If you’re a small business owner like me, you probably get multiple
calls per week from telemarketers wanting you to donate to their charity. So how do you know which charities to support?
First, not all charities are created equal. A few are very good, many are bad and lots are simply scams designed to separate you from your money.
Several years ago, I determined I would evaluate a charity by it’s efficiency – how much money went to programs versus how much went to administration and fundraising. So everytime I get a call I say, “I don’t give very much, but I always require that you send audited financial statements to review before I give“. 90% of the callers won’t send you any information (or send you an invoice!). Of those that do, it’s amazing how many are bad charities. My personal rule is at least 75% of funds should be for programs and no more than 25% for admin & fundraising.
Recently however, I’ve learned that financials aren’t the whole story. It’s easy for a charity to list an expense as program related when it’s really not. The other important issue is how effective are they? A charity could invest 90% of their funds on programming and yet still have all that money wasted.
Several entities provide ratings for charities. The most well known is http://www.charitynavigator.org/. The Better Business Bureau also evaluates charities http://www.bbb.org/us/charity/ and Guidestar http://www.guidestar.org/ collects information about non-profit groups.
These charitable evaluating entities won’t answer all your questions however. A charity I work with isn’t listed on Charity Navigator and another I have supported has only an average rating because they don’t do at least 2 board meetings per year and they don’t send Charity Navigator an advance copy of their financial disclosure instead they just post it on their website.
So the takeaway is that if you intend to give, ask for transparency. Can you get financials? Can you get a sense if that entity compares favorably with other charities that operate in the same space. At the end you want to feel that your support is making a difference.