A little research can help ensure your donations are put to good use.
Charitable giving can be one of the most satisfying aspects of a financial plan – and it may even have a feel-good impact on your year-end tax liability. Some charities, however, devote too many resources to marketing campaigns and exorbitant overhead, and not enough to the cause. So how do you know if a charity is doing right by your donation?
Your financial advisor can help you in this regard, but you can also do some research on your own. To ensure your contribution will be used wisely, you should evaluate a charitable organization’s track record of financial responsibility, accountability and transparency before giving. Fortunately, much of the information you need can be found online.
Before you open your wallet or spend one of your weekends volunteering this holiday season, check out the websites below for a look at the inner workings of your favorite charities:
- Guidestar.org contains records from 1.8 million nonprofits registered with the IRS, with access to each organization’s Form 990, a document that details nonprofits’ income, spending, mission and executive salaries.
- The Better Business Bureau Wise Giving Alliance generates free reviews of more than 1,300 charities every two years. Local BBB websites provide evaluations on an additional 10,000.
- CharityNavigator.org provides ratings (four stars being the highest) on the charities it follows, based on financial health, accountability and transparency. Of the three websites listed here, this is widely recognized as the easiest to navigate and understand.
Of course, the best way to get to know how a charity works is to spend time with it. Volunteering can remove the veil of uncertainty and give you an insider’s view of the organization’s people, practices and impact. Consider taking the kids with you and creating a family charitable tradition you can pass down through future generations. You may see firsthand the value and effectiveness of your charitable gift at work.