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Finances November 30, 2018 Amy L. Lauricella, Content Writer

Choosing The Right Charity: Your Guide to Giving Back

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The holidays are a popular time for contributing to charities—but with so many worthy causes competing for our attention and donations, choosing the right one or two can feel challenging. Giving wisely and with impact takes some time and thought. While the majority of charities are legitimate, there are a few scams out there that deliberately prey on the compassion of would-be donors. Other organizations may not have nefarious intentions, but nonetheless have poor track records for using their resources effectively. To ensure that the organization you choose for your hard-earned donation is both honest and effective, consider the following advice.

Choose a cause you feel passionate about.

According to the National Center for Charitable Statistics (NCCS), there are over 1 million public charities registered in the United States—which means there’s no reason to feel like you’re contributing your hard-earned money to an organization that doesn’t truly align with your values. Start by picturing what you would want to see your money accomplishing. Do you prefer to give back within your own local community, or do you reason that your dollars could go farther in a developing economy? Is there a cause that carries personal significance for you or your family, or is there an issue that you believe is of paramount importance around the globe? Rather than giving reflexively to a high-profile cause or one favored by your associates, go with the cause that you find genuine fulfillment in contributing toward.

Have high standards.

Some charities are very successful at campaigning for brand awareness, but not so effective at accomplishing goals for their causes. An organization’s well-known name does not automatically equate to a surefire guarantee that your money will be wisely and effectively spent. There’s no simple mathematical formula for quantifying a charity’s positive impact—but there are questions you can ask to help determine whether an organization has the best possible chance of achieving its stated mission.

Start your research on the organization’s website. Does the organization provide data that illustrates tangible results? Are the methods behind their programs backed by research? Next, try a Google news search. Can you find positive, independently researched stories about the organization in the press, or testimonials from individuals who have benefited from their programs? Another option, if the organization provides services or operates clinics, is to search online for reviews of those services: are they mostly favorable? Look for concrete evidence beyond a few photos and a feel-good story on the organization’s website.

Check in with these charity watchdogs.

For expert, unbiased evaluations of thousands of charitable organizations, check in with one of these three trusted, independent names. Charity Navigator has rated over 9,000 charities large and small based on two major criteria: “Financial Health” and “Transparency and Accountability.” Charity Watch bills itself as the “most stringent” of charity watchdog organizations, and provides reports with A to F ratings for widely known charities. And GuideStar compiles financial information and other organization details on numerous non-profit organizations in their searchable database.

Consider the numbers carefully.

All registered charities in the United States must file the IRS 990, and an honest, transparent charity will make the information on their 990 form easy for potential donors to locate. You can also get much of this information from Charity Navigator or GuideStar, but if you’d like to do your own research, you can glean some important insights on an organization’s inner-workings from the 990 form. Here are a few to consider:

Executive Pay

Registered non-profits should publicize the salaries of their CEO and any employees earning more than $100,000 annually, and that information can be found on page 7 of the IRS 990 form.

For many people, it can feel disconcerting at first glance to see that the CEO of a charity is making a six-figure salary. However, it’s not always realistic to imagine that an organization can retain experienced leadership without offering salaries that are at least competitive. To better discern whether a non-profit CEO’s salary seems reasonable, try comparing it against the CEO salaries at other similarly sized charities.

Professional Fundraising

It’s not uncommon or always inappropriate for a charity to rely on professional firms for help campaigning for funds. For many organizations, hiring professional fundraisers is more efficient than relying on staff and volunteers to rustle up much-needed donations. However, some charities have been found to spend an inordinately high amount on outsourced fundraising, and that doesn’t leave much money left for their stated mission. (A few so-called charities have been caught essentially splitting the take with for-profit fundraisers.) You can find information on a charity’s use of professional fundraising on their IRS 990 form in Part I, line 16a, column b, as well as in Schedule G.

Program Expenses

When you make a donation to charity, you likely envision your dollars going directly to programs that help people, animals, or the environment. You can determine what percentage of money goes directly to programs and services from page 10 of the IRS 990 form. In line 25, divide column B (program services) by column A (total expenses), then multiply by 100 to find that percentage.

In the past, “overhead”—the amount of money spent by a non-profit organization on administration and marketing expenses, as well as employee salaries—was widely considered the benchmark number for evaluating a charity. It’s certainly true that you should steer clear of supporting any charity that allocates the majority of its funds toward overhead expenses instead of programs and services. In fact, seven out of 10 of the charities listed by Charity Navigator dedicate at least 75% of expenses directly to their programs.

All that being said, a low overhead should not be the sole number considered when choosing a charity. There are some charities out there that do a lot of good but may have higher than average overhead costs, and this could be due to factors including the size of the charity or complexity of its programs. Prioritize proven results over low overhead when choosing where to give.

Growth of Program Expenses

If a charity is shrinking as opposed to growing, that means there’s a good chance they’re cutting back on the programs you aim to support. Look for signs of a charity that’s financially stable by checking the number in line 25b of page 10 of the IRS form 990 for the most recent year, and comparing it with the number reported in years prior. Ideally, you should see a pattern of growth.

Protect your personal information.

Any time you give your name and payment information to any organization, there are certain precautions you should take, and charities are no exception. If you make your donation online, look for a secure connection by checking the website’s URL field for “https://”’ plus a padlock symbol.

Also, check whether the organization has a donor privacy policy. This should state how and when they may use any internet data associated with your visits to their website, and whether or not they will share your name, mailing address, or other contact information with other organizations. Some charities may require that you formally opt out of their contact-sharing lists. So read the fine print, opt-out if you’d like, and make sure you feel comfortable with a charity’s privacy policies—and if you don’t feel comfortable, consider looking for another charity with a similar mission plus a more comprehensive policy.

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