It is now the giving season.  We will hear lots from charities on Giving Tuesday and perhaps you will be inundated with too many emails on Giving Tuesday from charities that you rarely hear from!   The media will be full of positive photo ops and puff pieces about charities.  Some media will try to give you ideas about which charities to donate to – sincerely felt advice that is often very wrong.  But hey it is the giving season so give and smile.

To be very general there are two types of giving.  “Obligatory giving” – when you give because you ‘have to’.  For example, your boss asks you to sponsor his 7-year-old daughter’s walkathon. Also, your religious institution encourages you to pay an annual amount.  You give because you don’t want to get fired or potentially go to hell.

Then there is “strategic giving” – you think in terms of a particular area of interest, with a budget, perhaps multi-year commitment, you give to charities that you are confident in their abilities and you share their “theory of change” as to how they have a positive impact.  Neither is actually better.  They are different.  Most Canadians give because they are asked to give- often by people they love (or fear!).  It is not always clear which is necessarily better – obligatory giving or strategic giving!

Why could obligatory giving be better?   Well first of all despite the hype almost all Canadian individuals and foundations are not really giving strategically anyway even if they say they are.  They think they are giving strategically but it may be giving to organizations that have great PR but are really not very effective.  Secondly, if you don’t give to your boss’ daughter’s walkathon you might just be part of a downsizing a few weeks later!   Sometimes bosses are emotional and not strategic in their hiring and firing choices! So let us not underestimate the importance of obligatory giving.  By the way, when I say “obligatory” giving it is not that there is a legal obligation to give – if that was the case then it is not really a gift and certainly not eligible for a tax receipt.  Much fundraising is based on obligatory giving.

Part of the problem with trying to be strategic and focus on impact is that there is poor information available on many charities and few are fighting for there to be more information that is publicly available.  The charity sector is about $260 billion in size and with some charities, there is a real paucity of information available to the public.  Charities often are pushing for more information to be available on businesses (especially mining or oil companies) and also government, but they seem quite silent when it comes to the non-profit and charity sector and what information should be provided.

While there are a few charities that get a lot of attention (both positive and negative) from the media, bloggers etc.  most charities don’t receive much attention and some may not have much accountability to anyone other than themselves.  They may have been vetted by CRA 30 or 50 years ago but a lot can happen in a few decades.

Did you now that there is not one question on the annual filing with CRA (the T3010) on how many volunteers the charity had.  For most charities in Canada, the volunteers they have and the contribution of volunteers is greater than all the financial resources of that charity.  Unfortunately, if all you have is information on the financial status of the charity and nothing on volunteers and their impact you are not able to understand the important work of that charity.

Also except for very large gifts, there is usually limited time and resources for the donor to contemplate which charity and how to give.  We have developed a free tool that provides some useful information on Canadian charities from the T3010 filings but an important caveat – the T3010 data cannot tell you whether a charity is a good or great charity and it is based on the little information collected on the T3010 which is provided by the individual charity and the information is not vetted by CRA.   See CharityData.ca

There are many misconceptions about giving by donor, both small and large.  See our www.SmartGiving.ca micro-site and especially the page on choosing a charity.

The biggest mistakes we see are:

1) focusing too much on administrative costs from the T3010 which are often not accurate and really bad charities often spend little on admin.  For large and complicated charities like hospitals, universities, social welfare agencies, and international development organizations if you are not spending some funds on administration it is questionable what you are up to and whether your filings are accurate.  You might find our article on admin expenses for charities helpful.

2) reading some articles on how these charities are the “best” or “most effective” in Canada.  There are good charities, many great charities and hundreds of charity scams.    Separating the good from the great is very hard with the limited information available but many good charities, if they had more resources (financial, volunteers, etc), could be great charities.  Trying to avoid scams is most important.

3) imposing or accepting well-intentioned “restricted” funds that can undermine the value of a gift significantly.  What may seem like a great idea to everyone today in the future may be anything from less great to a total waste of time.   By the way in the asymmetrical world of major donors with their power and sometimes ego and with charity’s desperate for more resources almost all ideas from major donors are “great” ideas.

It is hard to do much due diligence and analysis when you are giving a few hundred bucks.   But if you are giving away millions, either now or in your will, it is a good idea to carefully consider what you are doing and obtain expert advice.