Some of these
watchdogs are relative novices in evaluating the charity sector. They look for
a simple way to judge charities and transmit that evaluation to the public. There
are those that conclude that overhead cost ratio is one of, if not the single
most, important factor by which charities should be judged effective.
It is not.
While the
debate on how to best evaluate charities is relatively new in Canada, it has
been raging in the USA for years. Experienced donor advisory groups that relied
on the overhead cost ratio for years have started to abandon it in the face of methodical
studies showing that too low a ratio actually points to charities being less
efficient and less effective.
Unfortunately,
the charity sector in Canada sends conflicting messages to the public on this
issue. Some charities will not publicize their results from evaluations based
on overhead cost ratios (even if they receive good ratings), some actively try
to debunk the evaluations, but others actively promote their high marks as a
reason to donate to their cause.
In the USA, three
of the leading and most experienced independent charity watchdogs recently signed
an open letter to the public, launched a website called The Overhead Myth and started a pledge
petition on the site to get people to stop judging charities based solely or
largely on overhead costs. These groups collectively advise millions of donors
each year and they are now urging all donors to see the whole picture when
evaluating charities.
Two Canadian
organizations already evaluate charities based on good governance, transparency
and other factors that, when part of a formalized structure and plan, help
ensure that a charity can be effective. Imagine Canada and the Better Business Bureau have an accreditation process that evaluates
charities on multiple points and they have review and complaint reporting
procedures, so charities must take care to live up to those standards at all
times.
To ensure
public confidence and sector effectiveness, Canadian charities need to endorse
these accreditation groups and should work to meet the standards that they have
set. They also have to be open and accessible. Donors should be encouraged to
contact their charity of choice, without hesitation, if they have any
questions. As charities we must welcome their engagement and respond quickly
and definitively.
Charities
need to be effective and transparent. Those who rely on us deserve no less than
our best.
Dan Ross
