Like those big-box stores that bank on holiday sales, charities too depend on end-of-the-year donations. Hence the current stream of seasonal solicitations.
"If you just respond to these solicitations, you may not end up giving wisely or supporting your highest priority causes," says Bob Ottenhoff, president and chief executive of GuideStar, an organization that provides a repository of nonprofit information.
Before you open your checkbook, Ottenhoff suggests you step back and ask yourself what really matters to you.
Decide what you want your money to do. That goes beyond simply choosing a cause, such as cancer. Decide what kind of programs you want to fund — scientific research on the condition? Educational campaigns? Treatment facilities? Medical access for those who can't afford it? Emotional support ?
Find a group dedicated to your chosen mission. Go to GuideStar.org or CharityNavigator.org, websites run by nonprofits devoted to providing information to philanthropists. At the sites, you can compare a given charity with others working on the same cause. Then you can call or go the organizations' websites to get more detailed information.
Ottenhoff suggests three questions: What does the organization do? How does it do it? And what progress has it made? Ask for detailed information about its programs, objectives and accomplishments.
Check it out. Charity Navigator rates charities in two areas, organizational efficiency (is the money being spent on the cause and not overhead or fundraising?) and organizational capacity (does it have a rainy day fund for when times are tough? Is it growing at least at the rate of inflation?). "We think it's important that they're sustainable," says Sandra Miniutti, Charity Navigator's vice president of marketing and chief financial officer. Charity Navigator combines efficiency and capacity to allot one- to four-star overall ratings. The rating system doesn't tell the whole story, but it's a place to start.
Follow the money trail. Organizations are legally obligated to make available their IRS Form 990, which will show you where a group's money is coming from and how it's spending it. Most post their 990s on their website; you can also download them from GuideStar.org.
It's common for nonprofits to receive money from industry, says Arthur Aaron Levin, executive director of the Center for Medical Consumers. But though there's nothing inherently wrong with this, you'll want to exercise extra scrutiny when a company has a financial interest in the charity's medical condition.
Some organizations, such as the National Women's Health Network and the National Breast Cancer Coalition, don't take industry money. Levin says this is a good reason to support them, especially because they're likely to be more dependent on individual contributors.
Examine how the organization distributes its money. The 990 will offer clues, but these forms can be difficult to decipher. When in doubt, ask. Watch for payments for programs that aren't in line with your objectives. "Sometimes people think they're funding research, but instead the money is going to funding awareness campaigns," Miniutti says.
Examine the board of directors. Information about the board should be up on the group's website, and will give you insight into the organization. If half the board consists of people from drug companies, the organization may not be truly independent, Levin says. And look for a board that brings relevant experience and expertise. "I'm doubtful about boards that are made up of the founder's friends and family members," Ottenhoff says.
What's in a name? Just because the organization has name-recognition doesn't mean it spends its money efficiently, Miniutti says. Despite its high profile, the American Cancer Society spends only 72% of its money on cancer-related programs (the rest goes to fundraising and overhead), and thus earns just one star in Charity Navigator's efficiency rating. Since its organizational capacity score is four stars, it still earns an overall rating of three stars, however.
Watch for similar-sounding names. The National Breast Cancer Coalition Fund and National Breast Cancer Foundation each earned four overall stars from Charity Navigator, but the Coalition Against Breast Cancer and American Breast Cancer Foundation each received zero.
Ratings aren't everything. Greg Donaldson, the American Cancer Society's vice president of corporate communications, says that judging the group based on the percentage of donations spent to raise money isn't the best way to assess its effectiveness. "Fundraising raises more than funds. It also creates education, raises awareness, and supports mobilization," he says.
The March of Dimes gets one star for its overall Charity Navigator rating because it spends just 75% of its money on the cause and has very little money in reserve. But the group's chief financial officer, Richard Mulligan, says the ratings rely too heavily on financial metrics. "If you don't have a certain prescribed increase in revenue, you get a poor rating, and who has had good growth in the last year?"
Ottenhoff adds that in addition to finances, potential donors need to look at an organization's accomplishments and the quality of their programs — factors that Charity Navigator ratings don't assess. "You want to see tangible accomplishments. The overhead ratios are not necessarily going to be the most important ways to measure what an organization is really getting done."