≡ Menu

Charitable Donations 2008:

I received some flak the other day in an online forum for a comment I made about my method of selecting charitable donations:

I often donate my time with volunteer work, but one thing I always look at is the cost structure of the charity. If more than $0.10 of every dollar is going to pay for administration, advertising, etc than I’m likely not interested. When I give I intend for it to go to those who need it, not to help support fat charities who can’t work efficiently. There will always be some cost, but in the case of cancer research I want the money I give to go directly there, not anywhere else.”

I wanted to provide an example for readers who may be debating which charity to give a charitable donation to for the holiday season or year-end tax purposes.

My basic view is that charities should operate as efficiently as businesses in handling expenses. For every dollar a charity or any non-profit spends on administration or a frivolous expense that is one less dollar that goes towards important research, public education or client services.

When individuals or businesses donate to a charity that donation carries the expectation that the money is going to a good cause and trickles down to those who need it most. Management of any non-profit clearly have expenses that they incur from operating their individual charities but they receive donations with the trust that those funds won’t be mismanaged and will ultimately go to those who need the help.

If I give $2,000 to Charity X because I feel research into finding a cure for disease X is a worthwhile cause I want the majority of my money to get to where it helps the most. The same goes for public education, client services or other supports I donate money to for various charities.

Here’s a table I put together to compare three charities I’ve supported in the past:
– Canadian Cancer Society
– MS Society of Canada
– Canadian Diabetes Association

I look for two major things in a charity before I give:

  • The percentage of revenue that goes towards administration (target <10%)>The percentage of revenue that goes towards fundraising costs (target 20-30%)

The basic principle behind each target is fairly simple:

  • I want to ensure that the money I donate is being directed towards programs that benefit those who need it
  • I want to ensure that the money I donate is not being used for costly initiatives

I encourage individuals thinking of donating to a charity to always ask questions and investigate before donating. Your money might not be directed towards the activities you intend to support and instead might pay for expensive advertising campaigns or administration that doesn’t benefit those in need very much.

There are a number of popular charities who have very expensive administration structures, that I won’t name publicly, that still support good causes. While their cause is admirable their organizational structure and spending is horrendous. Information on any charity in Canada is easy to receive and by law every charity must make available their financial statements to the public.

My intention for this post isn’t to discourage charitable donations; in fact I advocate that those of us more fortunate than others give a little in return. What I do hope is that individuals or businesses willing to give this year ask important questions and investigate on where your dollars are going and how efficiently your money is reaching those who need it.

Clarie’s Three Charities for 2008:

  • Canadian Diabetes Association
  • Local Food Bank
  • United Way

What do you look for when considering a chartiable donation?

Subscribe to The Stock Analysis Mailing List

Email Format

{ 3 comments… add one }
  • Anonymous December 11, 2008, 1:50 pm

    While I agree with you that administrative costs need to be low, one needs to compare apples to apples. For instance running a free health care clinic is probably going to have much more overhead than running a food bank. Additionaly, it also depends if a charity is relatively new and growing its contribution/endowment vs. older established charitable organizations.

    Scott

  • Nurseb911 December 11, 2008, 1:58 pm

    And the difficulty is always trying to compare charities that are similar in nature despite their intended cause.
    The point I’m trying to make is that there are a number of charities that could easily “trim the fat” in order to be more productive and pass along contributions to those who need it.
    There are a number of large established charities who continuously use expensive/flashy advertising campaigns that could easily generate the same amount of contributions from more grassroots methods such as direct mailing or various initiatives.
    I’m just trying to make the point that a great cause doesn’t necessarily translate into a good charity and those giving should at least to some degree look at how their funds are managed.

  • bmfinc December 11, 2008, 4:28 pm

    I agree with your analysis, I think most people (myself included) automatically assume that all of their money is being used 100% for the charity, but your right, some charities are more efficient than others.

    Perhaps given the nature of charities they are just a sensitive/emotional subject for some. For example in my opinion many dollars could be saved at funerals but emotions tend to stand in the way of this.

Leave a Comment