Should you donate to a charity that’s flush with cash?

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Canadians are generous givers. We’re among the top 10 most generous countries in the world, according to the Charities Aid Foundation.

The biggest individual donation given in Canada recently was from the late Winnipeg business owner Miriam Bergen, whose gift to the Winnipeg Foundation last year was valued at almost $500 million.

Canadians prefer to give to religious organizations, followed by health, social services, international organizations, the environment and education, according to a 2018 report from Imagine Canada. That makes up 75 per cent of total donations.

Bigger charities in many of these areas often have more dollars available for advertising and fundraising, and some givers might wonder whether these better-funded organizations really need the donation. Why donate to charities that are flush with cash, instead of the other 25 per cent who are also looking to further their cause?

As you do your research to choose an organization, should you check out how it’s doing financially? Should people who plan on donating a significant sum of money rethink giving to old favourites if those groups are faring pretty well?

How should you balance the “neediness” of a charity with its (and your) goals?

Julie Quenneville, CEO of the University Health Network Foundation in Toronto, says families are being much more strategic these days in determining where and in what sector they want to contribute.

“They want to do something big and meaningful,” says Quenneville. “They want to make a difference in their communities and institutions like UHN because of the strength of the organization and its capacity to leverage dollars.”

Quenneville points out that large charities have the scale to magnify donations and benefit both local and international communities.

“We have the ability to leverage each dollar. So each dollar that we put in from philanthropy allows us to then go and secure large grants from the government and from other charitable organizations,” she says. “That includes building partnerships with hospitals all around the world to share data and advanced science.”

One example where donations funded an entire project was the development of the ex-vivo lung perfusion process, by which a pair of lungs is kept alive outside the body so that a surgeon can evaluate them for transplant. UHN has been a world leader in transplanting organs treated via ex-vivo perfusion. The process has enabled the pool of suitable donor lungs to be expanded, leading to shorter average wait times for transplant candidates. Quenneville says 100 per cent of the seed funding came from philanthropy, and today the procedure is used around the world.

Figuring out successful impact

Now that we know that big charities have the scale and connections to put donations to use, how do you decide their impact?

One common metric is the administration ratio. That’s the amount spent on administration costs versus projects, programs and services. The amount can be as high as 35 per cent.

Still, this may not be the best metric to determine impact, says Brad Offman, founder and chief executive officer at Spire Philanthropy, a management consultancy in Toronto that specializes in providing philanthropic advisory services.

“There’s no standardized impact,” he says, saying that it’s a challenging question for many donors. One way is to consult a charity’s annual report, but there is another way.

“The best way to do it, in my view, is actually to talk directly to the organization and ask the questions about their impact, ask what they’re doing and learn more about their programming,” Offman says.

As to why some donors prefer to support bigger charities, Offman says big institutions that raise hundreds of millions need that funding to maintain and expand their programming. “The figures may be large, but the reason why they’re typically larger is because the organization has had significant impact.”

Bri Trypuc, principal adviser and founder of Trypuc Philanthropic Office in Toronto, which provides clients with philanthropic advisory, private foundation and strategic consulting services, says that it comes down to donor preference and their end goals.

“Historically, some people support organizations because they’re looking beyond just unrestricted giving or general giving,” she explains. They are interested in donor-restricted grants, for instance, in which donors are given assurances that their money will be used in the manner they’ve chosen. Endowments and project agreements are also common.

Other givers are concerned about sustainability and long-term commitment.

Thinking small

“If they funded a charity that had a couple of months on their balance sheet, they run the risk of that charity possibly not receiving other funding and shutting their doors,” Trypuc says, explaining that for some donors, it’s about managing risk.

Trypuc says she’s a fan of supporting smaller charities that often struggle to compete because they don’t have the large charities’ fundraising machine, marketing and budgets.

If a donor is interested in funding smaller charities, Trypuc suggests calling them and asking questions about their impact. “Ask what the problem is that they’re trying to address, the size of it is, how many people are affected or impacted by it,” she says. “What are they doing or what activities have they put into place to address that problem?”

More from Canadian Family Offices:

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• Hotelier Sukhdev Toor came as immigrant and now gives back through foundation
• McCain family’s Daymark Foundation takes hands-on approach to mental health
• ‘Lot of light, not much heat’: Climate lags among charitable causes in Canada

She says potential donors also should check to see whether the charities are communicating, either in the grant applications online in their annual reports or in a phone call.

Givers can also ask about the theory of change regarding that problem and what the charity is doing to address the problem. “You want to know the problem and what change they’re achieving within the group that they’re trying to help,” she says.

One charity that Trypuc supports through her work is the TUFF Therapeutic Riding Foundation, which provides equine therapy for at-risk youth ages 12-20. It provides support for 10 kids. That’s a small number, but as Trypuc mentions in her newsletter, investing in youth leads to exponential change and makes it worth the donations.

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