In 2009, I wrote an article outlining how to navigate through the world of charitable giving.  Since that time, there has been a lot of coverage about charitable giving due in part to some charities involved in dodgy tax schemes and a greater emphasis on bang for the charitable buck during economic slow times.

While a positive step to promote transparency and accountability, has the law of unintended consequences taken over and we are too hyper-critical and reluctant to give as a result? The dialogue on charitable giving is generally being boiled down to two metrics- how much money has the charity spent on administration and what is its fundraising expense ratio (which is the amount of cents spent to raise $1.00- the higher the ratio, the better).

A recent study found that 40% of all surveyed believed that a charity should spend no money on fundraising costs (I am guessing these 40% also believe governments can deliver civilization with a 2% flat tax as well).  Another 60% believes that charities should have a fundraising expense ratio of approximately 15% (in other words, 15 cents is spent to raise $1.00).

Heres the catch- the governments contradict the public on this issue. The Canada Revenue Agency (CRA) generally accepts a fundraising ratio of under 30% without comment (for clarity, these are guidelines and not hard and fast rules; CRA has stated that the analysis is contextual).

Here is the second issue- it appears that the higher the charity spends on fundraising and administration a, the better the charity is rated within an acceptable range of expenses. The lesson seems to be looking at charities is not like looking at an investment; since the return is hard to quantify, one cannot boil down looking at charitable dollars with one or two metrics. Certainly, an increased focus on costs has been welcome but swinging too much the other way to look at costs and nothing else is not constructive either.

As I have written before, if one really wants to do good and are concerned about fundraising ratios and administrative costs, one should volunteer even one hour a year to a charitable cause (or bid on bloggers for charity if you feel charitable and telling the world your story).

 

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