6 Things to Research Before Donating to Your Next Charity

We’ve all been asked to donate to charity from family, friends and when we shop at stores during the holidays. Donating to our favorite cause can help cure a disease or help those less fortunate. However, not all charities are managed equally, leading to different amounts of money actually making it to the intended cause. Before you donate to your favorite charity, what do you need to know to make sure your donation goes as far as possible?

Look at Financials

Nonprofits are similar to businesses in that they don’t run themselves. Just like businesses, nonprofits need staff, marketing and accounting services. Organizations that willingly disclose their financials through their website, for example, will show how much they spend on the organization’s overhead compared to what they spend on their mission. While a mature nonprofit with a high proportion of overhead in its budget might raise some red flags, this is not always cause for concern. Younger nonprofits with higher levels of overhead might be ramping up their marketing efforts to attract more donations and maintain talented staff.

Look at Independent Oversight

When it comes to looking out for the short- and long-term mission of any nonprofit organization, redundancy, including independent oversight, is another positive sign for a reputable nonprofit. Other positive signs include non-familial members on the organization’s board of directors, independent case studies and registration with local chambers of commerce.

Understand How They Accomplish Their Goals

Along with the organization’s mission, how does the organization explain the work they do toward finding a cure for a disease or helping out those in need? Does the organization work by itself or with other organizations? Are their claims verifiable with larger organizations or those helped by the organization? How is the goal measured? How is progress verified: by internal methods or through an independent organization?

Level of Responsiveness

Looking at how committed and responsive the organization is to its donors and those it serves is a good indication as to how it performs and uses a donation. How does the organization show its donors that their donations are put to good use? What are the vetting processes for hiring, training, evaluating and ongoing development practices for staff and volunteers? How does the organization select individuals and research organizations that their donations and staff help? What is the follow up for funded projects, aid to individuals and accountability for research organizations?

Commitment to Safeguarding Information

Much like a business safeguarding your personal and financial information, understanding how a nonprofit safeguards your personal and financial information can tell a lot about its commitment to its mission. How well does it safeguard its online payment process with secure payment processing? What online and physical security measures does it take with employees and independent contractors who might have access to physical files on premises and virtual files on computers?    

Understanding the Landscape  

Much like businesses, there is often competition in the nonprofit sector. To assess your options, first identify which organizations work toward the same goal (supporting research on a disease or helping a certain segment of the population, such a veterans). Then, investigate the efficiency of the organization and its staff. Are tasks delegated individually to specific board or staff members, or is it a more general responsibility assigned to the board of directors?

While these are just some ways to research and look at the efficiency of a nonprofit organization, by performing due diligence, your donation can have a much greater and more meaningful impact.     

Sources

http://mashable.com/2014/12/23/charity-donation-tips/

http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=1209#.VYs_fkaFJOk

http://www.guidestar.org/rxg/give-to-charity/donor-resources/questions-to-ask-a-nonprofit-before-investing-in-it.aspx

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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