How to Vet a Charity

Recent news of charities being investigated for fraud may cause you to be wary of donating.  How can you avoid giving to charities that are fraudulent or lacking in good stewardship?

Fortunately, there are organizations whose purpose is to help you evaluate the performance of charities.checkmrk

Charity Navigator gives you a quick report card on a charity.  They have a 4 star rating system.  They evaluate:

How much money is getting to their programs to carry out their mission.

  • The fund raising cost per $1 raised.
  • Salaries and benefits package paid to the director compared to CEO’s of similar sized companies.

My dad was a WWII veteran.  My brother served in Iraq.  I have a passion for supporting veterans.  I looked up a charity that advertises regularly for veterans issues.  Their score was 3 stars and an 86%.  The Charity Navigator website also gave me suggestions for other charities with similar missions.  Some of these charities scored better and some were worse.  Vet

The basic report card is a free service.  If you want to drill down further, additional reports are available for a fee.

Charity Navigator covers charities with receipts of $1 million and up per year.  Not all charities are at that level of donations especially the ones in the local community.  GuideStar is a resource that can help evaluate the smaller organizations.

GuideStar reports the information a charity files on their 990, the tax form for non-profits.  They capture key financial information and present it in a simple format.  They give a summary of revenues from donations, fund raisers and investments.  Expenses are categorized by programs, administration, fund raising and other.  This is presented on one page.

From there it is a simple math step.  What is the percentage of program costs to the total revenue received?  This number should be at least 75%.  Charities are aware that this is the guideline and effective boards strive to meet or beat that threshold.

In the case of the charities indicted for fraud, looking them up at this time on Charity Navigator shows them tagged as Donor Advisory.  However, their 2013 tax filing information is on GuideStar.

For Cancer Fund of America, Inc., they report donations of over $8 million but less than $3 million in program costs or a measly 36%.  Other expenses were listed as over $4 million.  50% of revenue collected being classified as other expenses screams for an audit.  It may not be fraud without further evaluation.  But it sure isn’t good stewardship.  When giving my money to a charity – they better use it wisely.

Charities rely heavily on donations to fund their programs.  Over 70% of donations come from individuals as stated in the Report on Philanthropy from Giving USA.

Don’t let the abuse of a few charities discourage your giving.  Do your homework.  Check charities out using the websites www.charitynavigator.org and www.guidestar.org

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