Measuring the real-world impact of a charity can be subjective. How do you know if your donations are making a difference? Jo-Anne Ryan, Vice President of Philanthropic Advisory Services at TD Wealth and Executive Director of the Private Giving Foundation, joins Kim Parlee to offer some ways you may ensure your donation dollars will hit where it counts.
- Measuring the real-world impact of charities or a cause specifically is not easy. Let's say, for example, in the case of fighting diseases, is it lives that have been saved, research that they've done, or maybe is it how they operate, how efficiently they operate? It certainly is subjective and can be harder to pin down.
And to help us with today's question on that very subject is Jo-Anne Ryan. She's Vice President of philanthropic advisory services at TD Wealth and Executive Director of the Private Giving Foundation. Jo-Anne, thanks for joining us. Here is today's question. When I give money to charity, how do I know my money is making an impact?
- So that is a great question, Kim, because you want to make sure that your donations do count and they do get the results that you want. So start by asking the organization questions. You do want to take a look at their financials, look at their annual reports. But depending on what the organization does, you want to cater your questions accordingly.
So for example, if you look at an organization like Pathways to Education, they are fantastic. They do great work to help keep people in high school in very high-risk areas, stopping them from dropping out. So you might want to start with, how many people did they serve in a particular year? That would be a good starting point.
But you wouldn't want to stop there. If they're trying to reduce the high school dropout rate in a particular area, you want them to report on what those measurements are year after year after year. And hopefully, the dropout rate continues to decrease.
You might then want to take it a step further. And they would probably measure, how many people that participate in their program go on to post-secondary education? And what does that look like year over year? And how does that compare with what their strategic plan and their targets are? So those are some great questions, but you really need to customize them and have good conversations with organizations about how they are measuring impact.
- That's a great example and, again, just you really have to understand-- you're right-- the metrics that matter to the organization you're talking about, which is key. What about administration costs? Because that often is a big focus for a lot of people in terms of how much money is getting spent on running the charity versus the cause that they're helping.
- So one of the things I would caution is you don't necessarily want to judge a charity to say they are the best-performing charity if they have the lowest admin costs, because it actually costs money to run an organization efficiently. You want the organization to be able to hire people, good people. They have to pay them. Not as much as the for-profit sector, but they need to pay them.
They have marketing expenses to get the word out about the good work that they're doing. You want them to have computers and things that would help them to do their job more efficiently. So if a charity is 100% volunteer run and it has absolutely no admin costs, that doesn't mean that they are a better-performing charity than one that has costs. However, you want them-- the costs to be reasonable.
And so some of the things you want to look for are, is their revenue stream diversified? That would be something. Why would you ask that question? Because probably the most expensive cost a charity could have would be on galas and events. So if that's the majority of their fundraising, then their costs are going to be higher than an organization that would do some annual giving, some planned gifts, some events, and other streams of revenue that are not so expensive.
CRA has some guidelines in terms of what is reasonable. And you want to look at the financials of the charity, which you can find on their website. You can also find the financials of the charity on the CRA's information return on their website also.
- Jo-Anne, last question for you. What are some red flags that people should look out when they are assessing charity?
- Great question. So a couple of red flags would be look at the charity's mission. Is it a fuzzy mission or is it clear? And are they actually doing what they say they are supposed to do or have they deviated from that mission? That would be a red flag. A second one would be look at the leadership.
Is there a constant change of leadership, especially in senior positions such as CEO, head of finance, head of fundraising? That's definitely a red flag. It's all about building relationships with donors when you work at a charity. And so if there is constant change of key people, that's a red flag and something to look out for.
Again, you want to look at their financials. Make sure they're not bragging, as we discussed earlier, about having no or low admin costs. You want to make sure they have adequate reserves. We saw this in the pandemic. Some charities actually didn't make it because they didn't have adequate reserves. So you do want to take a look at their financials just as you would with any organization.
And then, finally, take a look at the governance. Look at the board. Is the board well-diversified or do they all look the same? Is the skill set on the board diversified, which is really important, especially for a not-for-profit organization.
And how are they evaluating? How is the board even evaluating the performance of the CEO and the executor? So as with any organizations, and especially charities, governance is becoming more and more important. So you want to ask questions about that also.
- Jo-Anne, thanks very much.
- My pleasure. Thanks for having me.
- Jo-Anne Ryan from TD Wealth. And if you'd like to ask MoneyTalk a question, send the email to firstname.lastname@example.org. Put Ask MoneyTalk in the subject line. We'll find the right person to answer that question, and you will find that answer on moneytalkgo.com.