Overview
A charity is a type of organization that focuses on non-profit and philanthropic goals. Charities may undertake activities that focus on relief of poverty (e.g., food banks, low-cost housing units), advancement of education (e.g., universities, research institutes), advancement of religion (e.g., places of worship, missionary organizations) and other benefits to the community (e.g., animal shelters).
Financial data, including revenue from fundraising, revenue from the sale of goods and revenue from investments, as well as non-financial data such as the number of employees or the type of charity are all potentially important indicators of the sustainability of a charity. Like all organizations, charities are vulnerable to financial insecurity. This risk may be associated with the internal structure/characteristics of the charity, as well as the financial health of the environment in which the charity operates.
The global recession that began in 2008 had a negative impact on the sustainability of charities in Canada and worldwide. Many charities experienced a decrease in donations, while simultaneously experiencing an increase in demand for services. Investment income decreased. Some charities were not able to continue operations.
In this case study you will explore various characteristics of charitable organizations in Canada, primarily financial characteristics, to predict their sustainability.
Data Source
The study data are from the Canada Revenue Agency. Specifically, the data come from the T3010 Registered Charity Information Return. All registered charities, from small community organizations to large organizations with an international focus, must complete this return as part of the requirements of maintaining charitable (tax-exempt) status. The form contains a report of the charity’s activities, sources of revenue, and expenditures.
Each charity that provided a return between 2006 and 2008 is included. Separate datasets are provided for each year; these datasets can be linked together via the charity identification number, which is unique to each charity. The outcome of interest is the success of a charitable organization at continuing operations in 2009. There are many financial measures in the dataset, such as the ratio of capital assets to total assets, as well as non-financial measures, such as the number of persons employed by the charity.
The datasets are characterized by a large amount of missing data, which will need to be addressed in developing an analysis plan. As well, the datasets contain a large number of observations. While you can work with all of the observations, a sampling methodology may also be acceptable when approaching the research questions. Machine learning models should be considered for these data, given both the large number of observations and variables.
- What characteristics of charitable organization are associated with their success at continuing operations in 2009? How do different models perform to predict success?
- Conduct an analysis of only those charitable organizations that ended operations in 2009. What characteristics predict the end of operations?
- Within successful charitable organizations (i.e., those that continued operating in 2009), what factors predict their level of success? How do different models perform to predict success?
| Variable Name | Description |
| Class | Success (1) or failure (0) at continuing operations in 2009 |
| BN | Charity identification number |
| Province | Province in which charity is located |
| X1540 | Charity was linked to a provincial, national, or intemational organization (0 = no, 1 = yes) |
| X2100 | Charity carried on programs outside of Canada (0 = no, 1 = yes) |
| X2900 | Charity made gifts to qualified donees (0 = no, 1 = yes) |
| X3900 | Charity compensated any of its directors/trustees or like officials duing the fiscal period (0 = no, 1 = yes) |
| X3600 | The average number of permanent, full-time, compensated positions the charity had in the fiscal period |
| X3700 | The number of permanent full time positions for which the annual compensation was between $1 - $39,999 |
| X37102030 | The number of permanent full time positions for which the annual compensation was above $40,000 |
| X3800 | The average number of part-time or part-year employees that the charity employed in the fical period |
| R3850 | Ratio of total expenditure on compensation for part-time or part-year employees to total expenditures before gifts to qualified donees |
| R4100 | Ratio of cash, bank accounts and short-term investments to total assets |
| R4110_20 | Ratio of amounts receivable from all to total assets |
| R4160 | Ratio of capital assets to total assets |
| R4170 | Ratio of other assets to total assets |
| R4300 | Ratio of accounts payable and accrued liabilities to total liabilities |
| R4310 | Ratio of deffered revenue to total liabilities |
| R4330 | Ratio of other liabilities to total liabilities |
| R4500 | Ratio of total tax-receipted gifts to total revenue |
| R4530 | Ratio of total other gifts to total revenue |
| R4570 | Ratio of total revenue from government to total revenue |
| R4580 | Ratio of interest and investment income to total revenue |
| R4630 | Ratio of total revenue from foundrasing to total revenue |
| R4640 | Ratio of total revenue from sale of goods and services to total revenue |
| R4650 | Ratio of other revenue to toal revenue |
| R4800 | Ratio of advertising and promotion to total expenditures before gifts to qualified donees |
| R4810 | Ratio of travel and vehicle to total expenditures before gifts to qualified donees |
| R4820 | Ratio of inerest and bank charges to total expenditures before gifts to qualified donees |
| R4830 | Ratio of licences, memberships, and dues to total expenditures before gifts to qualified donees |
| R4840 | Ratio of office supplies and expenses to total expenditures before gifts to qualified donees |
| R4850 | Ratio of occupancy costs to total expenditures before gifts to qualified donees |
| R4860 | Ratio of professional and consulting fees to total expenditures before gifts to qualified donees |
| R4870 | Ratio of education and training for staff and volunteers to total expenditures before gifts to qualified donees |
| R4880 | Ratio of salaries, wages, benefits and honoraria to total expenditures before gifts to qualified donees |
| R4890 | Ratio of donate and purchased supplies and assets expensed for the fiscal period to total expenditures before gifts to qualified donees |
| R4900 | Ratio of amortization of capitalized assets to total expenditures before gifts to qualified donees |
| R4920 | Ratio of other expenditures to total expenditures before gifts to qualified donees |
| R4950 | Ratio of total expenditures before gifts to qualified donees to total expenditures |
| R5000 | Ratio of total charitable programs expenditures to total expenditures before gifts to qualified donees |
| R5010 | Ratio of total management and administration expenditures to total expenditures before gifts to qualified donees |
| R5020 | Ratio of total fundraising expenditures included to total expenditures before gifts to qualified donees |
| LRate | Ratio of total liabilities to total assets (Liability Rate) |
| RofReturn | Ratio of net revenue to total expenditures (Similar to Rate of Return for profitable enterprises: the net revenue received for every dollar spent) |
| FRE | Ratio of net revenue from fundraising to total fundrasing expenditures (Fundrasing Efficiency: the net fundrasing revenue received for every dollar spent in fundrasing |
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Greenlee JS & Trussell JM. Predicting the financial vulnerability of charitable organizations. Nonprofit Management and Leadership, 2003: 11, 199-210.