This is the time of year for giving and receiving. As your mailbox fills up with solicitations from nonprofits – everyone from the Salvation Army to the World Wildlife Fund – how do you know which ones are worthy? And even more important, how can you tell which ones you should steer clear of?
One of the criteria most people are concerned about when choosing a charity is how efficient they are.
- Does the charity spend all of its revenue on fundraising, or
- Does a good portion of the contributions received directly support service programs?
- A rule of thumb is that 60% or more of your contributions should directly support programs.
How to find reputable charities
There are many highly rated charities to choose from, and fortunately, there are reputable online resources to help you narrow the field and select organizations that are making a positive impact on the causes you want to support. Whether you’re interested in a small number of top-performing charities, or learning more about charities in certain categories, you can find reliable information on these online research and watchdog organizations’ websites:
ProPublica’s Nonprofit Explorer – tax return data for nonprofits.
GuideStar – provides information about each nonprofit’s mission, legitimacy, impact, reputation, finances, programs, transparency, governance.
GiveWell – in-depth research aiming to determine how much good a given program accomplishes (in terms of lives saved, lives improved, etc.) per dollar spent. GiveWell focuses on the few charities that stand out most in order to find and confidently recommend the best giving opportunities possible.
CharityNavigator – uses unbiased, objective, numbers-based rating system to assess over 7,000 of America’s best-known and some lesser known, but worthy, charities. Examines two broad areas of a charity’s performance – their financial health and their accountability and transparency.
Give.org (Better Business Bureau Wise Giving Alliance) – helps donors make informed giving decisions and promotes high standards of conduct among organizations that solicit contributions from the public. Evaluates nonprofits based on 20 standards covering governance and oversight, effectiveness, finances, and fundraising and informational materials.
CharityWatch – America’s most independent and assertive charity watchdog. CharityWatch delves deep to find the real story of how efficiently charities use donations to fund the programs.
Avoiding the bad apples
The online resources list above will also give you reports on charities that have low ratings based on poor performance.
There’s even a list of “America’s Worst Charities.” In 2013 investigative reporters from CNN and the Tampa Bay Times collaborated to produce a report on the worst charities in the country based on the percent of funds spent on direct aid. The analysis was based on 10 years of results.
The number one worst organization was Kids Wish Network, with only 2.5% of revenues going toward aid to children. According to the report, “Every year, Kids Wish Network raises millions of dollars in donations in the name of dying children and their families. Every year, it spends less than 3 cents on the dollar helping kids.”
This cautionary tale should motivate you to do your homework and make sure the charities you choose are worthy.
Giving Wisely – Tips
Here’s some advice from CharityWatch, referred to by the New York Times as “the pitbull of watchdogs,” on how to choose a charity:
- Know your charity – request written literature and a copy of the charity’s latest annual report.
- Find out where your dollars go – 60% or more of your contributions should go to program services.
- Do not respond to pressure – no legitimate organization will pressure you to give immediately.
- Keep records of your donations – do not give cash; keep a record of all contributions of any amount.
- Remember that tax-exempt is not the same as tax deductible. Tax-exempt means the organization doesn’t pay taxes. Tax deductible means you can deduct your contribution from your federal tax return.
- Do no be misled by a charity’s familiar name – some unscrupulous charities are named to sound like other well-known charities to deceive donors.
- Do not be enticed by emotional appeals.
- Ask if the charity is registered by federal, state and/or local authorities.
- Beware of charities offering gifts – if a charity offers a gift, you are not obligated to donate.
- Consider giving generously once you have done your homework.
If you have been blessed with resources enough to share, make sure your charitable donations count by choosing charities that have a proven track record and consistently demonstrate the highest standards of conduct.