How to Vet a Charity

In the wake of major tragedies like Superstorm Sandy and the Sandy Hook shootings, we often seek out ways to help through charitable giving. Unfortunately, scam artists take advantage of these generous and sympathetic impulses by creating false charities that only work to line the pockets of the unscrupulous organizers. Here’s what you need to know before you donate money to any charity:

Do not give money to a charity based on a phone call or in-person solicitation

While legitimate charities certainly solicit donations through phone calls and in person, these are easy ways for scam charities to take advantage of your emotional response to their “mission.” If a phone call or door-to-door solicitation piques your interest in a charity, thank the representative for their time, and start doing some research into the charity on your own.

Check out the charity’s financial information

There are three things you need to know about the finances of your prospective charity: tax-exempt status, percentage of budget that go towards the mission, and the CEO’s salary. This information will help you decide if the organization is truly helping the cause. To find all this out, check out the websites Charity Navigator and GuideStar, which list all of the financial information that is publicly available.

A good rule of thumb is that a well-managed charity should have at least 75% of its funds go to programming and should pay the CEO about 5% or less of its total budget.

Look for transparency

Charities that you want to donate to are completely on the up-and-up. They do things like hire independent auditors, offer board members oversight authority and opportunities to vote on key issues, and put in place conflict-of-interest, whistleblower, and privacy policies. If a charity is unwilling to discuss this side of its workings, find a different charity that will.

The most important part of charitable giving is knowing that your donation will make a real difference in the lives of the people affected. Ask the charity for specific information about how your donation will help fulfill its mission.

Give to charities you have a history with

If all of this work sounds exhausting, you can always fall back on giving to charities that you have already familiarized yourself with. You can either give to an organization that you once volunteered for, or even one whose services you benefited from—which will add the karmic punch of paying forward the help you once received.

The Bottom Line

Charitable giving is a wonderful way to give comfort and aid to the people and causes you care about most. However, wherever there is money being donated, there are also sharks looking to make a buck off of your generosity. Make sure you know exactly who you are giving money to when you donate, and decide carefully before writing that check. You’ll feel better knowing that your money is really making a difference.

Tagged as: charity, personal finance