What should you look for in a charity, and how should you evaluate one?
First, learn what exactly it does with the donations it receives. What problems is it addressing, and how does it aim to solve or lessen them? If possible, learn about the successes the organization has had in the past and the lessons it's gleaned from mistakes. Find out what plans it has for the future -- what are its goals, its new initiatives? These days, you can usually learn a lot about a charity at its website.
Examine its financial record, too. Ideally, the charity will lay out its finances clearly on its website. You should be able to see what percentage of dollars donated go toward actual program work rather than administrative or fundraising efforts. The higher that percentage, the better -- for the most part. Many sources recommend that 60% or more be spent on program work, but a little digging will yield outstanding organizations that apply 80% or 90% or more to program work.
Still, don't automatically begrudge a charity, especially a small one, its necessary overhead expenses. It does need to maintain a photocopier, pay some salaries, and fund some travel. You just don't want to see these numbers be extraordinarily high. Also keep in mind that many charities are extremely effective with their fundraising money. If they're able to bring in a few dollars of donations for each dollar they spend on mailings, then that money is well spent, even though it may be annoying to receive lots of mailings.
You can dig deeper into the numbers, too. Even if an organization says that 75% of its income goes toward its good works, see whether you can get an itemized breakdown of that. The organization might be including a sheet of educational facts in its fundraising mailings and counting that as program work instead of marketing. A term to look out for is "public education" -- that's often used for items that are essentially fundraising in nature.
Ask for or look up the organization's most recent annual report and IRS Form 990 filing. These should offer important details about where money comes from and goes. Inquire whether the charity is registered with federal, state, or local authorities. (You'll find many organizations' 990 forms at GuideStar.org.)
You can look up the charity's record with one or more of the watchdog organizations that evaluate charities -- such as Give.org. You might also contact the Better Business Bureau or the local Attorney General's office to see whether there have been any complaints about the organization.
If you have any dollars you can spare for some exceedingly worthy causes, check out our Foolanthropy charity drive. Meet some very impressive organizations.
