How to Choose the Right Charity to Get Your Donation

There are many good charities—here’s a guide to help make sure you’re donating to the worthiest causes.

By: Mary Yarrison

March 5, 2012: San Diego-based Invisible Children releases a 30-minute video called Kony 2012. It gets almost 112 million views during its first week on YouTube, prompting Time magazine to call it the most viral video ever.

The video introduces viewers to African warlord Joseph Kony and depicts the havoc that his Lord’s Resistance Army has wreaked on Ugandan families since the late 1980s. It describes killings, torture, maimings, and the capture of tens of thousands of children who are used as soldiers and sex slaves. The story of Kony’s tactics is horrifying—that’s never been up for debate—and the video tugs at even the numbest heartstrings.

Millions of Americans jump at the chance to support Invisible Children in its mission to capture Kony by the end of 2012. They buy T-shirts and bracelets, make donations, and feel proud of contributing to an effort against such abuse and violence.

But within days after the video’s release, they hear some questionable data about Invisible Children’s finances—that just 37 percent of the group’s funds are spent on aid in Africa, with the rest going toward such items as salaries for nearly 150 employees, travel, and film production.

Invisible Children’s director of idea development, Jedidiah Jenkins, says in an interview: “The truth about Invisible Children is that we are not an aid organization, and we don’t intend to be.”

What’s more, newspapers all over the country report that Kony hasn’t been operating from Uganda for years. All of a sudden, donors feel duped because they didn’t get the full story.

Although many people may have chosen to give to Invisible Children anyway, experts say they shouldn’t have done so on the spot, when emotion overran reason. A few simple steps could have empowered them to make a more informed decision about how and where to donate.

With the end-of-year giving season upon us, we asked industry experts how donors can find and vet a charity that’s worthy of their support.

Step 1: Pick a problem you care about

Barbara Harman heads the Harman Family Foundation and edits the Catalogue for Philanthropy: Greater Washington, an annual publication that profiles and recommends about 70 local charities. She says the first step toward becoming an engaged donor is to ask yourself what you care about. Whether seasoned or first-time givers, people become consistent donors and take more pride in their gifts when they contribute to an initiative they find important.

“I might make a small unplanned donation if a friend asks,” says Harman. “But I’m not likely to stay involved unless I really identify with the organization.”

Robert Zagorski—who volunteers several times a week and has donated to more than 60 groups in the past few years—suggests choosing a handful of causes that strike a chord for you. For him, those issues are hunger and homelessness, education, and animals. Zagorski has chosen about 15 local groups to support, including Higher Achievement, ThriveDC, Manna Food Center, Junior Achievement of Greater Washington, and HorseNet Horse Rescue.

Though he reevaluates and adds new charities regularly, Zagorski says he would never quit supporting one of his core organizations: “No way, because I care about the issue and I know about the impact.”

Step 2: Decide whether you’d rather invest locally or globally

Opinions vary about whether donating to a local charity or a larger national organization has greater impact. The short answer is that both are worthwhile, and it depends on what type of problem you’re most drawn to solving.

On the one hand, multinational charities help people in dire need all around the world and, to some extent, spread goodwill on behalf of the United States. The American Red Cross, for example, provides global disaster relief, dispatching employees and volunteers when large-scale tragedies strike. After the 2011 earthquake and ensuing tsunami ravaged Japan, the American Red Cross, which is based in Washington, contributed more than $240 million to disaster response, providing temporary homes, appliances, and other necessities.

Keep in mind, though, that new organizations frequently pop up in the wake of disasters. Following the earthquake and tsunami, Gary Almond, a regional president of the Better Business Bureau, said in a statement: “Unfortunately, we’ve seen time and time again that scammers will try to take advantage of the generosity of the public after a disaster; that’s why it’s so important to take your time and do your research before donating to relief efforts.” Always be wary of a group that has formed very quickly to address one need.

Disaster relief isn’t the only area in which choosing to give to a large, well-known institution can be a wise bet—in many cases, the vastness of an organization is its biggest strength. Having financial security as well as a large network of employees and volunteers enables bigger charities to tackle systemic problems—everything from disease to crumbling roads and infrastructure—effectively. The DC-based United Nations Foundation, for example, runs a campaign called Nothing but Nets that has provided more than 6.5 million insecticide-treated bed nets to families in Africa since 2006. Such netting can reduce malaria transmission by 90 percent.

One downside to funding this type of work is that you can’t feel the impact of your donation at home. There’s plenty of poverty and illness right here in Washington, and you may prefer to help someone in your own community avoid hunger, learn English, or gain job skills. You might want to beautify a blighted area that you drive by every day or help clean up the Chesapeake Bay.

Thousands of groups are doing this kind of work in Washington. The Arlington Free Clinic (arlingtonfreeclinic.org), Potomac Conservancy (potomac.org), DC Central Kitchen (dccentralkitchen.org), Literacy Council of Northern Virginia (lcnv.org), and Homeless Children’s Playtime Project (playtimeproject.net) are just a handful of highly regarded Washington-focused nonprofits that address specific community needs.

Step 3: Research online

Once you’ve decided which problem speaks most strongly to you and to the scope of the charity you’d like to support, three websites can help you dig deeper and narrow your choices.

Started ten years ago by a husband-and-wife team who had in mind an unbiased model such as the investment-research firm Morningstar, Charity Navigator (charitynavigator.org) is a great first step. Its search function creates lists of charities based on several criteria. You can filter by categories such as arts/culture/humanities, environment, and health or by size or scope of work (regional, national, international).

Sandra Miniutti, vice president of marketing and chief financial officer of Charity Navigator, says that about 6,000 of the million or so charities in the United States appear on her organization’s website. Each year, the site’s staff of nine adds about 500 new ones—beginning with the largest charities recognized by the Internal Revenue Service and working toward the smallest—and each group is reevaluated annually. This means there are many charities that don’t appear in searches, but Miniutti says absence from the site isn’t a bad sign: “It’s just that we haven’t gotten to them yet.”

Despite the site’s limitations, one tool is particularly useful—a feature that allows potential donors to compare the financial details of up to five organizations side by side. It examines data such as total revenue and expenses, percentage of revenue used for programming and administrative costs, and whether an organization has independent, voting board members and independently audited financials. These criteria can all be used to determine a charity’s financial soundness—and they give donors a good idea of what to look for in an organization not reviewed by the site.

Another place to check is GuideStar (guidestar.org), which lets you look at a group’s Form 990, an annual return that certain federally tax-exempt organizations must file with the IRS. Barbara Harman suggests examining several years’ worth of 990s, as trends can be much more telling than a single snapshot.

If, for example, an organization is overhauling its database and website, bringing in a consultant to rework programs, and updating its office equipment all in the same year, it might appear to have drastically higher general and administrative expenses that year than it typically would. Looking at three or four years’ worth of data can make anomalies such as this clearer.

Finally, the industry watchdog group CharityWatch (charitywatch.org) can provide tips and background information to augment your research. Its vast collection of articles offers a wealth of information—you’ll find answers to common questions, including what percentage of revenue an organization should allocate to general and administrative expenses such as salaries, overhead, and fundraising. The answer, according to Charity Watch: no more than 25 percent.

Step 4: Look for red flags

Nonprofits should meet many of the same requirements that a for-profit business does to be viable long-term, such as having a diverse set of revenue streams and sound auditing policies.

In order to be listed in the Catalogue for Philanthropy, an organization must supply information on its major donors and explain anything that seems out of the ordinary. Some red flags that Harman’s group looks for:

• Excessive salaries, such as an executive director whose paycheck eats up 15 percent of the organization’s budget.

• Revenue or expense projections out of line with previous years’ budgets, indicating poor budgeting practices or unrealistic expectations.

• A significant deficit.

• A number of board members who don’t make regular donations. You don’t want people to sit on a board solely to pad their résumés. If someone cares about an organization enough to join its board, he or she should also care enough to donate money.

• Non-diverse revenue sources.

Industry experts say that another warning sign is if a charity asks for cash—it should want its records to be traceable and clean, which means that cash is a not a good idea. A check or a credit card is considered the best way to make a donation.

Step 5: Call or visit your finalists

Every philanthropic organization has staff or volunteers who can talk to you about its goals and how they’re reached. They should be able to discuss their programs in a specific, informed way and explain how people in need gain access to them.

Questions you might ask when you call include the following: What need do you serve, or what problems are you trying to solve? How are you doing it? Why do you choose to do it that way? How do you measure your impact? Where are you struggling? What kind of help do you need?

“We see people so often who pick a charity because it has ‘cancer’ in the name and they think it does research,” says Miniutti. “But if it actually does advocacy or helps pay for patient care, those people won’t have gotten what they wanted, even if the charity is very good at what it does.”

If you’re still looking for more information and you have time, many organizations, particularly smaller ones, will meet with you or show you around their facilities. Even better, see if it’s possible to spend a day volunteering. There may be no better way to judge whether a charity is well run than gaining hands-on experience.

Step 6: Get started early

Thoroughly researching a charity is a lot of work. To do it right, you’ll need time, and the few days before the end of the year—when many offices are closed or operating at a less-than-peak capacity—won’t likely be enough.

“This can get put off, and even if you plan to do it at Thanksgiving, all of a sudden it’s the end of December,” Harman says. “When you’re giving on December 31, how thoughtful are you in a position to be?”

This article appears in the December 2012 issue of The Washingtonian.