Before writing a check to a charity you want to support, take a minute to do your homework and make sure your donor dollars will be well spent. It may surprise you but some well-known organizations spend an overwhelming amount of money on administrative costs. For example, The New York Post points out that Sting’s Rainforest Foundation is particularly ineffective with its donor’s dollars. In 2006, a benefit concert for the Foundation raised $2,156,989, but only $887,374 (41%) of that money went directly to the cause. As a rule, a trustworthy charity should be spending between 75 to 80% on programs. Fortunately, there are a number of tools to help you do your research on nonprofit organizations.
The American Institute of Philanthropy’s Charity Watchdog gives clear information on national organization’s financial standing to help rate charities. Charity Watchdog uses an A-F letter grading system that analyzes how much it costs for the charity to raise $100 and what percentage goes directly to the cause. Another factor in rating is the willingness of the organization to provide the necessary documents to properly grade the charity. Charity Watchdog recommends to check the guide each time you plan on donating to see if the rating changed.
GuideStar offers a general account and a premium account. For the majority of donors, registering for the free general account will be sufficient. The guide offers facts about the charity in which you are interested and allows you to donate at the click of a button. In order to see reports and financial data, you need to be a premium member. However, with the general account, you’ll have access to organizations’ 990 forms, which show you how much money is going towards programs. What’s particularly helpful about GuideStar is that you can search for specific types of organizations. For instance, if you’re interested in donating to theater programs, you can search for “A65–Theater” and a list of options will come up.
Charity Navigator assesses the efficiency of over 5,300 charities in the United States. With top ten lists and helpful tips, Charity Navigator offers a broad range of knowledge on information about donating to charity. The information on Charity Navigator is user-friendly; it features: a four star system to rank its charities and easy-to-read and graphs that detail finances. Charity Navigator also allows users to comment and give feedback on each charity.
Better Business Bureau
The Better Business Bureau’s Wise Giving Alliance accreditation is considered the gold standard in charity ratings. Accreditation from the BBB points to an excellent organization. When looking at charities, the BBB considers “how they govern their organization, how they spend their money, the truthfulness of their representations, and their willingness to disclose basic information to the public.” Additionally, the BBB has 20 standards charities must meet to insure the organization is efficient, active and ethical.
While conducting your research it’s important to remember that rankings and stars aren’t everything. If there is a particular organization with a low ranking, to which you would like to contribute, call them and ask for an explanation. Sometimes the answer is as simple as the charity filed their 990 tax forms improperly. Use your research and your judgment to pick a charity you are comfortable impacting financially.
TIP: Be wary of donating online without researching a site first. Recently, a scam artist made a fake website similar to presidential candidate Barack Obama’s website, and used donations for personal use. For more information, go to the FBI’s website to view tips for avoiding charity fraud.
Originally Posted : September 11,2008 on NJ.com