Like toilet paper hoarders, some charities unnecessarily fill reserves
Hoarding by the richest charities leaves less money for charities that need it. Stop it.
Like hoarders of toilet paper, some rich charities have years of reserves to weather the coronavirus pandemic. Yet these charities are launching fundraising appeals for a coronavirus response. “Never let a good crisis go to waste” when one can raise money may be their thinking. But donations are not like toilet paper. It isn’t as simple as more will be on the shelves tomorrow and there will be enough for all. The pool of donation money is finite. Hoarding by the richest charities leaves less money for charities that need it.
On the other hand, many frontline charities need donations to provide critical frontline services.
Canadians are rightly motivated to give in this time of need. Yet before giving, Canadians must check a charity’s current reserves. Does it have years already stockpiled?
Every Charity Intelligence report shows you this information. On each charity report there is a line item in the Financial Ratios section called Program cost coverage. This shows a charity’s need for donations. It shows how much money a charity has as a percent of the costs to run its programs for a year. For example, 50% means half a year – enough money to run its programs for half a year. 500% means a charity has enough money to run its programs for 5 years.
In this current example, this charity has 684.4%. That is 6.8 years of cash and investments – think 6.8 years of toilet paper – and yet it just launched a coronavirus fundraising campaign.
Charities with large reserves should think about using them. Excess donations over the years are stocked up for a rainy day. Maybe this year and next are those rainy days?
In 2012, the CRA Charities Directorate updated its guidance against unnecessary fundraising. Yet this practice has been going on for years without penalty. As such, to make sure donations go where they are needed, donors need to do their own homework.
Please before giving, on Charity Intelligence's website search the charity's name and check its program cost coverage ratio to make sure your donation goes where it is needed.
For more Charity Intelligence articles on intelligent giving for Coronavirus:
Charity Intelligence's top pick charities for the covid-19 response: recommendations for donors
For charities: If your charity doesn’t need funding, stop fundraising.
Mark Blumberg’s Canadian Charity Law has a terrific overview for charity directors to review their compliance with Charities Directorate regulations regarding excessive reserves:
The information in this report was prepared by Charity Intelligence Canada and its independent analysts from publicly available information. Charity Intelligence and its analysts have made endeavours to ensure that the data in this report is accurate and complete but accepts no liability.
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