The general social expectation is that funds donated directly or provided through tax benefits to charitable organizations should be used to perform good works in the community. It is assumed that these activities will be performed as efficiently and effectively as possible. This paper is a policy analysis using existing literature and data sources to explain the impact of current tax policy, and the value and shortcomings of employing financial efficiency and effectiveness measures to evaluate charities. The paper examines the social governance expectations accompanying these good works and the historical concerns on the constitutionality of government support for charitable activities. It examines the difficulty in establishing common standards to evaluate performance across the large and varied group of charities. Efforts to establish a common evaluation yardstick in both the public and private sectors are described. The paper concludes by highlighting the key public policy questions that should be addressed and provides recommendations for further actions.
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