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How to evaluate a charity

Resource Center - Foundation

Evaluating a charity, and deciding whether or not you want to give, can be a challenging task. Many potential donors focus on how much the charity spends on its mission, administration, fundraising, and other matters. While these are important questions, here are more general factors to consider.

There is no single source that lists and grades all charities

There are hundreds of thousands of charitable organizations across North America, and the number has doubled in the past 15 years. Some organizations (such as a Better Business Bureau) may have information on certain local charities, but will have data for only a small fraction of area charities.

Develop a giving plan

Some donors work with brokers, and others consult financial professionals to monitor their earnings and investments. Yet, when it comes to voluntarily giving away money, donors tend to give quickly and often on a whim.

Donors should develop a giving plan of how much, when, and to whom they will give. It can be as detailed or as general as they want, but should include an outline of what kinds of organizations they will support (only health-related organizations? Environmental groups? Literacy groups?), approximately how much they can give, and when they can give. In addition, giving more to a few causes also tends to increase the overall value of contributions.

Deciding when to give is also important. More than a third of all charitable giving occurs in the last three months of the year. Donors should be sure to allocate some money to give during that period. But giving during the rest of the year is critical too, as some charities often struggle for funds in spring and summer.

Ask for the right information

What kinds of materials should donors ask for? First, the material should contain an overview of the organization, its mission and its programs. Financial data can also helpful; donors should look at a charity's cost of fundraising, its overall budget, and whether or not it is running a deficit. Ideally, donors should look for signs of consistent and improved management over several years.

Ideally, fundraising costs (which can be quite high for new organizations) should decrease over time. AFP has not created fundraising cost standards for charities because many variables are involved, and each campaign will be unique. For information on the variables that can impact a charity's fundraising campaign, visit Factors affecting fundraising costs.

On June 8, 1999, new IRS regulations went into effect requiring charities to distribute their Form 990 to anyone who asks for it. The Form 990 is the financial reporting document that most, but not all, charities are required to complete and file with the IRS. Donors can request a charity's three most recent Forms 990. Those documents should provide an accurate picture of the organization. The Form 990 can be difficult to understand; GuideStar has a great section on its website, about understanding the IRS Form 990.

Volunteer for an organization

One of the best ways donors can evaluate and feel confident about a charity is to volunteer for an organization. Talking with staff members, other volunteers, and the people the charity serves will give the donor a personal view of the charity's mission and operations. If the donor's impressions are positive, then he or she can feel good about giving to that organization. And of course, if the experience was gratifying, then the donor should consider volunteering on a consistent basis!

Ultimately, giving is a personal decision

Despite fundraising costs, management, and the best-laid plans, charitable giving, at its heart, is a personal decision that donors must make on their own. If the donor truly believes in the organization's mission, then he or she should give to that nonprofit. The guidelines that have been presented here are simply that -- guidelines. The real decision lies in each donor's heart.

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