How to choose the right charity for you

Choosing a charity for your donations, grants or endowments has many aspects: it makes you feel good, it allows you to support a cause you believe in and value, and it can play an important part in your larger wealth plan.

When it comes to choosing a charity for your donations, there are several considerations, including potential tax optimization. Here are five things to consider when taking a strategic approach to philanthropy.

1. What’s your area of interest?

When looking for a registered charity to support, create a short list of those that align with your values. Supporting a cause that resonates with you will ultimately provide a meaningful and fulfilling experience. For example, if you are passionate about supporting health research, childhood education or urbanization, there are a number of charities that support initiatives aligned with your passions. Finding a charity that aligns with your values will deepen your satisfaction with your philanthropic giving.

You may prefer to donate to multiple charities to support a variety of causes you are passionate about. This might include identifying a primary charity while also donating to other organizations that appeal to you.

2. Research and assess charities.

There are advantages in giving to both larger and smaller charities. Large, well-established charities often have the history and scale to maximize your charitable donations. They may also have the governmental and international connections to leverage donations to get research grants and share data with other research facilities.

While smaller charities may not have the scale and connections, you may be able to better see exactly where your money is going and the impact you are creating, whether you make a yearly cash donation, restricted grants or an endowment.

Regardless of size, one key consideration when doing your research is checking that the charities you’ve chosen are registered charities. Charities registered through the Canada Revenue Agency are granted tax exemptions and are able to issue tax receipts to donors to help encourage charitable giving. The Government of Canada’s registered charities database is a good place to start.

3. Conduct due diligence.

One common way to measure a charity’s impact is the administration ratio, which is the amount spent on administrative costs – such as employee salaries, marketing, equipment and infrastructure – versus what is spent on services, programs and projects. A lower administration ratio might suggest that more of your donation is going to support the cause. However, there are other ways to measure impact, and more to consider when assessing your charity of choice.

Another way to conduct due diligence is to review the charity’s annual reports, financial statements, fundraising plan and investment policy. This will give you an idea of revenue sources, future state and resourcing. You can also review the programs and services the charity provides to see if they’re properly resourced and on track to successfully deliver on the charity’s objectives. You can contact the charity directly, or for registered charities, you can request annual financial statements from Canada Revenue Agency.

4. Visit your charity of choice.

Consider reaching out to your network or wealth manager for suggestions on what charities they recommend supporting. Think about your own experience as well. Have you volunteered for any charitable organizations in the past that resonated with you? Charities actively encourage everyone to visit them to see exactly what they do and how they help. You can take this opportunity to ask them about the problems they’re trying to address, how they’re addressing them, what activities they’ve put into place and the progress or impact they are making. Getting that first-hand experience can help inform your decision on the direction of your charitable giving and philanthropy.

A visit also lets you connect and build a relationship with the charity’s representatives to gain a deeper understanding of their work and goals. You can see their operations and meet beneficiaries, and you and your family can take part in activities.

It may also provide the opportunity to discuss strategic partnerships between you and the charities, such as a funding mechanism, or leveraging your experience and network to bring awareness and funding to them.

5. Monitor success.

If you’re interested in seeing the impact of your donation, you can monitor and evaluate how your contributions are being used. Understanding how your contributions are being used can help you with future decision-making, as well as adjustments to your wealth plan in future years. Perhaps you may want to increase your donations, or leave a charity shares or a legacy donation in your will.

If you’ve developed a relationship with the charity and its administrators, you can arrange meetings with the leaders, review financial reports, ask them questions, tour the facilities and meet new beneficiaries and hear their stories. By actively monitoring and evaluating the charity’s progress, you can ensure your giving makes a meaningful and lasting difference.

Once you’ve decided on your charity, remember to let your wealth planning team know so they can incorporate your philanthropic goals into your wealth plan. Making donations to support charitable causes is a great way to give back. Taking the time to learn about a charity not only boosts the effectiveness of your donations but also helps you build a legacy of meaningful philanthropy that can last for generations.
 

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