Is the Money You Donate to Charity Going to the Cause, or into the Administrator's Pockets?

The Holiday season is upon us and many of us are in the giving spirit. Each year Americans donate thousands to their favorite charities during the holiday season.

Be aware that there are many scams run in the name of charity. Even in a legitimate charity as much as 50% (sometimes even more) of your donation may not go to the cause itself, but towards the administrative costs of the organization. For these reasons, it is important to make an informed decision when selecting a charity.

Luckily, there are free resources available on the Internet to help you determine how much of your donated dollar goes towards administration and other non-cause related expenses. This article examines three such resources: Charity Navigator (http://charitynavigator.org), Give.org (www.give.org), and the American Institute of Philanthropy (www.charitywatch.org).

Charity Navigator

There is a wealth of information at this site, which is itself a 501 (c) (3) non-profit organization. This site evaluates charities according to their financial health, organizational efficiency, and organizational capacity. The information is based on the IRS Form 990 that each charity is required to submit to the IRS each year.

The site is free, and most features are available to the general public. A few features require you to become a registered user (at no charge).

The site allows you to search for evaluations for specific charities by name, by category, or even by ratings. Once you have opened the evaluation of a particular charity you will see an overall rating and figures for the percentages that go to the program itself and to administration and fundraising. The page compares the charity's efficiency to the efficiency of other charities with a similar mission, lists the most recent income statement of the charity, and the name and salary of the leader of the charity.

The site also contains tips for donors and various other resources. This site was easy to use and understand. I found it to be extremely helpful.

Give.org

Give.org is the website for the BBB Wise Giving Alliance and is affiliated with Better Business Bureau system. It provides detailed reports of national charities. Its evaluations are based on standards which generally include the following areas: 1) how the charity governs its organization, 2) the ways the charity spends its money, 3) the truthfulness of the charity's representations, and 4) the willingness of the charity to provide basic information to the public. The complete list of standards is available online.

To find the report for a specific charity, you need to access their free National Charity Reports Index. When you view a particular charity's report, it will usually provide contact information for the organization, the year and state of incorporation, any affiliates of the organization, the stated purpose of the organization, and the conclusions of their evaluation. It also provides a description of the charity's programs, information on fund-raising methods, and information from the charity's financial statements.

The BBB Wise Giving Alliance also publishes the BBB Wise Giving Guide magazine, which is available for a donation. This site was fairly easy to use and very helpful.

American Institute of Philanthropy

The American Institute of Philanthropy is a nonprofit charity watchdog and information service. To get the information for the charity, they conduct an in-depth financial analysis of audited financial statements and other reports.

The site provides an index of top-rated charities by category. The grade of each charity is listed. Grades are A through F, just like in school. It appears that only charities with an A or B grade can be listed on the index of top-rated charities. Clicking on a link in this area takes you to the website of the charity.

The site also includes some helpful tips and some testimonials. For $40 dollars, you can become a member and receive a copy of the organization's triannual Charity Rating Guide & Watchdog Report.

Conclusion

If you are considering giving to a charity this holiday season, it is a good idea to research it using one of these handy tools.