Charitable giving often comes to mind this time of year. The holidays might have you thinking about the less fortunate, or charitable donations might be part of your year-end tax strategy. Whatever the reason, make sure the group you choose will put your money to good use and not spend it on big salaries for its executives or huge payments to professional fundraisers.
The easiest way to research national charities is with the three major charity watchdogs: Charity Navigator, CharityWatch, and the BBB Wise Giving Alliance. They rate charities based on how they spend their money, protect donor privacy, govern themselves, and more. Some have tools to sort and search for organizations and reviews. They use somewhat different criteria and don't always agree, so check out a charity with all three groups. (Only CharityWatch requires a donation for full access, although it provides useful information without one.) The watchdogs don't always rate the same charities, so look for a charity that has high ratings by at least two of them. Sometimes the BBB Wise Alliance says it didn't rate a charity because the group did not provide the information necessary for an evaluation. Take that as bad sign. It could mean the group knows it wouldn't meet the watchdog's standards. In any case, if a group wants public support, it should cooperate with the watchdogs.
Generally the watchdogs don't rate religious organizations, although you might find some listed, especially if they solicit money from the general public.
Figuring out which small, local charities deserve your support is tougher because many aren't rated by the watchdogs. Regional BBBs have evaluated about 10,000 local groups; these reports are available through the BBB Wise Giving Alliance.
One option is to give through a fundraising federation, such as the United Way, which screens groups for you. You can evaluate a charity yourself by looking at its annual report, audited financial statement, and IRS Form 990, which includes, among other things, the salaries of the group's highest paid employees. You might find those documents on an organization's website, or you can ask the charity to send them to you. (If it refuses, give elsewhere.)
You also can find a group's IRS Form 900 at GuideStar.org. Free registration is required. At GuideStar, you also can read and write charity user reviews.
Some additional advice:
- Verify tax-exempt status. If you're not sure about whether donations to a particular charity are tax deductible (don't assume they are), confirm a group's tax-exempt status by visiting the IRS website.
- Give directly. If you're contacted by a professional fundraiser for a charity you want to support, hang up and give directly instead. Fundraisers often take 40 to 80 percent of the proceeds. In some cases, charities get nothing, or they can end up paying fundraisers more than they take in, leaving them with a loss.
- Request privacy. If you don't want to be bothered by endless fundraising appeals, tell groups you support that you don't want your name and contact information to be sold to other nonprofits. You can also ask the groups not to send you further appeal letters or e-mail. Check the charity's privacy policy before giving.
- Be on guard for sound-a-likes. Some low-rated charities have names that resemble those of high-rated ones. For example, there's the low-rated Parkinson Research Foundation of Sarasota, Fla., and the high-rated Parkinson's Disease Foundation of New York. Be sure you're giving to the right group by carefully checking the name and address.
—Anthony Giorgianni
This article was adapted from the December 2012 issue of Consumer Reports Money Adviser.
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