(Illustration courtesy ThinkStock)
Deciding which charity to support is a bit like bringing home a fruit tree to plant. With luck, you’ll harvest something vital for your friends and neighbors in the community. Of course, it takes time and diligence to select the right plant, to cultivate it, to keep an eye on the weather, and mind its growth and health.
For some of us, though, planting a tree may come easier than making an informed decision about a nonprofit that will most effectively turn donations into real, positive change for people in need. The Williamsburg-based online information service Guidestar.org publishes a trove of information about the 1.2 million nonprofits registered with the U.S. Internal Revenue Service. Its clickable, five-step “Guide to Giving” (learn.guidestar.org/give-to-charity) spells out the core considerations for supporting a cause. Guidestar’s editorial director, Suzanne Coffman, walked us through the process.
Avoid the ‘Overhead Myth’
“Many people will start with the numbers first,” Coffman says. Hoping to understand exactly where their dollars will go, prospective donors often first use Guidestar.org or other research tools to dig into a nonprofit’s financial statements. It’s known as the Overhead Myth — the belief that somehow the online nonprofit tax returns (the IRS 990 form) will tell the whole story. “I’m like, ‘Why do you want to put yourself through that kind of pain if it’s not an organization you’re interested in supporting,’ which is why I suggest to people to really step back from it.“ First, decide what causes matter most to you.
Go with your Heart
Guidestar suggests that before you support a charity, you should take a look at your core values. What causes are dear to you? Do you have a specific idea of how you’d like your money to be used? This will help you narrow your list of prospective organizations.
Focus on the Mission
Look at the nonprofit’s mission statement. How does the charity present its mission? Is it clear and does it offer evidence of how well it is carrying out the work to address the cause? Pay attention to anything that states performance over time in concrete numbers.
Look at the Long View
Coffman suggests taking a broad perspective when scrutinizing financial information. “We feel the best way to use the financial information that you get from a 990 [form] is to look at a single organization over time and say, ‘OK, what kind of trends am I seeing? Did this organization suddenly have a huge drop in the income they brought in?’ It could be that they did, or it could be that they got a big grant the year before. Or it might be a multiyear grant and nonprofit accounting principles say that you have to declare the grant in the year you get it, even if it’s going to be paid out over five years.” If you see fluctuations in income and expenditures, dig deeper. She says that also you can observe how stable a charity’s assets are. If something seems awry, Coffman suggests asking the nonprofit what’s behind the numbers. “There’s usually an explanation for it.”
Kick the Tires
You can use online resources like Guidestar or the Better Business Bureau Wise Giving Alliance’s website (give.org) to see if a nonprofit is registered with the IRS. Has the charity been the subject of complaints? Both organizations point to obvious red flags: Be skeptical of charities that have no public disclosure, or any organization that pressures you for donations. For more personal detail, call a nonprofit and ask to speak with a representative who can answer specific questions. Social media such as Twitter, Facebook and LinkedIn can yield valuable details about a nonprofit’s culture or personnel changes.