Vetting charities: a guide to giving and why you should do your research before donating

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INDIANAPOLIS – The season of giving is here, and if you are considering donating money to a charity, you may want to do some research first.

Many organizations are honest about where your dollars are going. But you can never be too careful.

“I think it’s a natural feeling that you’d want your gift making the most possible good,” said Michael Thatcher, President and CEO of Charity Navigator, the nation’s largest independent charity evaluator.

“Whether you have $10 dollars or $10,000, you still want a lot of good to be coming from that,” he said, “so doing some research ahead of time can really help you refine your choice so you’re giving to an effective organization.”

“Just like any investment, absolutely you should do your research,” said Gina Miller, Chief Operating Officer and Chief Financial Officer for United Way of Central Indiana. “One is just researching the organization to see if they are aligned in their mission and their work in what is meaningful to you. That’s the reason you’re doing it so that’s the first thing.”

A FEW WAYS TO VET CHARITIES

CHARITY NAVIGATOR

Nonprofit Charity Navigator breaks down thousands of the largest charities, and smaller charities, nationwide, and ranks them based on accountability to their donors. It’s free for anyone to use.

On their site, they rate and rank more than 160,000 nonprofits. “I think transparency is critical in the sense that there isn’t necessarily a universal measure of impact,” said Thatcher.

“If you think about it in the for-profit world impact is usually measured by return on investment on stock price or the valuation of the company. You can’t really do that in the nonprofit sector because nonprofits, in many cases, are providing services or they’re working on long-term advocacy issues.”

He said it’s much more complicated to measure the “return on investment” in the nonprofit world, so transparency by nonprofits is key to knowing where their funds are going.

“If you’re worried about where the money’s going, if they’re transparent, you’re gonna know where that is,” said Thatcher.

You can search a charity’s name, a keyword, or their employer identification number (EIN) on the website and view the breakdown of the charity if Charity Navigator rated it.

The profile for a charity will include the rating, financial performance metrics, compensation of that nonprofit’s leaders, breakdown of money spent on the programs a charity supports, historical ratings, their IRS (990) forms, and more.

“What we’ve tried to do with Charity Navigator is basically take that 990 and put it into a more readable format for you so that you’re able to actually get that information in a screenshot,” said Thatcher.

Like all tax documents, you should not expect light reading. be prepared to dive in if you decide to look at the 990 forms.

On Charity Navigator, highly-rated charities will have a four-star rating. United Way of Central Indiana is one of those. They received a four-star and a 97.73 score out of 100.

Experts say a general rule of thumb is charities should spend 70 percent or more on their programs and how they are achieving their mission, which means preferably 30 percent or less should be allocated to fundraising, administrative costs, and other expenses.

Thatcher this number should not be the only thing people base their decision to donate on, because it only shows what they spent, not what the nonprofit has been able to achieve.

He said people should be asking those types of questions to nonprofits directly.

According to Charity Navigator, United Way of Central Indiana spends 84.3 percent of its total expenses on the programs and services it supports, well above the 70 percent recommendation.

It also received a high rating on other similar sites that evaluate the nonprofit’s performance and accountability to its donors. “I’m proud to say the United Way has the highest possible ratings in all three of those,” said Miller.

Thatcher said 2020 has been a difficult year for everyone, including nonprofits. He recommends people view donations as an investment in a cause. He said, “the organizations that you’ve been supporting over the last few years, stay true to them if you can.”

“You may have less to give but give what you can and give within your means because it’s really – now is the time to give and be as generous as you can be and be smart in your giving.”

He encourages donors to think, “It’s not just a financial transaction, I’m actually part of some change that I feel strongly about and that’s a gift in and of itself that we get through giving.”

“When you donate, wherever that might be, think of it as an investment. It’s an investment in something meaningful to you and your family and your community,” said Miller.

CHARITYWATCH:

FOX59 spoke with Laurie Styron, Executive Director of CharityWatch, a charity watchdog organization that publishes in-depth, independent A+ to F ratings of charities. These ratings are to help donors understand how efficiently their donations to charities will be used.

“Top-Rated charities typically spend 75% or more of their annual budgets directly on programs, spend $25 or less to raise each $100 worth of donations raised, and have met benchmarks for good governance and transparency, such as maintaining an independent board of directors, and posting their current annual audited financial statements on their websites,” she said.

Styron offered tips for people researching charities they may be interested in donating to. The organization provides those on their website, as well as resources for donors to read.

She said people should never feel pressured to donate on the spot. “A lot of legitimate, efficient charities have their hands out this time of year, but so do a lot of fraudsters and predators.”

“In my experience, the best charities are proud of their program accomplishments and their financial track records and aren’t scared to let donors walk away and do their research before making a donation,” said Styron.

For people donating online, Styron said, “Give directly when possible through a charity’s official website or mailing envelope rather than through a third-party website raising money on behalf of a charity. Some third-party websites are legitimate, and others are not. Some take exorbitant fees from your donation prior to passing it on to the charity weeks or months later.”

OTHER RESOURCES:

Other sites donors can use to vet a charity include GuideStar and the Better Business Bureau’s Wise Giving Alliance.

Through a handful of ways to vet a charity, experts say you can make sure your donations are going to the cause a nonprofit says they are.

“Donors should always think of giving thoughtfully as being an essential part of their gift. 10 to 15 minutes of research can sometimes mean the difference between 85 to 90% of your donation going to a charity’s programs and 0 to 10% going to programs,” said Styron.

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