Giving for Good: How to Judge a Charity

Is your approach to charitable giving more scattershot than specific? Do you wonder if the donations you make have impact?

If so, you’re not alone.

Experts in the philanthropic field recommend doing your research before writing a check to an organization.

“Review charities using a three-legged stool approach,” says Sandra Miniutti, chief financial officer of Charity Navigator, America’s largest independent charity evaluator. “The first leg is financial performance, what is the financial health of the organization? The second leg is accountability and transparency. Finally, what are the results of the work? Are they having impact?”

So how can you best determine which charities to finance? After verifying that the organizations vying for your dollars are 501(c)(3) nonprofits, follow these guidelines:

1. Identify your cause. What are your specific goals? If you want to support programs for autistic young adults, do you want to donate to the national Autism Research Institute, or someplace more local like Our Place of New Trier Township?

Adriane Glazier, a consultant who acts as an intermediary between donors and charities at Foundation Source, suggests that donors ask themselves questions like: “Is your goal to help find a cure for cancer in general? Or do you want to fund a particular research project that will make a difference in specific lives? Is leaving a legacy part of your goal?”

2. When telemarketers call, hang up, says Charity Navigator’s Miniutti. A 2011 study in California found that even some prominent charities, including Amnesty International, lost money that was raised through professional telemarketing fundraising operations. Overall, the charities got back an average of just 10 percent of funds raised by for-profit fundraisers.

3. Get beyond the storytelling. The emotional tug of your heartstrings can lead you astray when it comes to giving.  What you really need to know is if the charity can articulate its challenges and goals. Check out the website. Volunteer and find out firsthand what’s happening.

4. Do they need your money? According to Adriane Glazier, some organizations with large endowments may not be looking for smaller contributions.

5. Are donations used wisely? This gets back to the accountability and transparency question. Charity Navigator recommends that a baseline of 75 percent of donations be used for programs, 25 percent for administration costs. “Keep in mind that museums have higher overhead, food banks are the opposite,” Miniutti says. “Try to benchmark against similar organizations.”

Executive compensation is a thorny issue. Remember that these execs aren’t working for free, but Charity Navigator’s Miniutti says “When salaries approach $1 million, that’s unreasonable.”

6. Consider an annual charity budget. Just as it sounds, identify each year how much and where you want your money to go. Create a reserve fund for disaster relief that you can distribute on an as-needed basis.

However you choose to donate, consider these words from Andrew Carnegie: “It is more difficult to give money away intelligently than to earn it in the first place.”