Whether due to the holiday spirit or simply trying to maximize tax deductions for the year, many people finish out the year by giving money to worthy causes and charities. You have until December 31st to make your final contributions for the year. As you are discussing with your family which charity gets the limited amount of money you plan to donate, how do you decide which charity is best?
Photo by Mr. Kris via Flickr
There are many ways to evaluate whether a charity is well run and deserving of your donation. Here are a few strategies:
There are several organizations that rate charities online in terms of their efficiency. Charity efficiencies are based on how much of their revenue goes towards fundraising expenses, administrative expenses, and program expenses.
If a charity is of substantial size but a large portion of its revenue goes to administrative expenses then the charity may be paying great salaries but not have a great impact. Likewise a small charity that puts nearly all of its revenue towards the program it supports is probably having a greater impact on their specific area.
The best charity to contribute to is the one you are most familiar with. If you have given in the past or volunteered with a specific charity, that organization should be at the top of your list.
It is always good to get an opinion from someone you trust. Maybe you have never volunteered or donated to a charity. If not, there is probably someone you know that could offer you an opinion on something they’ve done. However, be careful here. Just because someone has written a check to a charity doesn’t make them an expert in that specific charity. You can feel more confident if they have volunteered at the facility or can talk to you about someone they know who has.
Some believe the focus on looking at a charity’s efficiency — essentially how much of the non-profit’s revenue goes to non-program expenses — is unfair. An enormous charity with hundreds of employees will undoubtedly be spending a big chunk of money on salaries, office space, and other administrative expenses. However, some large charities are simply inefficient and waste a lot of money that is given to them. If an ideal “small” charity can spend 6% of revenue on administrative expenses, you would expect it to spend roughly the same amount as it grew. Yet some massive charities spend double that just on administrative expenses alone. While focusing on overhead may not be 100% accurate in helping you determine the best charity to give your donation to this year, it is certainly a guide that can help you identify where you need to invest more time in research.