Do Diligence

How to size up charities on your own

Amy Purdy

Purdy in Southern California     Photo: Chris McPherson

There are 1.6 million nonprofits in the U.S., but only a small number are rated by groups like Charity Navigator (charitynavigator.org) and the National Center for Charitable Statistics (nccsdataweb.urban.org). Interested in one that hasn't been vetted by either? Do your homework using their methods.
Check financial health. Efficient charities spend at least 75 percent of their annual budget directly on programs, according to Charity Navigator. An organization should be able to provide recent 990 forms—an annual report to the IRS, required of most nonprofits, describing their mission and finances—online or upon request.
Assess executive compensation. You don't want to spend too much on somebody else's salary. Be aware that average executive pay for the largest 5,500 organizations is $150,000, but highly effective organizations may spend more for a seasoned CEO.
Consider reputation. Grants from well-known groups, such as the Bill and Melinda Gates Foundation, or contracts with government agencies lend organizations credibility, since they require detailed vetting. Do a search of the organization on Google News for any red flags.
Request the organization's policy on donor relationships. Most will agree not to sell your contact information to other groups or will offer you the opportunity to opt out.
Investigate results. Established charities should be able to demonstrate the need for their services, report their activities, measure their results, and communicate all of it clearly. If the group is small and local, observe projects in your area.

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