Thrifty Thinking: How to Make Smart Charitable Choices for End of Year Annual Gift-Giving

Take a wild guess – how many registered charities are there in the United States? You might be surprised to know that there are approximately 1.5 million registered nonprofits, according to the NationalCenter for Charitable Statistics. So, how does a person select the right charity to support especially around the holiday season, which brings in the most charitable dollars than any other time of year? Here are some resources you can use to find the right charity that meets your desire to help someone or some cause as well as questions you can ask the charity or charities once you make your selection.

What are the best Charity Watchdog Organizations?

Donors are in luck because there are three extremely reputable groups that have been monitoring and ranking charities for years:

1. Charity Navigator has been in existence since 2001 and gives a Star Rating 1 through 4, one being the lowest, 4 being the highest for about 7,000+ best known and lesser known charities. It examines the charity's efficiency by looking at its financial health, accountability and transparency. Charity Navigator is now looking into adding an “effectiveness” rating, how effective the charity has been in carrying out its mission. I happily serve on the board of Operation Homefront, which provides emergency financial and other assistance to the families of our service members and wounded warriors. From personal experience I can share with you that, when I speak with donors and ask “How did you hear about us,” 9 out of 10 people say they searched Charity Navigator and we have a 4-star rating. That gives them confidence that when they give to Operation Homefront their gifts will be used immediately and to help those who serve our country.
2. GuideStar gathers information on IRS-registered nonprofit organizations. It provides information on the nonprofit's mission, legitimacy, impact, reputation, finances, programs, transparency, and governance. Tax exempt organization must file an annual Form 990 which lists the charities’ income, spending, mission and executive salaries. Most people use it to compare charities or to check to see if the charity is spending charitable dollars on high salaries or high overhead costs.
3. BBB Wise Giving Alliance monitors and assesses nonprofits using a set of 20 guidelines, and publishes over 1,000 comprehensive reports on charities that evaluate their key attributes of accountability.

What are the red flags to avoid?

Once you have narrowed down your search, you can go to the charity’s website and view or download the past 3 annual reports. Having worked in the nonprofit sector for over 20 years, let me share with you some secret tips in these reports that will help you with your selection:

1. Board and Staff Turnover. Simply compare the names listed in the last 3 annual reports. If you see different names year after year in either the board or the staff that signals something is not right. Many organizations have a 1-year board requirement (most have at least 2-3 with the right to renew for a second term) but you should see some names with consistency. Also, if the organization has different executive directors or directors of development that look like a revolving door, that signals a great dissatisfaction with the organization. If you really want to contribute, I highly suggest a telephone call to the CEO or board chair and ask, “I’ve been reading over your last few annual reports and see a tremendous turnover in board/staff. Can you tell me why?”
2. Where did the funds go? Most reports have the pie chart that shows the breakdown of where the funds go. Make sure a majority, at least 80%, of the funds raised are going direct to services or programs that matches the mission of the organization. For example, if a pet and animal charity has a mission statement that its purpose is to “rescue stray animals” in your community, yet the annual report shows that 20-40% of the funds went for “advocacy” purposes, you have to decide if you want to support advocacy or immediate rescue of stray and neglected animals.
3. Where did the funds come from? Giving USA 2014 (http://www.givingusareports.org) reports that a total $335.17 billion was raised in the United States. 72% came from individuals. If you add bequests (because it is an individual who places a charity in a will), total individual giving is really 80%.

Compare these ratios to the charities you are interested in supporting. If the organization is too reliant on foundation or corporate giving, there is a warning sign that they are not moving in the direction of individual giving, which is the largest giving area. This would merit a telephone call to the chief fundraising officer and ask “What strategies do you have in place to capture more individual gifts,” and add “Is this part of your strategic plan?” If they answer yes, request they send you a copy of that plan. You want your hard-earned dollars to go the organizations that will use that money wisely – so, ASK wisely!

Information from Laura Fredricks, owner and CEO of THE ASK© for PHILANTHROPY, BUSINESS and EVERYDAY LIVING. Find out more: www.EXPERTonTHEASK.com.