Money & Policy

How to Check Out a Charity Before You Give

Now that you've filed your 2011 taxes, visit these websites so you donate wisely when making your 2012 contributions

I’ve been thinking a lot about my charitable contributions recently, since I just filed my taxes.
As I reviewed the charitable deductions on my 2011 return, I thought of negative news stories I’d read not long ago about three prominent charities, and it made me wonder whether the groups that received my money were spending it wisely. I suspect you may have the same question about your own charitable donations.
Charities in the News

Those negative news stories came one on top of the other. First, there was the controversy over the decision by Susan G. Komen for the Cure to cut off money to Planned Parenthood (which it reversed after a storm of protest). The uproar led to articles about the charity’s spending, including one by a Washington Post blogger that noted chief executive Nancy Brinker’s salary ($417,000 in 2010) and the Dallas-based foundation’s annual travel expenses ($3 million, often for first-class fares).

Then came the controversy over the Invisible Children documentary on Joseph Kony, the head of a Ugandan guerilla group known for abducting children to use them as soldiers and sex slaves. Critics complained that Invisible Children, the nonprofit organization behind the film, spent more on its awareness campaigns than on aid.
The Better Business Bureau faulted Invisible Children for failing to cooperate in its review of charities. “I don’t understand their reluctance to provide basic information,” said H. Art Taylor, president and chief executive of the BBB Wise Giving Alliance. In response, Invisible Children said that many of the BBB’s criticisms “are based on outdated sources, false ‘facts,’ and misinformation.” The nonprofit maintained that it had intentionally decided not to participate in BBB’s voluntary program until it was able to expand its board of directors. (Invisible Children said the small board reflected its grassroots origins, but charity watchdogs prefer a larger board so that decisions are based on a diversity of opinion.)
After that, Attorney General Steve Bullock of Montana reached a $1 million settlement with Greg Mortenson, the best-selling author of Three Cups of Tea after finding that Mortenson had misused his nonprofit group, the Central Asia Institute, to promote and buy copies of his book. In addition, Bullock found that Mortenson “had significant lapses in judgment, spending the charity’s money on charter flights for family vacations, clothing and Internet downloads.”
Helpful Charity Watchdog Sites

Thankfully, the Internet has made the task of researching charities easy. I especially like three useful — and even engaging — websites run by nonprofits that judge other nonprofits: Charity Navigator, the Better Business Bureau’s National Charity Report Index and Guidestar. 

Lately I’ve used these sites both to read up on charities in the news and to check out my personal favorites. (I learned that one of my preferred charities had failed to provide requested information to two of the sites, so I’m now considering switching to a more transparent group.)

You don’t have to use all three websites to do your charity research — one may be plenty. But if you don’t find a particular charity in the source you select, you should try one of the two others.

Here’s a rundown on the three free charity watchdog sites:
Charity Navigator

Charity Navigator rates 10,000 charities, focusing on their financial health, accountability and transparency. It’s a fun site — you can spend hours browsing its top 10 lists, which include the best charities, celebrity charities (think Michael J. Fox and Lance Armstrong) and those most routinely in the red.
The site has a four-star rating system, with the full four going to charities that earn grades of 60 or higher (the top score is 70). This makes it easy to compare charities with similar missions. And in case you don’t know the names of nonprofits comparable to the one you’re researching, Charity Navigator lists some at the end of each review.
At Charity Navigator, Susan G. Komen receives four stars, Invisible Children gets three, and Central Asia Institute has a “donor advisory” (Charity Navigator’s response to the negative news stories about Mortenson’s nonprofit), which supercedes any rating.
BBB’s National Charity Report Index

The BBB reviews 11,000 charities, looking at how they spend their money, their truthfulness, their willingness to disclose basic information to the public, and how well they’re run.
According to this site’s basic rule of thumb, a charity’s fundraising costs should not equal more than 35 percent of its total expenses, and at least 65 percent of the group’s money should be spent on programs. Komen meets this standard (BBB calculates that fundraising accounts for 8 percent of Komen’s expenses; programming, 84 percent). Neither Invisible Children nor Central Asia Institute is rated because both failed to respond to BBB’s requests for information.
I have one small gripe about this site: Every time I tried to research a charity, I was asked for my location. That’s annoying.

A valuable clearinghouse that provides access to vital public information about charities, Guidestar has the tax returns of all 1.8 million nonprofits that file with the IRS.
Guidestar also rates charities for their transparency, awarding a Guidestar Seal to those that cooperate and answer its questions.
But beware: The Guidestar Seal doesn’t necessarily mean that a group uses its money wisely or that there is no wrongdoing associated with it. The seal simply indicates that the charity has answered the dozens of questions Guidestar asked.

Komen and Central Asia Institute have the Guidestar Seal; Invisible Children does not.

Guidestar also lets you share reviews about a charity after you log in.
A Charity Watchdog That Charges
If you want even more information about large U.S. charities than these three sites offer, consider sending $3 to CharityWatch (formerly known as the American Institute of Philanthropy) to receive its Charity Rating Guide of roughly 600 groups.
The CharityWatch guide, published three times a year, provides detailed information about nonprofits it rates and gives each a grade from A to F based on three factors: the percentage of money spent on its charitable purpose, fundraising costs, and the size of the group’s cash reserves.

Although the guide itself is not available online, you might want to spend some time at CharityWatch’s Hot Topics area, which includes the watchdog’s take on charities in the news as well as its lists of top charities.

Caroline Mayer
By Caroline Mayer
Caroline Mayer is a consumer reporter who spent 25 years working for The Washington Post, covering such issues as product safety, scams, and credit cards. Mayer has received several awards, including the Betty Furness Consumer Media Service Award. She has written for Consumer Reports, CBS MoneyWatch, Ladies Home Journal, Kaiser Health News and others. Follow her on Twitter @consumermayer@consumermayer

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