08/29/2013 05:27 EDT | Updated 10/29/2013 05:12 EDT

Where is Your Charity Money Really Being Spent?

Do you ever wonder what happens to the money you donate to charity? Have you ever taken the time to find out?

People give to charity for various reasons, but I think most people give because they believe it's going to help the people or animals that the charity represents. Usually this is the case, but all too often there are unknown benefactors of your generosity.

I finally got around to reading through the summer edition of MoneySense magazine. I was pleased to come across an article titled "Hearts & Minds" written by Mark Brown. What MoneySense did was send out a questionnaire to charities across Canada to come up with The Charity 100. To quote from the article, "The Charity 100 is a scorecard of the largest charities in the county, as measured by the amount of money raised directly from the public."

They scored them in four areas: per cent of spending on programs, cost to raise $100, governance, and reserves. Finally, the charity received an overall grade based on how it compared to others in the same category (environment, hospital foundations, and health/health services are examples of categories). They used a letter grade system ranging from a top grade of A+ to a low grade of C-.

I had heard about this kind of thing in the U.S., but I've never seen this kind of analytical information available in Canada (I'm a new subscriber of MoneySense). What I saw was shocking. The difference in the ways that charities are being run is frightening. I counted 13 very well-known charities that spend less than 50 per cent of the money they raise on programs. Two were less than 40 per cent!

Another startling insight was the number of charities that spend in excess of $50 for every $100 they raise. That means that there is a lot of money to be made in telemarketing and direct mail. I know that charities have to pay overhead but spending over $58 to raise $100 doesn't sound very reasonable when other charities in the same category are spending as little as $.09 per $100.

Before reading this article, I was living in my own little bubble believing that the money I was giving was going to send that kid to camp or help find a cure for cancer. Now I realize it's my responsibility to look more closely at which charity I want my hard-earned money to go to. I can't just go along with anything that has the word cancer or children in it. All charities are not created equal.

All the information that MoneySense gathered was a matter of public record, except the governance grade which was based on their questionnaire. Every charity has this information available. If you don't want to pore over financial reports you can ask the charity for their specific information. Here are some questions you can ask:

  • What percentage of spending is on programs?
  • What is your cost of raising100?
  • If you didn't raise another1, how many months could your organization continue to run?

I found giving money easy. I'd write a cheque and feel good believing I made a difference. That was the way it used to be. Tomorrow things are going to be different. I want my money to make more of a difference. I need to invest the time to make sure most of my money is going to its intended target. No more lining the pockets of advertisers and telemarketing companies. Thanks, Mark Brown and MoneySense, for opening my eyes.