How to Evaluate Your Charity Choices
New charity scams come to light every day. With 1.8 million nonprofits registered in the United States, it is not easy to tell whether a charity you’ve never heard of is legitimate. How do you make sure your donated money is not going to waste? Whether you’re looking for a nonprofit to help clobber climate change or keep water clean, there are resources to help you find the best nonprofit organizations and avoid charity fraud.
According to the Federal Trade Commission, there are several red flags for charity scams. Scammers will try to rush you into donating, may thank you for previous donations you haven’t made, and will talk about the cause more than the charity’s work. Any references to “sweepstakes” as part of a charity campaign are suspect and may even be illegal. Scammers often use names that sound like better-known charities and fake a local number on caller ID. That’s why researching an organization before donating is so important.
Is It Legitimate?
The IRS’s Tax Exempt Organization Search tells you if your donation would be tax deductible. The resources below will help you find out even more about the charity you are considering.
Is It Efficient?
Charity Navigator is the largest charity evaluator in the U.S. They evaluate registered 501(c) (3) charities meeting a minimum size that file a Form 990 with the Internal Revenue Service for seven consecutive years. Charity Navigator examines a charity’s financial health and governance. They do not evaluate a charity’s effectiveness.
Charity Watch evaluates extensive financial documentation to determine two ratings. “Program %” is what’s left for programs after overhead. “Cost to Raise $100” looks at the percentage of their budget dedicated to fundraising. For some charities, additional information is provided about governance, staff salaries, and relevant news.
The Better Business Bureau maintains charity reports. They evaluate 20 standards, ranging from governance to efficiency and the quality of donor communications. They also report any complaints lodged against the organization.
Is It Effective?
Guidestar requires an account to view in-depth profiles on 2.7 million currently and formerly IRS-recognized nonprofits. GuideStar’s Gold Seal of Transparency is earned by providing qualitative information about how the organization aims to achieve its goals. The Gold Seal will soon be visible on Charity Navigator profiles.
Another Charity Navigator partner, GlobalGiving helps nonprofits be more effective. They provide an additional layer of vetting and due diligence for donors. GlobalGiving-vetted charities are given Partner, Leader, or Superstar status.
Online fundraising platform Classy’s Progress website offers a framework that helps nonprofits self-report the impact of their programs. Donors need an account to access nonprofit profiles. The annual Classy Awards recognize innovative work from nonprofits around the world.
We All Make Mistakes
It’s easy to let your heart get ahead of your head, especially when scams are sophisticated. If you are the victim of a scam charity, report it to the Federal Trade Commission and your state charity regulator. Give them the name of the organization or fundraiser, phone number, and what the fundraiser said. The information you provide can help others give more wisely.
This article was originally published on March 19, 2019.