Giving from the heart can be a satisfying feeling. But when it comes to donating money to a charitable organization, it’s worth your while to do your research before you pull out your wallet.
One thing the best charities all have in common is that they make it easy for you to see where your contributions are going.
If you’re interested in charitable giving, an organization’s transparency should be important to you. In fact, it should be one of your biggest concerns.
How To Choose the Best Charities for Your Money
Unfortunately, there are many charities that make it difficult to tell how much of your donation is going to the actual cause and what’s allocated to things like operating expenses or fundraising.
In this article, I’ll lead you through four steps to help you choose the best charities for your donations.
1. Decide What You’re Passionate About
When it comes to giving, the well-known advice to “follow your heart” is quite appropriate.
If you’re passionate about different causes like animals, veterans, the homeless, or something else, you’ll want to prioritize those kinds of organizations so that your money can make the biggest impact where you want it to.
Money expert Clark Howard gives his time and money to several charities that he’s involved in. Here are a few of his favorites:
(Editor’s Note: Not all the organizations listed on the sites above are nonprofits.)
Once you find a charity that matches your interests, it’s time to do your homework.
3. Research the Organization Before You Give
To make sure your dollars will be spent well, it’s wise to learn as much as you can about the organization before you start writing checks. The following charity watchdogs make it easy to research organizations online:
Give.org is the website for the Better Business Bureau’s Wise Giving Alliance, which not only provides information for prospective donors but also evaluates and accredits charities.
Does it cost for donors to use Give.org? No
How it rates charities: Give.org rates charities based on 20 standards including complaints, donor privacy, conflicts of interest and more. On each report, you’ll see one of these symbols:
Green checkmark — “Meets Standards”
Yellow X — “Standards Not Met”
Blue question mark — “Unable to Verify”
Give.org also lets you file a complaint against a charity, read and write reviews, and get tips on giving.
CharityWatch is a nonprofit organization that has made it its mission to inform the public of wasteful or unethical practices by charities.
Does it cost for donors to use CharityWatch? There’s a free version, but the site asks for an annual donation of $50 to get unlimited access to its services.
How it rates charities: CharityWatch assigns a letter grade (A+ to F) to charities depending on their financial efficiency. The grade is based on the following two criteria:
Program %: This is the percent of total expenses a charity spent on its programs in a given year.
Here’s an example CharityWatch uses on its site: “A Program % of 80% means that the charity spent 80% of its expenses on charitable programs. The remaining 20% was spent on overhead, which includes fundraising, and management & general.”
Cost to Raise $100: This reflects how much it costs the charity to raise $100 in cash donations from the public in a given year.
Here’s an example CharityWatch uses on its site: “A Cost to Raise $100 of $20 means that the charity spent $20 on fundraising for each $100 of cash donations it received.”
Charity Navigator says it has rating information on 1.6 million nonprofits registered in the United States. That said, the site rates only charities that have generated at least $1 million in revenue for two consecutive years.
The site does a great job of rating large nonprofit organizations on how sustainable they are and for transparency.
Does it cost for donors to use Charity Navigator? No.
How it rates charities: Charity Navigator uses an overall score and star rating to rate charities. The ratings address two main categories:
Financial health: Charity Navigator weighs the financial information found on charities’ tax returns (IRS Form 990) against seven performance metrics to come up with a score (0 to 10) assessing solvency, efficiency, capacity and more.
Accountability and transparency: In addition to analyzing tax returns, Charity Navigator reviews charities’ websites to see if the sites make it easy for donors to find important information.
Combined Federal Campaign
This is a tip from a listener (thank you!). The Combined Federal Campaign (CFC) is run by the U.S. Office of Personnel Management (OPM). You can search the database of more than 20,000 organizations.
Does it cost for donors to use CFC? No.
How it rates charities: The CFC doesn’t necessarily rate charities. Instead, it provides a transparent view of the nonprofit’s mission, employer identification number (EIN), and Administrative and Fundraising Expense Rate (AFR).
4. Watch for Red Flags
Consumer Reports says that when doing your research, you should be able to see at least three things on a nonprofit organization’s website:
A list of the board of directors
The latest financial reports
If you can’t find those items on a charity’s website, it may have some transparency issues.
Clark says to remember these three things:
1. Make sure you have the organization’s name right. Many fake operations will use a name very similar to a reputable nonprofit’s. If you’re off by one letter or word, you could get scammed!
2. Avoid phone solicitations. “Never give money over the phone or on a street corner,” Clark says. “If someone calls you to solicit you, tell them, ‘Send me literature on your organization first, so I can look it over at my leisure.'”
3. Resist high-pressure sales tactics. Clark says if someone presses you to make an instant decision, the answer should be “no.”
If you do happen to fall for a charity scam, you may not be able to get your money back, but you do have some recourse.
You can report a charity scam at FTC.gov/complaint. You can also file a complaint with your state charity regulator and the National Fraud Information Center at Fraud.org.
When you call to report such a scam, make sure you share these bits of basic information:
What the fundraiser told you
It’s easier now than ever to investigate an organization to see if it’s as effective and honest as it may seem. As a recap, here are the four steps to take to choose the charities that deserve your money:
Decide what you’re passionate about.
Find a charity that matches your passion.
Research the organization before you give.
Watch out for red flags.
If you complete all these steps, you can gain peace of mind knowing more about where your money is going — whether the amount is large or small.
In the end, giving is not about how big your bank account is but about how big your heart is.
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