To choose a charity you need to decide what type of cause you want to contribute to, if the charity uses financial resources responsibly and how you want to make donations.
Narrow Down Charity Choices
Type of charity: Are you concerned about the environment, disease research, poverty, education or some other issue? Choose a charity that performs a service you feel passionate about.
Local charity or international: Do you want to contribute locally to a church, shelter or school? Or would you prefer to reach out to impoverished nations abroad by contributing to humanitarian aid or sponsoring a child?
Forms of Charitable Giving
Gifts of cash or time: Are you willing to donate money, volunteer your time, or both?
- To volunteer time, contact the charity to find out what their volunteer needs are and find a way to stay involved on a regular basis.
- Decide if you will make a lump sum contribution or spread cash donations out over time. Contact the charity to find out how to make either type of donation.
Charitable trusts: A charitable trust reduces your estate tax while providing an asset to charity.
Noncash donations: Call the charity to find out if they take donations of clothing, office equipment, packaged food, garden produce, or other items.
Financial Responsibility
To evaluate a charity's distribution of funds and finances, get the following details either via mail or the charity's web site:
Annual report:The charity should have an annual report in print and/or on the charity's web site.
- Check the report to determine if the charity's mission statement is focused and if the charity is succeeding in meeting defined goals.
- The report should reflect all income sources and the percentages of income allocated to charitable work, administrative costs and fund raising.
Form 990: Nonprofit organizations taking in more than $25,000 annually must file Form 990 with the IRS. Open to public inspection, Form 990 gives a breakdown of revenue, expenses and service accomplishments. Ask to see Form 990 and analyze it to ensure you are comfortable with the charity's operations. The Nonprofit Coordinating Committee of New York provides an excellent tutorial for analyzing Form 990.
Independent auditing: Find out if the charity is audited yearly by a reputable accounting firm and ask for the latest report from an independent certified public accountant.
Check charity ratings:
- Give.org, which is affiliated with the Better Business Bureau, offers an online National Charity Reports Index.
- Get local charity information from your local Better Business Bureau.
- The American Institute of Philanthropy provides a listing of top-rated charities.
Shelley Elmblad - Shelley Elmblad has been writing about personal finance and reviewing money management software since 2005.
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