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Before you give: How to vet a charity

Amid all of the worthy organizations, there are a few bad eggs. Do your research, then donate.

- 05:01
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Whether you're giving your money, your time or even your plasma, you want to make sure your charitable donation makes an impact. With so many worthy causes to support -- from Black Lives Matter to COVID-19 relief -- and deserving organizations vying for assistance, it's never been more important to vet your charitable donations. 

Here are some good steps to take before you donate.

Read more: 6 ways to give to charity without even trying

Make sure its mission aligns with yours

If you want to see what a nonprofit's goals are, check its mission. A mission statement tells you the organization's purpose for existing and plans to work towards a bigger goal. 

"If it's unclear how an organization is delivering on its mission, that could be cause for alarm," says Kevin Scally, chief relationship officer at Charity Navigator. "Do they have a proven track record for making an impact? This should be very apparent on the organization's website or in their marketing materials."

Evaluating a charity means making sure its mission is in line with your values. Most charities have a mission statement on their websites or printed on brochures. If you found an interesting charity through social media, these are usually in the "About" section or the profile summary. 

Look for financial efficiency

Public charities are registered with the US government as 501(c)3 nonprofits -- that means the lion's share of donations and income are diverted to the organization's mission and administration, and not employees or private individuals. It also means donations to the organization are tax-deductible and annual reports are published publicly. 

Operating within a budget is important for any organization -- charities included. The first step in vetting a charity is reviewing fundraising expenses and administrative costs. The more money that's allocated towards administration costs means less money goes to programs and services. Look for charities that have a low percentage of revenue going to administrative costs. 

"We recommend that at least 70% should be allocated toward programs," Scally says. "Anything less and your donation isn't being stewarded properly."

You can check an organization's annual report to see where its money goes. Many post this publicly on their websites or you can use GuideStar to find the details. 

Look for results

A reputable charity will be able to point to examples of work it's done, goals that have been met and changes it has advanced. 

Word of mouth can be an indicator, too. GreatNonprofits uses a version of customer reviews to show what people are saying about charities. This site features 1.7 million charities and more than 36,000 testimonials from people who have donated to -- and been helped by -- charitable organizations. 

"As philanthropy is an extremely personal process, many donors find organizations through personal experiences or recommendations from family and friends," Scally says. "The important thing is doing your research and finding an effective organization that aligns with your passions."

Evaluate transparency

Look for the groups that report back to you on their progress. Transparency is important. If a charity doesn't want to share what it's doing, that's a big red flag. 

Charity Navigator is a good resource for assessing a nonprofit's transparency. The site has information about whether a charity submits financial audits by an independent accountant, has a conflict of interest policy, document board meeting minutes and how much of its money goes towards programming compared to other expenses. For instance, program expenses for Feeding America allocates 98.6% of its expenses to programming.

Read more: Google now lets you donate to charity through the Play Store

Check the leadership

Though volunteers and staff professionals can make a charity shine, the best-run organizations have great people at the top. Do a bit of research about a charity's executives -- how long they've been involved in the cause, previous nonprofit work, other positions they've held at the current organization and overall years of experience. If the charity doesn't have any staff information available or the information on leadership is sparse, that should give you pause.

Compensation is important, too. Look at what the executive leadership earns -- not just in salary but also in benefits, retirement package, bonuses and more. The IRS requires charities to report details about the CEO and the top five highest-paid employees. You can also find this on Charity Navigator. 

Beware of red flags 

As always, be careful about giving out your financial information -- whether on the internet, over the phone or in person. Pay close attention to how an alleged charity handles donations. The safest way to donate is to use a credit card on a secure website. Never give personal and financial details over the phone. If a charity asks for money through a wire transfer, prepaid debit card or gift card -- that's a huge red flag. 

Read more: 8 best payment apps in 2020

More resources for vetting a charity

  • Charity Navigator: Evaluates organizations across broad criteria including IRS filings, revenue, how long it's been operating, fundraising and administrative expenses. 
  • GreatNonprofits: Users review nonprofits on GreatNonprofits, giving you the chance to see how charities have helped (or hurt) the community it serves. Browse by category or location or search for the charity by name.
  • GuideStar: Find out a charity's data and information -- including IRS documents and annual reports -- when you search through GuideStar. 
  • CharityWatch: This charity watchdog lets you sort by popularity, compensation and other metrics. It also includes information on "red flags" such as a history of unethical practices, wasteful spending or investigations into the organization.