How to Use Charity Ratings in Canada
You’ve figured out your philanthropic goals and have a list of charities you think match your giving criteria, now what? 🤷♀️
Get a Second Opinion with Charity Ratings
After conducting preliminary research on the charities you’ve selected, the next best thing is to turn to accredited charity watchdogs to see how well they’ve assessed your chosen organizations. With a good rating system, you’ll find new financial perspectives, reports on any scandalous behaviours, along with other valuable insight that might help you select the right charity for your next donation.
First, Identify Where Your Charity is Registered
Before digging into other sources, it’s important to establish where your prospective charities are registered. Are they based in Canada, outside, or do they have several country-specific divisions?
More often than not, a rating system will use publicly available financial statements held by the government to conduct their charity rating. So, if for instance, you’re donating to a Canadian charity, the rating system will use the publicly available financial statements provided by the Canadian government (in this case, the Canadian Revenue Agency) to conduct their analysis.
Organizations that operate across several different countries may show some discrepancies between each division (i.e., their American operations vs. their Canadian operations). Therefore, identifying where your organization is registered or which subdivision you plan on contributing to, will help you pick the appropriate rating websites.
Second, Cross-Check with Charity Ratings in Canada
Assuming you’re dealing with a Canadian-registered charity or subdivision, you can refer to the following charity rating websites.
Charity Intelligence (Ci)
As one of the most popular (and only) charity watchdogs in Canada, Charity Intelligence is a great site for getting a full rundown on the organization’s you are planning to include in your philanthropy.
A registered charity themselves, Charity Intelligence consists of a small team of analysts and volunteers, on a mission to provide donors with the information they need to make informed and intelligent giving decisions. They pride themselves on being fiercely independent and do not accept money from the charities they rate.
What Info Does Charity Intelligence Provide?
Ci provides a thoughtful overview of the charities in question. They include descriptive information like the charity’s sector, mission, and key programs. They provide a thorough financial review, including key financial ratios and publicly available financial statements. And they also showcase a variety of useful miscellaneous assessments, such as how financially transparent the organization was throughout Ci’s rating process, the organization’s need for funding, the proportion of donor dollars spent on the cause, and for some charities, an impact score.
All of these individual assessments are then converted into a Charity Intelligence Star Rating, showcased at the top of the charity’s profile. The highest score is four stars, among which, Ci claims just under 25% of charities rated by the organization have achieved so far.
Overall, we believe, the analysis Charity Intelligence conducts is thorough and very well done.
But, There are Some Drawbacks
A significant drawback is the number of charities that have not been rated by the organization. Although Charity Intelligence has rated an upward of 780 Canadian charities, according to the Canadian government, more than 86,000 registered charities are operating in the country.
Another drawback is the type of charities featured on the website. Initially, the watchdog only rated leading Canadian charities recognized for their best practices and notoriety. However, they have since expanded their pool, now rating organizations requested by donors, nominated by executives, or featured in industry research. Nevertheless, the number of well-established charities on the site far exceeds their smaller, local counterparts. So, if you’re looking to cross-check a newly established charity or one that’s smaller in scale, you might be out of luck.
Lastly, some of the ratings may be outdated - albeit, only a small portion. For the most part, charities rated by Charity Intelligence have been revised annually, with only a small portion of profiles not updated regularly. You can quickly assess how recent a rating is by looking for the “Updated on” date right above the financial ratios. When it comes to relying on an outdated analysis, use your best judgement or try to seek out an additional source.
Another charity rating system that has risen in popularity is MoneySense’s annual Top 100 Charities in Canada list. This list offers an excellent overview of the top charities in Canada, without bombarding readers with too much information. In a matter of minutes, you’ll be able to identify critical financial facts about a charity and gage its overall effectiveness.
What Info Does MoneySense Provide?
Although significantly less detailed than Charity Intelligence, MoneySense focuses on two main criteria, an organization’s financial situation and its overall transparency.
At a glance, the financial website provides four letter-grades for each charity. A grade for the charity’s fundraising efficiency, their charity efficiency, social results transparency, and similar to Charity Intelligence’s star rating, a final letter-grade that combines all of their individual assessments.
For more information on a given charity, expanding the charity’s description offers the organization’s mission statement, alongside quick financial ratios, such as their need for charitable donations.
A Major Drawback
One of the most significant drawbacks from MoneySense’s annual assessment is their stringent criteria. To be considered in the Top 100 Charities, an organization must have been rated by Charity Intelligence and must pull in at least $2 million in annual revenue.
This hits on the issue mentioned earlier, the fact that more than 85,000 charities fly under the radar.
What if a Charity is Not Rated?
If the charity you are considering is not featured on any of the rating systems, a great alternative is to look for an accredited stamp of approval.
Accreditations are different than charity rating systems in that they consist of a third-party peer-review analyzing a charity’s operations against a series of quality standards. The standards an organization must meet can be found on the accrediting organization’s website.
What if a Charity is Not Registered in Canada?
If you are dealing with an organization that’s registered outside of Canada, you’ll need to refer to different rating systems than the ones highlighted in this article. Fortunately, other countries, like the United States, seem to have a more extensive selection of charity watchdogs. The following list includes some of the most popular U.S. options.
United States Charity Watchdogs:
Key Takeaways 🔑
Once you’ve figured out your philanthropic goals and selected charities that match your giving criteria, the next step is to get a second opinion.
Charity rating systems offer an in-depth overview of the charity’s operations and help you make a more informed decision. In the case that your prospective charity is not featured on any rating sites, the next best thing is to identify whether or not the organization is accredited by a charitable standards association. Being accredited would indicate that the charity has successfully met a series of quality standards.
At the end of the day, the goal is to make sure your hard earned dollars are spent on the right charities. Taking the time to get a second opinion is a great way to ensure you’re giving wisely.