How to choose a charity

Join the conversation

How can you find the right charity to support? How can you be sure your dollars are making the most difference possible? Owen Charters, CEO and executive director of CanadaHelps will take reader questions Tuesday at noon ET

Thousands of worthy charities ask you to donate each year, but you only have so much to spend. How can you be smarter about giving?

Research

"Do you have time for … ?"

It can be hard to dodge that question when you're approached on the street by charity canvassers (or as the British like to refer to them, chuggers - as in charity muggers).

But you should never feel guilty about not signing a cheque or handing over your credit card on the spot, says Kate Bahen, managing director of Charity Intelligence Canada.

Her organization researches Canada's charities based on effectiveness and efficiency, and much of that is done by looking at how they stack up against their competition.

Think about charitable donations the way you think about personal investments, she says. Ask for audited financial statements and documentation of what the charity has tangibly done to help its cause.

"You can invest blindly. You can invest in stock tips from your dentist or people you ride the elevator with," she says. "[But]once you've done the research, you're going to give intelligently."

Owen Charters, executive director of CanadaHelps - a public foundation that facilitates online giving to domestic and international charities - says that after a natural disaster strikes, people are far more likely to donate without properly scrutinizing charities.

"We find that the emotions are so powerful when you see the devastation in Haiti, you want to give," he says.

If it's an organization you're not familiar with, you can run it through the Canada Revenue Agency's registered charities database to check out its legitimacy. Disasters provide a fertile ground for bogus charities to crop up.

"You need to know that the charity is willing to tell you stuff," Mr. Charters says. "If they don't want to, it's an immediate red flag."

Don't obsess over administrative costs

One of the questions Mr. Charters is asked most is, "What is the magic number?"

But that number - they're referring to the percentage of revenue applied to administrative overhead - may be misleading. "There are charities that are close to 50 per cent and they do amazing work," he says.

Ms. Bahen agrees. "The effectiveness of the charity is far more important than fixating on cost efficiency," she says.

When you scrutinize a charity's balance sheet, she says, "the big gorilla in the room now is fundraising costs."

In 1999, it cost about 18 cents to raise a dollar in donations. By 2009, it had jumped up to 35 cents a dollar, she says.

"While we are giving at the highest levels ever seen, less of our money is going to charitable work," she says. "Because you're dealing with scarcity, what I see is an arms race going on between charities to get that share of donor wallet."

If a charity is spending heavily on fundraising, make sure you're satisfied with how much is left to spend on projects, she says. If you want your money applied to a specific initiative, ask what it will provide.

Complete regular checkups

If you've done your research and found a charity you'd like to support, take a page out of Bill and Melinda Gates's playbook and periodically check in on how your money is being spent, Ms. Bahen says.

The Gates Foundation evaluates its beneficiaries regularly. High performers are rewarded with larger grants and those who aren't achieving their goals are cut off.

If you sign up to make monthly contributions to your charity of choice rather than a lump sum, "do an annual review, just like you would with your stock portfolio," Ms. Bahen says.

"It's a win for the top charities that are actually performing. They're being judged on their results, not just their glossy brochures or gold Rolodexes."

*And don't do this

Forget to ask the charity for how you can get the best tax treatment - you may benefit from donating stock rather than cash.