Three Tips for Choosing a Charity

December 1, 2014

Have you put off making your charitable donations for the year until the last minute? If so, you're not alone. A full 30% of annual charitable giving occurs in December, with 10% happening on the last three days of the year, according to a study conducted by Network for Good. It appears that we're a nation of procrastinators. One reason for the delay may be decision paralysis—with so many organizations battling for our cash, it can be hard to know which ones are really worthwhile.

Whether you're still trying to decide how to allot the money you have to give this year or are interested in updating the list of organizations you'll support in the coming year, it's important to know how to evaluate whether a charity if a good fit for you, both personally and financially. Below, we outline three questions that you should ask yourself before giving to a charity.

30% of annual charitable giving occurs in December. [Tweet this]

1. Is This Charity Aligned with My Passions?

Most of us have causes we're passionate about. Most of us also have limited resources available to share with others. Our time, talents and treasure aren't infinite, after all. If you whip out your checkbook every time someone asks for cash, you'll likely deplete your resources quickly. At the same time, you may also feel like your giving is unfocused and not really aligned with the issues you're passionate about.

Rather than trying to help everyone, consider choosing a handful of charities or causes that matter most to you and concentrate your giving there. For example, if a close friend passed away following a battle with breast cancer, you might decide that supporting research to find a cure for the disease is the cause that's most important to you. Or if you went on a life-changing mission trip to Africa, you might direct your efforts toward supporting charities that work in that part of the world. 

Once you've identified your passions, you can then research those issues, learn about where support is most needed, and hopefully find a few great nonprofits that do work you believe in. After you've identified a few charities you like, you can direct most of your time, talent and resources to those groups. By concentrating your efforts in this way, you'll have a bigger impact and be better able to see the positive impact of your giving.

2. Could This "Charity" Actually Be a Scam?

Unfortunately, there are scam artists who try to take advantage of people's generosity by setting up fake charities. These fraudulent groups may look and sound legitimate (they may even have names that sound similar to well-known and better-established groups), so it's easy for even savvy people to be taken in. Before donating to an unfamiliar organization, do some basic research. Check GuideStar, Charity Navigator and the Better Business Bureau's Wise Giving Alliance to see if they have information about the group. You can also check to see if the group is a registered nonprofit with the IRS.

Some warning signs that a charity may be illegitimate include:

  • Intense pressure to donate immediately, without giving you time to evaluate the organization
  • Not willing to provide proof that your contribution will be tax deductible
  • Providing vague or confusing information about how the organization is run or how your money will be used 

3. What Are the Organization's Financials?

Some charitable organizations are well-run and use their money wisely. Others are less financially responsible. As a donor, the burden is on you to research who you're giving money to and how they spend that money. Again, you can check with charity rating organizations to see how much a group spends on programs, administration and fundraising.  You can also look at an organization's annual report and its Form 990, the tax form that all nonprofits are required to file with the IRS.

How can you know if an organization is managing their money well? It's not always easy. Every organization is different, and there are no hard-and-fast rules about how much a group should spend in different areas. High staff salaries could be a sign of a bloated organization, or they could be an indication of a need to offer competitive compensation in order to attract qualified employees. A museum is likely to have higher operating expenses than a food bank, because the former has to spend more to maintain its collections. Still, if a group is spending a lot of money on fundraising and salaries, and little on programs, that could be a bad sign. Similarly, if the group has been around for a while and yet can't point to measurable achievements, that might also be an indication that something is amiss.

By doing your due diligence and being actively involved with the charities you support, you should be better able to see if the group you support is well-run and achieving its goals. If you're not happy with what you see, take your time and your money elsewhere.  With limited resources and seemingly unlimited needs, taking the time to make an informed decision about what charities you support simply makes good common sense.