Is anyone else a sucker for those Salvation Army bell ringers around Christmastime? I’ve already donated to at least three or four this year, and I am sure there will be many more Diet Cokes scarified this season in pursuit of those beautiful bells.
But if you’re like me, you’ve never really stopped to think about where your money is going.
It’s important to look into the charities you’re donating to, and I chose to include this topic in my gift guide since I am sure many of you want to support charitable causes this season or donate on behalf of someone else on your list.
As a disclaimer, it should go without saying I am no expert on this topic by any means. At work one of our favorite sayings is that “you need to know what you don’t know, and then find someone that does.”
So that’s exactly what I did.
I picked my friend Monique’s brain on her top tips for choosing a charity since she is a philanthropy expert at a national nonprofit.
Luckily, since we live in the golden age of the Internet (#hallelujah), getting the scoop on the charity of your choice is never more than a few clicks away. These are Monique’s top tips for analyzing nonprofits before you get out your checkbook this holiday season—
- Go to Guidestar.org and search for the philanthropy of your choosing, then click on financials to see what their program expenses are as a fraction of their revenue. A great charity to donate to would have about 80% of their funds going to programs and 20% going to overhead costs.
- In an ideal world, 100% of funds would be going towards causes, but administration and fundraising costs are necessary, so don’t dismiss a charity just because they have overhead fees. A nonprofit is still a business, and the most successful ones are run like for-profit businesses.
- It’s also worth checking out what the executive level positions of the charity of your choice are making, which are usually disclosed on Guidestar. You’ll be shocked to learn some of these positions are better paid than for-profit jobs!
- On Guidestar, you’ll see that some charities are given a bronze, silver, or gold exchange badge. That is a rating on transparency, not impact or scale of altruism. For instance, an extreme example to make a point is that charity could be 100% transparent that all of their funds go to terrorist groups, but will get a gold badge because they are open about it. While it’s important for a charity to be transparent, this rating should not be given too much weight when making a critical analysis of a charity since Guidestar does not verify whether or not the information provided is legitimate or truthful, it’s more a badge of how complete an organization’s profile is. (All you LinkedIn users out there will understand!)
- Be sure to look at what your charity of choice considers programs. Check the individual charity’s website and read their program pages with a critical eye—some programs are unnecessary or not-related to the charity’s core mission and that should be a red flag when considering a donation.
- When stores ask you to donate a dollar to a cause, be sure to inquire further on what organization your money will be going to. You’re usually not given the name of the specific charity, like American Cancer Society or the Center for Missing and Exploited Children. While it may be a small dollar amount, your dollar can be put to better use elsewhere if the store can’t provide you more information on where it will be going.
- Charity Navigator is also a great site when looking to evaluate nonprofits. While there aren’t as many listed, they do provide a more complete analysis of charities than Guidestar, where your critical analysis comes more into play.
The bottom line is that the Internet, while also a beacon for research, is full of falsified information, but the IRS forms you can find on charity evaluation sites don’t lie. Do your research before donating to a charity this holiday season, and see your dollar stretch even farther!