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How to Choose and Evaluate a Charity Before Giving

WebMD discusses how to find out more about a charity before making a donation.

Donating to a health-related charitable cause, either in your own name or as a gift or tribute in someone else's, can be a personally gratifying experience. But if you find out later that the organization you gave to is not reputable or trustworthy, is poorly managed, or is an outright charity scam, the experience can also be heartbreaking.

That's why it's so important to do your research ahead of time to properly vet an organization before sending in a check.

"Unfortunately, the vast majority of donors don’t bother to check out charities before contributing," says Bennett Weiner, chief operating officer of the Better Business Bureau (BBB) Wise Giving Alliance. "As a result, some will be very disappointed to later learn that the charity may not be carrying out the activities the donor had in mind or may not be well managed."

Laurie Styron, an analyst for the American Institute of Philanthropy (AIP), adds that many people mistakenly assume all charities are worthwhile, or that they are monitored by the government to ensure they are fulfilling their mission

"In truth, under the First Amendment, the government is not allowed to mandate that a charity spend a minimum percentage of your donations on bona fide charitable programs,” says Styron. “Charities just have to show that they are doing something charitable, which in the worst case can mean that only 1 percent of what you donate will be used for charitable programs."

The good news is that there are steps you can take to vet charities on your own.

Step 1: Put Away Your Checkbook or Wallet Until You Know More

Resist any pressure to donate right away. "Be wary of any appeal that is demanding an on-the-spot donation decision," says Weiner. "Legitimate charities will be happy to receive your gift at any time and won’t pressure you to give immediately."

Step 2: Visit the Organization's Web Site

Chances are that any legitimate charity has a web site, and it's well worth the keystrokes and mouse clicks to check it out. Take time to look for key information about how the organization is run.

"Does [the web site] provide easy access to fundamental pieces of information such as a description of current activities, a roster of the board of directors, and electronic access to the most recently completed IRS Form 990, the annual financial form filed with the IRS?" asks Weiner. If this type of basic information is missing, it may be a red flag.

Step 3: Consult Your Nearest Search Engine

While you are online, type the name of the charity into a search engine. You may find critiques of the organization or insights from news coverage.  Sometimes, you may find that an organization isn't the one you thought that it was, but merely has a familiar name -- an occurrence that frequently happens.

"Many charities have extremely similar sounding names,” says Weiner, “so be sure you are donating to the group you intend. For example, Charitywatch gives the Breast Cancer Research Foundation an A+ rating for spending 92% of its expenses on charitable programs, but gives Breast Cancer Relief Foundation an F grade for spending only 5% on programs. One word can make all the difference."

Step 4: Ask Questions

As a potential donor, you should not hesitate to ask straightforward questions about how charities spend money. While all organizations have overhead costs to consider and money to invest in further fundraising, the best charities devote the bulk of their donation money to actual services. In fact, AIP's standard for a "satisfactory" charity rating (grade C) is one that puts 60% of its funding toward services. Higher ratings are reserved for groups that spend 75% or more on programs.

But don't just take these numbers at face value -- ask follow-up questions about precisely where the money goes. Some groups consider things such as expensive telemarketing or direct mail fund-raising campaigns to be types of "outreach" or "education," which is a bit of a stretch. Some questions you may want to ask include those around fundraising, how much the group invests in research initiatives, which of their programs have been most effective,  and how many individuals the group has served in recent years.

Step 5: Make Sure the Charity Is Properly Registered

Most states require that charities and other nonprofit groups register before soliciting contributions. Checking with the agencies that govern these groups is an important step on your checklist before moving forward with making a donation.

Step 6: Check With Charity Watchdog Groups

Groups such as the BBB Wise Giving Alliance and AIP's Charitywatch are always great resources to turn to when choosing a charity. Both organizations offer a wealth of helpful information on their web sites. Additionally, AIP's Charity Watchdog Report is published three times a year and is available by mail for a modest shipping and handling fee.

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