It’s in the news again: charities with bloated administrative budgets and excessively compensated executives.
Recently, the Washington Post reported that “eight veterans charities, including some of the nation’s largest, gave less than a third of the money raised to the causes they champion, far below the recommended standard… One group passed along 1 cent for every dollar raised… Another paid its founder and his wife a combined $540,000 in compensation and benefits last year.”
It’s not illegal to spend exorbitant amounts of donated money for administrative costs and fundraising–and admittedly it’s a relatively small percentage of organizations that do. But if you’re among the Americans donating hundreds of millions of dollars to these organizations, and intending to help returning combat veterans by doing so, this is troubling news indeed.
“We are giving with our hearts and not our minds,” according to this month’s Congressional testimony by the president of American Institute of Philanthropy. “It is a national disgrace that hundreds of millions of dollars… are being squandered” by charities.
Informed Giving
Americans’ charitable donations will approach $300 billion this year–roughly half contributed between Thanksgiving and year-end. So, at a time when you’re likely to be giving to charity, how can you ensure that your donations will be used wisely?
There’s just no substitute for personal experience or in-depth knowledge. If you’re planning to give to a new charity this year, it pays to do your research rather than responding too quickly to an emotional appeal or other pressure.
A charity should be willing to provide you with information you need to make an informed decision, such as its mission statement, a list of its board of directors, and its latest financial statements or an annual report. Much of this information is available in the charity’s publicly available IRS Form 990.
There are also a number of online tools that can help.
GuideStar
GuideStar’s mission is to revolutionize philanthropy and nonprofit practice by providing information that advances transparency, enables users to make better decisions, and encourages charitable giving.
For potential donors, the organization’s website provides a free search tool encompassing more than 1.7 million nonprofit organizations.The advanced search option helps you to find organizations by key word (for example, university,veteran, or children), name, or location (i.e., city and state).
When you find an organization that meets your general criteria, you can view an online report that includes its contact information and general statistics, an explanation of its mission and programs, financial and operational information from its IRS Form 990 (and sometimes an annual report), as well as whether your contributions are tax deductible.
When you’re ready to make a donation, you can even donate online through GuideStar.
American Institute of Philanthropy
The American Institute of Philanthropy is a national charity watchdog organization with a mission to help donors make informed giving decisions.
To help you give more effectively, the organization’s website includes a number of useful tips and tools–including a list of important factors to consider in making charitable donations. You can review all ten considerations online.
The website also provides a free, categorized list of top-rated charities.
