How to Check Out a Charity Before You Donate

Step-by-Step Guide

1. 1

   Step 1: Check to make sure that the organization you are considering is a good one.

   Is it well-regarded among the community (in particular the people it aims to benefit)? Is it criticized much? Is it considered one of the best charities in its area?
2. 2

   Step 2: Check how they spend their money.

   What percent of your donation will actually go to the cause? It's natural for some percentage to go to administrative costs and miscellaneous expenses that are necessary in running a charity.
   
   However, some charities are more cost-effective than others.
   
   The standard is 25 percent for administrative costs and actual fundraising.
   
   The rest should go for the charity programs. , To know this, you will need to know what the mission statement is and if it has clear goals.
   
   For instance, if it is a program to help abused children, see how many children or their facilities have been assisted in a given amount of time. , Charities must file a Form 990 with the IRS.
   
   If it isn't on their website, call and ask for a copy.
   
   One year of negative returns isn't necessarily bad, but several years is a sign that it is at the end. , They are difficult to maintain in hard times, but they are always needed for potential capital.
   
   A good heuristic (rule of thumb) is to have at least six months to a year's worth of working capital. , This is often attached to the charity's annual report.
   
   What this contains is the auditor's opinion of the charity's 'health'.
   
   One word that you should look for is unqualified.
   
   This is in reference to the charity's finances.
   
   Qualified would mean there is some kind of problem.
   
   If there is, the auditor will state what that is. , Consider this in relation to how much the charity operates on.
   
   High administrative costs, or large salaries to founders and executives, suggests that this charity's goals are not completely charitable. , Most states will require registration for charities that solicit within their borders and also track complaints against them.
   
   If your state does not require registration, look for information in states that do, such as New York, which provides a searchable database.
   
   The Better Business Bureau also tracks complaints against charities. , Do people take issue with how the charity behaves, and do these people have a good point? Do the benefactors feel that the charity is helping them or hurting them? Look for voices such as...
   
   The (supposed) beneficiaries:
   For example, Autism Speaks is widely criticized by autistic people for excluding and stigmatizing them,and some breast cancer campaigns (e.g.
   
   Coppa Feel) focus on sexy ads that upset survivors.Critics who believe in the same causes:
   For example, animal rights activists have expressed discontent over PETA euthanizing over 90% of the animals in its shelter., Don't set your heart on one particular group right away; instead, look for all top-rated charities related to the cause you wish to support.
   
   Examine how they spend their money, what they do, and how well it matches up with what you believe in.
   
   Then find the charity you believe is best.
3. 3

   Step 3: Look for concrete results.

4. 4

   Step 4: Find out what their assets are.

5. 5

   Step 5: Check into their capital reserves.

6. 6

   Step 6: Look for an auditor's commentary.

7. 7

   Step 7: See who is getting paid how much.

8. 8

   Step 8: See if there are any complaints.

9. 9

   Step 9: Look for criticisms of the charity.

10. 10

    Step 10: Examine related charities.

Detailed Guide

About the Author