Finding the Best Charity: A Guide to Giving

November, 2008. By

The blunt realities of today's economy—shrinking 401(k)s, declining home values, foreclosures—might have caused you to think twice about your charitable contributions this year. On one hand, giving is more critical than ever: charities face the double blows of reluctant donors in the face of rapidly increasing demands for their services. On the other hand, you want to make sure that the limited funds you have to donate are used wisely—and not simply contributing to a fancy boardroom table.

The quest to find the best charity-- efficient and well-managed-- may seem overwhelming. The giving possibilities are endless: Should you donate to a well-known national organization like Save the Children, or to a local homeless shelter? What about the person who calls seeking contributions to international relief efforts? Or the children going door-to-door on behalf of a church food bank?

While finding the best charity may seem like a daunting task, you can take a few calming breaths knowing that Top Of The List's web expertise is at hand with key tips on giving to help you along the way. Whatever your favorite cause, the following tips will help make the holidays a little merrier for your charity's beneficiaries, and will warm your own heart too:

Browse a Charity Guide

If you're unsure which charities you would like to support, consider visiting an online directory such as Charity Navigator. Over 5,300 American charities are listed by category, and cover causes ranging from animals and the environment to international relief to religion and human services. Within each list, you can filter results by charities' financial health ratings, size (in terms of total expenses), and scope of work (whether regional, national, or international). An added bonus is a guide to Highest and Lowest-Rated Charities by Cause.

Find a Charity Watchdog

Once you find a charity whose mission you support, your first step is to check its legitimacy and reputation on one or more independent charity watchdog sites, including the American Institute of Philanthropy's Charity Watch, the Better Business Bureau's Wise Giving Alliance, or Charity Navigator. All of these sites employ multi-step rating systems and IRS data to assess a charity's efficiency and sustainability.

Charity watchdog sites also contain valuable information to help you make smart giving decisions. The Better Business Bureau offers general tips on giving, Charity Watch offers a similar charity guide to giving, and Charity Navigator features a number of Top Ten Lists, including 10 Inefficient Fundraisers, 10 Highly Paid CEOs at Low-Rated Charities, and 10 Charities Worth Watching.

Think Locally

While large, well-known organizations are easy to find on charity watchdog lists, what about your local shelter? One of the easiest ways to donate locally is to make contributions to an umbrella network such as Community Shares or Earth Share, which divides funding among a number of small, local charities addressing similar issues. If you'd like to do your own detective work, you can search for charities at your local Better Business Bureau or find out if your state's attorney general has received complaints about the charity.

Crunch the Numbers

What if you find a charity that is too new to be reviewed by other organizations? If you don't want to wait for it to appear on charity watchdog websites, you can always ask to look at the charity's goals, board and staff members, and first-year budget, including its IRS Form 990. Although this form can be confusing (the Nonprofit Coordinating Committee of New York offers this charity guide). In addition, the Consumer Reports money blog offers these red flags to watch for on Form 990:
  • Over 35% of the charity's spending goes toward fundraising and administrative costs
  • Unrestricted assets equal more than three times the charity's annual expenses (a situation that suggests the charity is hoarding too much of its money)
  • Joint education and fund-raising expenses that make up a large portion of total spending
  • A Board of Directors with fewer than five voting members, with more than 10% of members compensated, or compensated members that hold the position of Chairman or Treasurer

Don't Get Scammed

If you have limited time to review a charity's information online, it is important at the very least to be aware of best practices for donating. The Better Business Bureau and Consumer Reports offer these tips:
  • Do not give cash
  • Ask if the contribution is deductible and keep records of all donations for tax documentation
  • Avoid "copycat" (and often fake) charities whose impressive-sounding names resemble those of well-known organizations
  • Be wary of unsolicited email, which may contain links of phony websites
  • Never give donations over the phone. If a telemarketer calls, contact the charity directly to make sure the solicitation was authorized

Ready, Set... Donate!

You've researched the best charity and know it's legitimate and well-run. Now it's time to donate! Remember to consider making recurring payments throughout the year, which are often welcomed by shelters, food banks, and other organizations that receive large holiday contributions but are left scrambling for donations by springtime. If your charity doesn't offer recurring payments directly, Network for Good allows you to schedule recurring payments via credit or debit. Though the economy may be struggling, the value of your donations to efficient, sustainable charities will make society infinitely richer.