Grading Canadian charities: Does your donation go where you think?

MoneySense's 2012 Charity 100 issues reveals how charities spend their money.

Canadians donated $10.6 billion dollars to a myriad of causes in 2010 (the latest year for which data is available). The lion's share of that money went to Canada's biggest charities, household names focused on health-care, community services and international development.

Most Canadians expect that their money is being spent as effectively as possible. But not every charity produces their financial reports in the same way making it difficult for donors to know exactly where their money is going. How much is actually getting to the intended beneficiary after fundraising, publicity, utilities and program costs are paid for? And is that the only criteria to consider?

For the third straight year, MoneySense has graded Canada's biggest 100 charities based on charity efficiency, fundraising efficiency, governance and transparency and reserve fund size. Organizations not generally thought of as charities, such as churches and universities, were excluded.

Among Canada's 25 biggest charities (bringing in more than $33 million annually from donors) only five received an overall grade of "A" or higher. They are the Canadian Red Cross Society, Nature Conservancy of Canada, United Way of Greater Toronto, United Way of Calgary and Area and Centraide of Greater Montreal.

In each of these organizations, at least 87% of all spending went directly to the designated cause. They also score high in other areas measured by MoneySense such as cost to raise $100 as well as governance and transparency.

Of the 10 biggest charities, only the Canadian Red Cross Society received an "A+." Of the $360 million in donation and fundraising it brings in annually, some $315 million goes toward disaster relief and other safety initiatives.

The majority of big charities finished in the "A-" to "B-" range, while five received final grades of "C+" or lower. These charities tend to struggle with high overhead and fundraising costs. Between 50% and 75% of all spending at "C"-rated charities typically goes to beneficiaries.

At The Salvation Army, the only one of the 10 biggest to receive a "C", just less than 63% of all donation and fundraising revenue goes to program spending. It's worth noting however, that it scores well in the fundraising efficiency category and in 2011, the Salvation Army helped more than 1.7 million people in Canada & Bermuda by providing 6,350 shelter beds and 2.7 million meals, while offering another 1.1 million people food and clothing.

Here's a snapshot of the 10 biggest (in order of size as measured by revenue*) and how they fared according to MoneySense's 2012 Charity 100:

World Vision Canada: A-

Salvation Army Territorial Headquarters for Canada & Bermuda: C

Heart and Stroke Foundation of Ontario: B-

Canadian Red Cross Society: A+

United Way of Greater Toronto: A

Canadian Cancer Society Ontario Divison: C+

SickKids Foundation: B-

Princess Margaret Hospital Foundation: B-

Plan International Canada: B+

Art Gallery of Ontario: B+

For more on how MoneySense calculated the results, read the 2012 Charity 100 methodology.

It's important to note that not all charities can be equally efficient in their spending. Popular hospital lottery fundraisers for instance can be considered "inefficient" due to massive overhead costs but they can also net millions in funds for research and care.

*Revenue is a three-year average and refers to donations and fundraising money

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