'Tis the Season -- for Sensible Charitable Giving

The Tampa Bay Times and the Center for Investigative Reporting recently identified the "50 worst charities in America" -- charities they singled out because they "purport to help the needy, but devote pennies on the dollar to worthy causes."


Some background.

The Center for Investigative Reporting used as its metric that charities spend "no more than 35 cents of every dollar on fundraising costs." Their impression was that the worst charities "spend more than 80 cents of every dollar on fundraising." They further concluded that "charities that use telemarketing firms and fundraisers are far more likely to receive only a fraction of the money raised."

Without some tools to evaluate the great from the mediocre or the bad, it's physically impossible to be able to stay on top of which ones are doing good work and which ones aren't. It's not always best to take one person's recommendation, either. It's fine that your friend thinks such and such nonprofit helped them or someone they know -- but take that good recommendation and check it out with your available tools, too. Do what lawyers and others call your "due diligence," which only means, you've verified as much as you can what supporting evidence there might be to confirm what is otherwise often a fairly emotionally-based decision.

(On that note, look out for your elders, too. Charitable marketing phone scams are very big this time of year, and they are hard on the elderly in particular who may be moved to give beyond their means, or to non-deserving groups. You can print this article out and share it with an elder in your life, or keep it as a reference.)

But fortunately there are tools to help you decide. Some are tools you already have in your possession -- good questions for you or elderly family members to ask when people approach you for donations, either in person, on the phone, or online. Others are tools you can use on the Web to research the charities you or others you care about are contemplating giving to.

The tools you already have:

The tools you already have are your inquiring mind, and the ability to ask direct questions. You don't need the Web to do that, but the Web can assist you later on in your search. Some questions to ask, again from the Center for Investigative Reporting's work:
• "What is the full name of the charity?"
• "Do you work for a paid fundraiser?" (Or, "Are you a paid fundraiser?")
• "Will any local programs directly benefit? If so, how?" (And it may not matter to you that they do, but it might).
• "What is the website address for the charity?"

The tools you can find on the Web:

Two main sites evaluate charitable organizations in an impartial, Consumer Reports-like way, and give them a score -- and/or provide reviews. Those two sites are CharityNavigator.org, and GuideStar.org. But before you approach those sites to learn more, you need to have the full name of the charity, and its correct spelling. Many, many charities have similar-sounding names, and (see previous comment about scoundrels wrapping themselves in the flag) sometimes the intent is actually to confuse.

Look over the charity's marketing materials -- whether a brochure or the website itself. Does it say that it is an IRS 501(c )3 nonprofit? Look for that specific terminology. Not all charities are or need to be, but if you're contemplating a substantial donation only -- and want a tax write-off for it -- the charity needs to be. (Talk to your accountant or a tax professional if you have questions here. Many charitable donations are below the level where this status would matter - in other words, if you're not planning to itemize your charitable deductions.)

If you've established the nonprofit is a 501(c)3, then the IRS site itself has some materials you can review about the charity itself. You can go here to check what material the IRS has on a tax-exempt organization. So you can start there, or you can skip that step. Typically what it helps you do is narrow down the spelling of the name, and the full legal name of the charity -- and perhaps where it is located.

Now that you know some details about the charity, including its all-important full legal name, take that information over to one of the two main impartial charity-ranking sites on the Web, CharityNavigator.org and GuideStar.org, and check out what they have to say about the charity.

Keep in mind that it takes several things for a nonprofit to show up on their lists, impartially. One is that it has to be an IRS 501(c)3 -- see above -- and it may not need to be, especially if you're planning on giving just a small amount. But, if it is, it will show up there -- once those organizations have had a chance to receive the notification from the IRS about their tax status, and once enough time has elapsed for them to establish a record of the charity.

So, if it's a brand-new charity, with or without its tax-exempt status, don't expect it to show up on those sites immediately. But if the charity has been in business for a few years, and has its tax-exempt status, it should be -- or it will be soon. Keep checking back, every few months, if you're interested. Or give your dollars somewhere else, where the evaluation is available now.

Similarly, if you know of an organization that used to be good -- don't just assume it still is. Check it out and see, using CharityNavigator.org and/or GuideStar.org. Some organizations have management changes, direction changes, or go through cycles of using their contributions wisely and less wisely.

Along the way, you may come up with a few favorites of your own. Here are some of mine, though "your mileage may vary."

Additional Resources on Holiday Giving:
Charity Navigator's Holiday Giving Guide.
GuideStar's "Giving More Impact to the Giving Season."