The end of the year is traditionally the most popular time for making charitable donations. But to make sure your hard-earned donations really do the most good, it is very important that you do some due diligence before you write that check or donate that stock, car, antique, or other item.
First of all you should approach the donation as a business deal. Ask yourself what causes matter to you. Maybe you want to help the environment, or provide scholarships to gifted but impoverished children. Maybe you want to support the arts programs in your local community, or make sure that stray animals have a safe, no-kill shelter where they’ll be taken care of. Or you may want to help cure diabetes, or wipe out smallpox, or make sure families affected by a recent disaster get the emergency assistance they need.
Whatever your cause, you’ll need to do some research to find charities that are helping in that area. Making sure you find a worthwhile charity for your donation does take some work. You do need to verify that any agency that you are dealing with is legitimate. A simple way to do this is to do a search online for a charity and download its IRS 990 Form at guidestar.org. You can also contact the charity directly and ask for its IRS 501c3 determination and a copy of its latest IRS 990 form.
The 990 form is the tax return that charities file with the IRS every year, similar to what businesses must file. (Please note that some churches are not required to file this form). The 990 form can look complicated but it gives you lots of useful information to help you decide if a charity is a good one to trust with your hard-earned money. The 990 form shows you what percent of its total funds an organization actually spends on its programs, as opposed to using these dollars to build up an endowment or pay administrative and fundraising fees. The 990 form also includes the salaries of highest-paid employees and how much went to high-paid independent contractors, so you can see if a charity is paying fair wages or is perhaps using most of their donor funds to pay themselves instead of advancing their mission.
Besides Guidestar, another place to find reliable reporting information about charities is the GreatNonprofits website, which lets people evaluate charities based on their actual experiences as a client, staff member, volunteer or board member. And the Charity Navigator website has a star-based rating system that looks at a charity’s finances, accountability and transparency.
After you’ve looked at the various evaluation materials that are available, it’s time to narrow down your charity search to a few promising organizations and then check out their websites or contact them directly before you make your final decision. Certainly you want to see that the organization has a defined mission statement as well as a practical strategic plan to carry out that mission. A charity should make it clear to you why you should donate to their organization, and how your funds will be used.
Finally, you need to know that the charity is able to measure the progress they make towards achieving their goals. While many charities use heart-felt stories and images to help induce donors to give, in the end what matters is that real changes are really going to happen as the result of the donations you and others make. So before you sign your check or do your electronic transfer, take some time to do your research so that you can be sure that your gift will actually do the good that you intend it to.