How to Choose the Best Charities to Donate To

how to choose the best charities to donate toThere are currently over 1.5 million nonprofit charities in the United States, according to the IRS.

All of these organizations purport to do good work and make a difference, so how do you decide which ones are the best charities to donate to?

Back in 2005, an email began to circulate on the Internet imploring people to “Think Before You Donate.”

The email targeted specific charities whom it claimed were not worthy of your donations because of how much compensation their CEO received, and other charities who were more worthy because of how little compensation the CEO received.

The email went viral and, eleven years later, is still being circulated. Unfortunately, much of the information in it is inaccurate, outdated, and out of context.

But because it was on the Internet, people believed it and kept forwarding it without verifying its claims.

And groups like Goodwill, who were unfairly maligned, have to keep fighting it to set the record straight.

Despite the fact that people didn’t think (or verify) before forwarding this email on to others, the premise behind it was good – we should think before we donate. But what criteria should we use before donating to charity? And how can we be sure that our money will be used well and go to the people who need it?

Choosing the Best Charities

Here are four things to consider when choosing which charities to donate to…

1. Affinity

Give to charities that you’re personally connected to or affiliated with somehow. Like your church or denomination, your alma mater, an organization you volunteer with, a listener-supported radio station you listen to, etc. The closer you are to the organization, the more confident you can be that they’re really doing what they say they’re going to do, and in the way you hoped they’d do it.

2. A Cause You Care About

Give to charities that are working on causes or passion areas you really care about. Like evangelism and missions, abortion prevention, cancer research, the environment, politics, the arts, children, fraternal organization, the symphony, museums, etc. The more you care about what they do, the more you’ll want to stay engaged and informed.

3. Good Financial Stewardship

Give to charities that spend the majority of their income on programming and lesser amounts on overhead costs like fundraising and administration. There is no hard or fast rule on how much is acceptable for overhead – it varies depending on the type of organization and where it is in its life cycle.

For example, new organizations often spend more on fundraising and administration for the first few years because they’re just getting started. But a general rule of thumb for the best charities is to spend 80-90% on programming and just 10-20% on overhead (including staff salaries and fundraising costs).

Another factor to look at is how much the organization pays in salary to their CEO, which is what that “Think Before You Donate” hoax was getting after. But compensation is somewhat subjective because it all depends on the context like the CEO’s experience, the organization’s size, scope and budget, the cost of living in the community where the organization is located, etc.

4. Good Board Governance and Accountability

Give to charities that have an active, informed, and independent board. A good rule of thumb for the board is to have at least five members who are not employees of the organization or family members of the CEO.

If the board is made up of several staff or family members, there is greater risk that they will not act independently or in the best interests of the organization. Also, look to see if they submit to an annual independent audit or review of their financial records.

Researching Charities

So how do you know if the charity you’re interested in supporting practices good financial stewardship and board governance? Should you really be giving to them? Here’s how you find out.

1. Contact them for information.

Don’t be afraid to call and ask to speak to someone about the work they do, how much of their income goes to programming expenses, etc.

2. Research their website.

Many organizations are open and transparent about their financial and management practices and post their most recent financial audit report or IRS 990 form online for all to see.

The audit report is a report of their finances and financial practices, which is conducted by an independent accounting firm.  The 990 form is an annual tax return that most tax-exempt organizations (excluding churches) are required to file with the IRS each year.

3. Check third-party sources.

It’s easier than ever to research charities online thanks to charity evaluator and accreditation sites like GuideStar, Charity Navigator, and the Evangelical Council for Financial Accountability (ECFA). Each site offers an easy way to look-up your favorite charity to see if they’re listed and to learn about their governance, finances, programming focus, and more.

What are the best charities to donate to?  For me, they do work I believe in and am passionate about, are financially responsible, and open and transparent. What do you look for when deciding which charities to donate to? Leave a comment!

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  1. Jake Erickson

    This is great advice when deciding where to donate your money. I feel like there are a ton of great charities out there, but there are definitely more than a few bad ones. I agree that overhead costs should be minimal. I’m donating to support the cause, not the people who run the organization.

  2. Susan

    Not so long ago I watched a TED talk that argued that spending money on fund raising was a good idea because of the extra amounts of money it brought in. The argument was that by reducing the money spent on fund raising some charities were shooting themselves in the foot. The speaker did not agree with measuring fund raising as a proportion of total expenditure and therefore kept to a minimum. What he wanted to see was the money used for fund raising events being regarded as investments. If the money spent brought in a healthy profit then the event was worth doing. An interesting perspective but very much one from the business world i.e. spending money to make money.

  3. Sherri

    I do check the financial ratings before I give to an organization, but do you not think as a Christian our money should be going to feed the hungry, provide clean drinking water and help in these ways that the Bible talks about. There are enough people in the secular world to give to the arts and organizations that do not take care of humanity. The Bible speaks of taking care of the poor more than anything else and the world is in God’s vision – not just our community or the United States and I think as a follower of Jesus we would take care of those that struggle through no fault of their own – droughts – the government – floods.

    • Michael

      Money, lack there of usually isn’t the root of poverty. Most often its poor leadership, socialism, and out right govt thievery. Gotta pull the weed by the root or it will never die.

  4. Michael

    I ALWAYS ask two questions;

    1. Who is the CEO or company head?

    2. What amount is their salary?

    Usually the solicitor ignores the questions and I persist till they answer and most times they lie. At this point I decline their request. Recently a nation wide radio campaign informs us all the so called wisdom of donating money instead of items. This is because for years consumer groups have said give items to prevent fraud waist and abuse. I’ve even herd how lucky we all are that charity director only making/taking 6 figures is soooo under paid of their true value. Uh hu anybody buying that self centered load of thievery? Its your money go ahead pay some a hundred times more than you make its not unusual political class have been soaking us for generations now.

  5. KC @ genxfinance

    Yeah, I carefully check the charity’s background before I make my donation first, although I can’t deny that I was naive before.. But this should be share because not everyone are aware. They should not just give their money aware.

    • Michael

      Well said. Best to restrict out going funds from those the would use it against you ie big govt. We can vote every day with our wallets and minimizing our tax exposure even at the reduction of earned income will reduce out of control agencies as they cant pay their bills. Much better to defend freedom with our wallets than on the battle field.

  6. jerrylewis

    Giving something be it small or big is a virtue, don’t expect anything in return from the things you have shared.

    Be very cautious for a lot of these charitable institutions are just lurking waiting to prey on someones donations. They claim to be helping our less fortunate brothers well in fact only a few are benefiting from the proceeds.

  7. Chris

    We have a simple rule.. if your books aren’t open and held accountable by one of the 3rd party organizations that Bob listed, we don’t give. Too many Christian ministries feel they’re above all that and won’t even open the books when you ask b/c they use the loophole of the.. we’re a church and we don’t have to open our books though they really aren’t a church.