What Predicts Sustainability of Canadian Charities?

2016

Date Source: 

Canada Revenue Agency

Organizer: 

Dr. Xu (Sunny) Wang, St. Francis Xavier University

 

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.

 

Research Question: 

  • 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?
     

Variables: 

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

 

Data Access: 


Sign up for an account at sync.com. Then send a request to lisa.lix@umanitoba.ca to join your share; the data files and data dictionary will then be shared with you.

 

References: 


Greenlee JS & Trussell JM. Predicting the financial vulnerability of charitable organizations. Nonprofit Management and Leadership, 2003: 11, 199-210.