are allocating capital to charities across a vast country.  Here we believe, particularly in smaller communities, there is local knowledge; residents know which charities are the “go to” organizations that achieve results.  Similarly, there is local knowledge about which executive directors’ lights are on late, and which organizations are the hardest working. Perhaps the local residents have a family member or neighbour who has been served by the charity.  Ci is seeking a way to measure this local knowledge and identify organizations that have high levels of
“community ownership.”
Our work in this area is initiated by Michael Porter’s comment that in the whole history of the tourism industry, nobody ever washed a rented car. Similarly, Bill Draper finds that in funding projects in developing countries, funders should seek projects where the funding is supported and contributed to by local residents, so the funding is not seen just as a gift bestowed by others.  A similar ownership indicator is used in the stock market where investors monitor how much of the shares are owned by management.  Investors find companies attractive where management has high “skin in.” sharing the same risks and returns as investors.
At Ci, we are seeking a similar ownership measure. We assess how much of the funding is from local sources (local donors and foundations, local United Ways and Community Foundations, local municipal governments) believing that these funders close to the community will have a more intimate knowledge of the charity.  As such, we separately assess local support, broken out from all funding received.  This local support, divided by the local population, creates the local ownership measure: how much each man, woman, and child in the community gave to the charity.
The local ownership metric appears to break down in larger communities where the population exceeds 100,000.  In these larger towns and cities, there is less local knowledge, with funders dependent instead on making giving decisions based on a charity’s marketing profile.  In addition, the local ownership measure may need to be adjusted for economic prosperity; local support for a charity in towns with lower income per capita may need to be weighted relative to donations in more prosperous towns.
 
Scope
Ci uses a charity’s scope to inform funders of the number of people a charity directly serves in its community, and as such, lets funders see how many people will be affected by their donation.  A charity’s scope reflects the type of service it provides.  Each year, East York Learning Experience works intensively with less than a hundred adults teaching basic literacy skills.  Its scope of service is narrow, directly affecting less than 0.1% of Toronto’s population. Conversely, Inner City Home works each year with 7% of Sudbury’s population.  We cannot say that either charity is better or worse than the other.  Some funders may wish their donation to affect many Canadians in need and here they may consider a charity’s scope. When funders are solicited for donations, a basic question every charity should be able to answer is how many clients it served in the last year.
 
Program Costs:  A Caution
In the research reports on Recommended Charities, Charity Intelligence presents funders with the charities’ operating data. For some charities, this data is relevant.  For others, we have serious concerns about whether the correct measurement is used.
The measurement of program hours is an example of this. Charities report their program hours using different methods, often using a method that is based on their time spent administrating the program – the input method.  Ci attempts to use an output-driven method that is based on the charity’s service to clients.  For example, if a charity provides a program that runs for four hours per week for eight weeks, the input method counts this as 32 program hours (4 x 8) with no regard for how many clients benefited from the program.  If ten clients attend this program, the output method counts this as 320 program hours (4 x 8 x 10). Ci prefers the output method, as it reflects the benefit that the clients receive.

 
March 15, 2019
https://www.charityintelligence.ca/news-and-views/ci-articles?id=278 https://www.charityintelligence.ca/news-and-views/ci-articles?id=268 https://www.charityintelligence.ca/news-and-views/ci-articles?id=268  Be a fan, cheer for your favourite team. Yet be careful not to confuse supporting your team with donating to your sport team’s charity. 
 

On March 6, 2019, a . In our reading of the settlement, Canadian donors to Gospel for Asia known in Canada as GFA World are  for information.
Donors sued Gospel for Asia USA for misrepresentation. This US settlement may give other charities the heads up about advertising. At the heart of this class action suit was the 100% guarantee that donations went to the cause. Another wrinkle was the Christmas gift catalogs where donors “bought” items like water buffalos and sewing machines. Gospel for Asia could not provide evidence that donations actually funded these “gifts”.
https://www.charityintelligence.ca/charity-details/371-gfa-world Charity Intelligence’s donor advisory and rating of Gospel for Asia
The legal case went on for more than three years. While the donors sued for fraud and racketeering, they settled for less. Part of the settlement requires the charity to publish annual reports on the work accomplished with donated funds.
Dr. Garland Murphy, who led the legal suit, gets one board set replacing Gospel for Asia’s founders’ wife. No other family members of Gospel for Asia’s founder, K.P. Yohannan, are allowed to be added to the board for three years. In addition, donors will lead a sub-committee overseeing donor accountability and how donor funds are spent.
While this donor victory is in the US, two charity directors and the executive director of Canadian charity GFA World (known in Canada as Gospel for Asia) were named in the suit, founder K.P. Yohnannan, his son Daniel Punnose, and Canadian Executive Director, Pat Emerick.
Similar allegations about the use of donations have been made about GFA World, based in Stoney Creek, Ontario. Canadians have notified the Charities Directorate and the RCMP about GFA World.  Garry Cluley, a retired RCMP officer who worked in security and intelligence was a director of Gospel for Asia Canada (recently names GFA World) until he asked to see the financials. His “term expired” thereafter. Cluley filed a formal complaint with the Charities Directorate. At the heart of the complaints are allegations about how $128 million in donations went “missing” in India. All Gospel for Asia chapters have vehemently denied these allegations of fraud as “entirely false, even absurd”.
Gospel for Asia is notorious in India. The lawsuit alleged that between 2010 and 2013 Gospel for Asia collected US$4.2 million to support widows and orphans. The reports government’s documents show that only $31,265 was spent on widows and orphans. Historically Gospel for Asia was the largest foreign charity remitting funds to India. India’s Ministry of Home Affairs reports that in F2016 it transferred US$268 million. In October 2017 MHA cancelled the registration of Gospel for Asia and its associated charities, forbidding the remittance of overseas funds.
With remittances to India canceled, Gospel for Asia’s charity return shows spending on its overseas charity programs declined from $10 million to $108,000 in 2017, while donations remained at $8.6 million.
It will be interesting to see if Canadian donations and the $11.1 million in funding reserves at Canada’s GFA World are used to pay this refund to American donors. Given GFA World’s current transparency and accountability here in Canada, we’ll likely never know.
“, Hamilton Spectator, March 6, 2019
Disney Tom, ““, Times of India, March 6, 2019
Shenoy Karum, ““, Times of India, October 6, 2017
Sarah Eekhoff Zylstra ““, Christianity Today International, March 1, 2019