Canada’s charitable sector is more diverse than (some) rating agencies think – Opinion

Ronan Ryan, Chief Development Officer, Canadian Red Cross and Bruce MacDonald, President and CEO, Imagine Canada

Google data from the past five years show that the top search results in Canada for “donation”-related topics were Syria, Typhoon Haiyan, southern Alberta floods, and the Fort McMurray wildfire – with a most significant spike during the first couple weeks of May, 2016.

Canadians are profoundly eager to help, and transparent reporting is a key tool in assisting them in their decision making.

However, some of the metrics adopted by charity rating agencies create confusion rather than clarity.

An Imagine Canada survey conducted in August, 2016, revealed that 72 per cent of Canadians said they were more likely to trust and have confidence in charities that have been accredited by a third party. While rigorous accreditation processes (which are voluntary and involve participation by the charity) and charity rating agencies (which can involve some sort of “report card” evaluation on activities) are not exactly the same, the sentiment is similar – people looking for some form of assessment about the impact of organizations.

The challenge is that some of the criteria and metrics used by charity rating agencies in Canada are not effective, and are in fact misleading.

While we appreciate the intent to help donors make informed giving decisions, charities with very different causes, structures, operating systems and mandates are evaluated as though all charities are the same. We are not.

It would be like an investment analyst trying to advise a client about a specific stock by comparing it to a company in an entirely different industry, of entirely different size and with very distinct strategic goals. It just won’t lead to informed or helpful conclusions. Although we operate within the charitable sector, there are diverse subsectors that must be recognized by these charity rating agencies.

For example, a large international medical relief aid agency with a Canadian affiliate may appear on the surface similar to an organization focused on social services like the Canadian Red Cross, but our mandates, geographical scope, regulatory commitments, funding and structures are often fundamentally different. And the difference between us and grassroots, regionally focused charities is even starker. It is an “apples to oranges” reality that simply cannot be compared.

It is an often-noted paradox. In their book A World of Indicators: The Making of Governmental Knowledge Through Quantification, Richard Rottenburg and Sally Engle Merry say that “one useful way to think of quantitative indicators is that they are technologies of simplification, strategies that make complex process visible and easy to grasp, and make comparisons – across people, organizations or time – easy. This simplification is both why we value indicators so much and why we often feel they misrepresent us.”

The Red Cross recently used a charity rating agency’s system on our own organization, and we quickly realized that the metrics within the categories were in many cases highly subjective. The rating system didn’t allow for contingencies and particularities, such as a year with a major disaster in the vein of last year’s Alberta wildfire. It also didn’t take into account the need to have funds in reserve for longer-term community recovery and healing, such as the tragedy that hit Lac-Mégantic in 2013 and the major floods that affected many communities in Alberta the same year.

A more meaningful approach would be to judge charities through a more complete lens. One that includes financial transparency and accountability, but also emphasizes strong leadership, good governance and a commitment to delivering value.

Scrutiny of our workings, however challenging or difficult, is fair and warranted. In fact, we encourage rigorous third-party accreditation instead of simplified ratings because we believe that the success of charitable organizations in Canada is firmly rooted in giving people a window into our workings. Our charitable sector model is based on this transparency – without it, we wouldn’t be able to do the work that we do. We only ask that it be done in a reasonable and objective manner using appropriate comparative methods and metrics.

The Imagine Canada survey data also supports this assertion in that “transparency and sound management” were the top considerations for donation support among 86 per cent of respondents.

Whether a donor is an individual, a family, a small business, a community or a community organization, our overarching goal is to build on that support through trust – every day.

The emergence of social media have given organizations additional tools to increase their transparency and accountability – and we believe that is a good thing.

Canadians keep setting the bar higher on the expectations of their donations and we are open to learning and improving how we operate in Canada and globally.

But just as you scrutinize the work, funding and disbursements of donor funds by charities, so too should you scrutinize the methods and purpose of charity rating agencies. We share the responsibility of continual learning, adapting and improving with all Canadians.

Ultimately, donors hold the power in making our charity model in Canada more effective. And we encourage you to exercise that power.

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