May 29, 2013
You want to give to a charitable cause, but you can’t decide which one because you receive so many solicitations.
How do you know which one to give to – and where your hard-earned dollars will do the most good?
GuideStar, a nonprofit group that helps donors investigate charitable groups, recommends the following five steps to determine which charity deserves your donation.
1. Clarify values and preferences. What means the most to you? The arts? Animals? Health research? Consider the type of charity that you would have the best connection with, including whether it would be a large charity or a small one, as well as if you would prefer local, national or international.
2. Focus on the mission. Make sure the nonprofit has an easy-to-understand mission that aligns with your principles and beliefs. You can look up a specific nonprofit in GuideStar’s database (www.GuideStar.org) of more than 1.8 million organizations, or use the advanced search to find charities by category, size and location. The mission should also be easily found on a nonprofit’s website.
3. Verify the charity’s legitimacy. There are sham nonprofits out there, and some charities that used to be tax-exempt no longer are. Verifying that the IRS currently recognizes a nonprofit as a tax-exempt organization is imperative and can be done at the GuideStar site. If the charity is not on GuideStar, ask to see its IRS letter of determination. If the organization is faith-based – churches and other religious nonprofits are not required to file with the IRS – ask to see its official listing in a directory for its denomination.
4. Trust your instincts. If you still have doubts about a charity, don’t contribute to it. There are usually multiple nonprofits focusing on a similar mission, so find another that does the same kind of work and makes you feel more comfortable.
Reputable charities:
- Are willing to send you literature about their work or direct you to a website.
- Don’t use pressure tactics and will take “no” for an answer.
5. Dig deeper to get the facts. Once you find a nonprofit that meets the previous requirements, dig deeper. Closely review the organization’s GuideStar profile, visit the nonprofit’s website, read its annual report, or look into recent media articles to learn more about its programs and how it spends donation dollars.
A reputable organization defines its mission and programs clearly, is transparent about its inner workings, has measurable goals and uses concrete criteria to describe its achievements, and is open about programs and finances.
What questions should you ask a nonprofit before giving to it? GuideStar recommends:
- How are you collaborating with similar organizations on a local, regional or national level?
- What are the main obstacles that inhibit the fulfillment of your mission? How are you planning to overcome them?
- What are your annual goals, needs and results? How do they compare to similar organizations in your community?
- How much turnover have you experienced of employees and board members in the last two years?
- To what degree have you attracted new people and new ideas to your organization and board?
- How well have you utilized your funding? Describe how efficiently you have fulfilled your goals of recent years in relationship to the amount of funds you have raised.
- Most for-profit organizations have restructured themselves in recent years to become more efficient and productive. How, if at all, are you considering (or have you implemented) some version of this approach?
- How efficiently is your organization run? To what degree have you assigned day-to-day management responsibilities to a tightly run executive committee instead of relying upon your full board?
- Who are your main competitors, and how do your results in recent years compare to theirs?
This article was originally posted on May 29, 2013 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at marketing@grfcpa.com.