Donating to charity: where does your money go?

Businesses are often asked to make donations to all sorts of charities.  As a business owner, it is good to support causes that you believe in and want to give a helping hand to. How can you know if your dollars are going where you intended?

Some charities hire third party telemarketing companies that keep the bulk of the donations, other charities use familiar sounding names to solicit donations but aren't exactly who you think they are, and unfortunately some are just not legitimate charities. We have a few tips to help you feel confident that your money is well-spent when you make a donation.

Before you donate

Think about the causes that are important to you. You can then pick the charities you want to support and make a donation before you are even asked. This gives you more control in your ability to research causes and find the most effective way to support them. You'll be less likely to respond to pressure and your money may go further because during appeals a portion of the donations go to funding the appeal itself.

When you are approached by a charity

• Make sure the charity is who it claims to be. 
  • Sometimes fraudulent organizations use names that are similar to well-known and respected charities.
• Ask for the charity's registration number. 
  • Each registered charity has a specific registration number that must appear on your official donation receipt.
  • You can confirm that a charity is registered by searching for them by name or registration number in the CRA Charities Listings.
• You have a right to request written literature and a copy of the charity's latest annual report.
  • The annual report should include a list of the board of directors, a mission statement and the most recent available audited financial statements with accompanying notes.
  • If a charity does not provide you with the information you request, you may want to think twice about donating. Honest charities typically encourage your interest and respond to your questions.
• Find out where your dollars go. 
  • How much of your donation goes for general administration and fundraising expenses and how much is left for the program services you want to support? 
  • Most efficient charities are able to spend 75% or more on programs. Although, keep in mind that newer groups and those that are working on less popular issues may find it necessary to spend a greater percentage on fundraising and administrative costs than more well-established or popular groups.

DO NOT RESPOND TO PRESSURE AND EMOTIONAL APPEALS

Do not let yourself be pressured into contributing on the spot. You have a right to say no.  A legitimate organization will not pressure you to give immediately.

Be firm when you don't want to give. For your own sake and for the sake of the charity making a request, it is better to say "no" rather than "maybe." You can't support everything so don't feel bad about saying "no." Without a decision, the charity will contact you again, you'll feel bothered and pressured.

After you donate

Keep records of your donations. Be sure to obtain a receipt or printed copy of your donation so you will have a record for tax purposes.  Registered charities are not required to issue an official donation receipt. However, the Canada Revenue Agency advises charities to notify potential donors of any circumstances in which they will not issue an official donation receipt.

You should be aware that you cannot claim a charitable tax credit or deduction unless you have an official donation receipt.  

Other ways to give back to your community:

• Volunteer
  • This can be a great way to get information about a charity before giving money. Hands-on experience will tell you how well-managed the organization is and how effectively it accomplishes its mission.
• Make donations-in-kind
  • Often a donation of your product or services could be just as helpful as a cash donation. 
• Donate your employees' time
  • Recruit your employees to get involved and ask them if they are willing to spend some of their working hours to help out.
• Advertise or promote an event
  • Sometimes charities can use an avenue to get the word out.  Offering space in your business or letting your customers know about the event could be a helpful promotion for the charity.
• Consider sponsorship
  • Sponsorship has many benefits that can help charities and local groups but also can benefit your business by creating company visibility and increasing sales.

For more information you can visit CRA's Giving to Charity: Information for Donors.