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How to Know If a Charity Is Legitimate and Worthy of Your Support
There are charities for everything nowadays, cancer, childhood diseases, and misfortunes of all kinds. The all encompassing United Way, Red Cross, disabled veterans, soup kitchens, heart transplants, and a myriad of other causes, conditions, and situations.
How does a person navigate through all the information to determine which charity or cause is doing the most good? Which nonprofit organization is doing the most to further their mission? Which charity or nonprofit organization is the best one to contribute to?
I learned about raising money for various causes, and how to judge the efficiency and ethical character of a nonprofit organization in a class I took at the university I attend.
That class at the university along with working for a short time for a non-profit organization that raised all their money by phone gave me insights I had never considered before. What I learned is by no means comprehensive on the subject, but it is enough to help the ordinary person decide what charity or service organization they may want to contribute their resources to, whether money or time.
The nonprofit I worked for was legal, but I personally think it was as unethical as any organization could possibly be, and that is one of the reasons I am writing this article. I hope this article will help people to know how to judge when an organization is reputable and when it is not. Lots of things are legal, but are they ethical?
For obvious reasons I cannot divulge the name of the nonprofit I worked for, nor what states it operates in. I can tell you it is operating in more states all the time, so if it is not currently in your state, it likely soon will be. Even if it is not, there are probably similar nonprofits that are operating in the state where you live.
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Where To Start
If a nonprofit organization is at least a year old, it should be listed on Guidestar.org. You can easily visit this website and check out charity organizations and nonprofit organizations all over the U.S. You need only register as a user and there is no charge for their basic information. Just go to www.guidestar.org. Register as a user to get information on thousands of different nonprofit organizations or charities.
If you do not have a particular organization in mind, but favor a specific cause such as children’s needs or organizations that help people break the habit of drug dependency, just type in the kind of cause you are interested in and the name of the largest city near you, as well as the state in which that city is located.
Organizations that meet the description you put in the search box will come up and you can check them out as to exactly what they do, who their main office holders and administrators are, who qualifies for their help, how efficiently their revenues are used, and much more.
If the location of the organization is not important to you, do not put a city and state in the search box. Just put the type of organization you are interested in knowing more about. Your search will find all organizations that meet your description of the type of organization that interests you from all over the United States. You can then search through them all to see if any of them meet your interests.
Type in the name of the charity/nonprofit you want to check out if you know it, and the city and state where it is located. Once you bring up that organization, you will find a wealth of information about it.
Learn What the 990 Form Can Tell You
The first thing you will want to do is click on the “start your search” button. From there you will want to click the “read more” button. After that you will want to click the tab “forms 990 and docs.”
The 990 form will tell you a great deal. It is the tax return required of all 501 (c) (3) organizations by our government. It may be filed on a fiscal year basis, or at the beginning of each new year.
You want to look at line 12 on the 990 Form. What was the total revenue taken in by the organization according to their most recent 990 form? The amount on line 12 will tell you the answer to that.
Next look at line 17 where it will tell you the organizations total expenses for the year. That total includes administrative and other costs, as well as fundraising costs.
Ideally 90% of All the Organization's Revenue Should Go To the Stated Mission Of the Organization
Ideally, the total expenses for the year of any non-profit organization should not exceed 10% of their revenue. It should definitely not exceed 15%. If it exceeds 15%, then it is not being run as efficiently as it should be.
Ideally, 90% of the revenue should be going to the purpose or mission of the organization. Another words, 90% of all the revenue (money) the organization receives from all sources should be going to help the homeless, or maintain the historical buildings, rescue abused and neglected animals, or whatever the purpose and mission of the organization is stated to be.
If you find that less than 80% of the revenue is going for the purpose or mission of the organization, I would definitely recommend you reconsider your contribution and look for a different charity or service organization.
It is a simple thing to check out any non-profit organization on Guidestar.org and there may be other websites with this information also. Most of the information you will need and receive from Guidestar.org is free.
Study the 990 Form and Get Familiar and Comfortable With It
There is a great deal of information on the 990 Form and I recommend you study it and familiarize yourself with it. Do not let it intimidate you. A little bit of careful study will help you feel comfortable with it and you will obtain a great deal of information that will help you to know what charities are working the hardest to accomplish their mission.
Some Different Organizations That Depend On Contributions But Are Not Charities
Some organizations may not be nonprofits. Again, you want to consider what their purpose is. I have seen websites that say, “If you have benefitted from any of the information here, please send a contribution to help maintain this site and assure that it remains on the web.” There is nothing wrong with this.
The site may have saved you time finding much needed information, or it may contribute to your life, and to society in general, in other positive and important ways. You know why you are being asked to contribute and what your money is going for. It is likely not a nonprofit organization nor claiming to be one. Generally they are looking for small donations in line with the benefit you have received by accessing it.
If you have benefitted from the website, then it makes sense that you might donate whatever you feel the information you received is worth.
Get Informed Before You Contribute
Some organization’s requests may not be so clear. You may receive a phone call that requests your donation to help support the police or firefighters, or a local hospital, etc. Do not assume your local, county, or state police, are aware of this organization making calls in your area. Do not assume your local, country, or state law enforcement agencies approve of, or support what these organizations are doing.
Anyone can place a call telling you they are benefiting any number of things that you might on the face of it approve of, but if you look deeper, they may be trying to take advantage of both you and whomever they claim to be trying to help.
In this situation, unless I personally knew the administrators of the organization, I would get the exact name of the organization, write it down, and tell them they can call back later after I check them out. Better yet, get their number and call them back once you have had a chance to determine if they are truly a worthwhile organization. If they are unwilling to give you time to do that, and give you all kinds of reasons why they cannot call back, and why you need to commit to a pledge or donation right then, I would simply hang up the phone.
There are organizations that technically qualify as charities or nonprofits, but most of the revenue goes to the organization’s officers or to fundraising expenses. As little as 10% of the money you contribute to these organizations may be going to the mission, or so-called purpose of the organization.
My personal inclination, when I learn that a nonprofit is spending more than 25% of their revenue on operating expenses, is to just say no. Do not be afraid to ask questions of the caller. The caller should be able to tell you how much of the revenue goes to the mission. If they do not know the answer to that question, ask to speak to their supervisor. If no one is able to give you the answer to that simple question, I recommend you tell them you will call them back later after you have had an opportunity to find the answer for yourself.
Telephone and television fundraisers tend to be the most expensive ways of raising money and often very little of the money raised goes for the cause, purpose, or mission of the organization sponsoring the fundraiser. Most of the funds raised by these two methods go to pay for the fundraiser itself. When you see organizations using these methods to raise money, you might want to question how efficient they are being run.
I would again direct you to www.guidestar.org to get the answers to the questions you may have, such as where is an organization’s money being spent?
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