What to look for when picking a charity
With more than 85,000 charities registered with the Canada Revenue Agency, it can be difficult to sort out which ones are deserving of your donation dollars. Many new charities tend to appear in times of crisis or natural disaster.
Charitable donations (2008)
Per cent of those with incomes above $80,000 who donate: 23
Per cent of those with incomes from $20,000 to $40,000 who donate: 29
Median donation: $250
No. of Canadians who reported charitable donations on their tax returns: 5.8 million
Per cent of donations that come from those with incomes above $80,000: 51
Source: Statistics Canada
There are some steps you can take to increase the odds that more of what you give actually goes to a good cause.
Search the CRA database. All registered charities are listed in the database. You can also search for charities that have had their licences revoked either voluntarily or "for cause." The CRA will cancel a charity's registration as the direct result of an audit that turns up serious irregularities.
When you search the CRA database, you will also be able to view the charity's most recent tax returns, giving you more information on which to base your donation decisions.
Online donations. Make sure the charity site uses secure technology for online donations. Before you enter any information such as your credit card number or personal data, verify that the page requesting that information is secure. The letters https:// rather than http:// should precede the page's URL or internet address. In addition, there may be an unbroken key or padlock symbol located in a corner of the web page. If in doubt, contact the charity by phone or email before you provide the information online.
Ask the charity for written information. Legitimate charities will provide a brochure outlining their mission, how the donation will be distributed and/or proof that your contribution is tax deductible. If they are a registered charity, ask for their latest annual report so you can assess where the money is going. The information should also be available on the charity's website. A charity website that is little more than an opportunity to donate online should raise red flags.
Ask a fundraiser for identification. If you are solicited over the phone or at the door, ask for the organization's name, address, phone number and material explaining what they do and where the money goes. Fundraisers working for a charity should carry ID that clearly identifies them as working for that charity. Do not give right away. If you are unsure but interested in giving, call the organization and ask if they have a phone or door-to-door campaign happening.
Ask a fundraiser who they work for. Some charities — especially smaller ones — hire external fundraising companies to raise money for them. For many of those charities, it is the only way they can raise money to do the work that they do. But in some cases, most of the money raised goes to the fundraising company. Ask the fundraiser if they work for an external company or if they are employed directly by the charity. Ask how much of the money goes directly to the charity. You might want to think twice about your donation if the fundraiser is vague or refuses to answer your questions.
There are no rules on how much a charity can pay an external fundraiser. However, the CRA does have guidelines.
Generally, if the charity spends less than 35% of what it takes in on external fundraisers, the CRA will not audit.
If the charity pays 35% to 70% of money raised to external fundraisers, the CRA will look for a trend of high fundraising costs. The higher the ratio, the more likely that the CRA will come looking for answers.
If the charity pays more than 70% of money raised to external fundraiser, odds are good that an audit will be done. The charity would have to provide compelling reasons to show that it is in compliance with CRA guidelines.
Call the charity. Ask how much of your gift will be used for those in need and how much will go toward other programs and administrative costs - or to external fundraising companies. A good charity should be directing at least 60 per cent or more of its money toward services.
Be wary if someone thanks you for a donation you don't remember making. This method is used to corner people into giving. If you don't recall a pledge, check your records first before giving.
Refuse high-pressure tactics. Legitimate charities do not coerce people into giving. Get a receipt with the name of the charity on it.
Similar sounding names. Be on the lookout for charities that use names that look like or sound like those of established organizations.
Be firm when you don't want to give. For the sake of the charity and yourself, reply with a firm "no" rather than a "maybe" if you are solicited because that charity will contact you again. You will feel bothered and they will be wasting time.
Do not donate if the person over the phone offers to send a courier or "runner." Legitimate charities will be just as happy to accept your donation after you have had the time to check them out.
Tax receipts. Be sure to ask for one if you need it as charities may set minimum limits for issuing one. They are not required by law to issue tax-deductible receipts for all donations, and those that do must be registered with the CRA. A registered charity must comply with laws governing its non-profit status, must make its yearly financial statement public and be subject to monitoring or auditing by tax authorities.
The Better Business Bureau. Call your local branch to check whether a charity has had any complaints filed against it.
Charities bearing gifts. Some organizations include free address stickers, greeting cards, key rings or other "gifts" in their direct mail solicitations. You are not bound to make a contribution to keep the items and charities are not permitted to demand payment for any unordered merchandise.