How To Make Sure Your Charity Isn't Wasted

Personal finance

December 01, 2009|By EILEEN AMBROSE

Money is tight, so all the better reason to make sure the charity you donate to this year will use your cash wisely.

Now more than ever, you have tools at your fingertips to check out a charity, from its annual filings with the Internal Revenue Service to ratings by watchdog groups. Even just a few minutes of research can help you decide whether a charity is for you.

For example, I considered adding two charities to my annual giving. One mailed an appeal featuring cute kids in need. The other called and politely asked if they could send a donation request to me along with information about the charity.

On Sunday, I Googled the first to find an article about the charity. But the quick search turned up the charity's "B-" grade from the American Institute of Philanthropy, which concluded more donations could be going toward helping children if the group operated more efficiently.

A search on the other charity revealed that the nonprofit declined to disclose information to the Better Business Bureau.

Of course, this doesn't mean that the two don't support worthy causes. But I decided to pass on both for now and stick with charities I know better.

So, how do you go about checking out a charity?

First, don't be pressured into making a donation on the spot if someone calls you up or appears at your door.

"That's sometimes a ruse to get you to give without finding out more," says Bennett Weiner, chief operating officer with the BBB Wise Giving Alliance. A legitimate charity would be just as happy to get your money next week after you have had time to think about a donation.

Also, some solicitations feature pictures designed to bring tears to your eyes and open your wallet, but don't give without checking the charity out, says Daniel Borochoff, president of the American Institute of Philanthropy.

You can start by visiting the charity's Web site to learn more about its programs.

"Watch out for mistaken identity," Weiner says. Charities frequently have similar names, although some shady players intentionally mimic the names of well-known charities to confuse you.

Many organizations, such as political groups, are tax-exempt. Double-check that donations to the group are "tax deductible" if you want a tax break.

Check sites that rate charities, such as Charitynavigator.org, the BBB Wise Giving Alliance at bbb.org/charity and the American Institute of Philanthropy's charitywatch.org.

Critics complain that online ratings are too simplistic and don't measure a charity's effectiveness.

Still, the sites are a helpful tool for busy donors. Charity Navigator, for instance, rates 5,500 charities. It tells you what percentage of the charity's money is spent on programs versus fundraising and overhead. And it lists other charities doing similar work.

Check more than one site because each uses different criteria to judge a charity. Charity Navigator likes to see 75 percent or more of the money spent on programs; BBB Wise Giving suggests at least 65 percent.

You can dig deeper by checking the nonprofit's annual financial filings with the IRS at Guidestar.org. And most states, including Maryland, require a charity to register if it's raising money from residents. Some states even post the charity's audited financial statements online for donors. Search the Maryland's Secretary of State database at sos.state.md.us.

Look for charities that are forthcoming with information about their operations. "They should be more than willing to be transparent and open their books," says Sandra Miniutti, a vice president with Charity Navigator.

Also, concentrate your donations, giving, say, $100 to one charity instead of $10 to 10, Miniutti advises. Charities are more likely to sell your name to others if you're a very small donor. "That's the best way they can make money off you," she says.

Check the charity's donor privacy policy if you are concerned about what the group will do with your information.

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