Unless you live under a social media rock, you probably saw Facebook and Twitter blow up in March 2012 with links to the KONY2012 video—a short video released by the Invisible Children Organization that called for the arrest of the Ugandan war lord Joseph Kony. Over 85 million people viewed the viral video on YouTube and many donated to the cause. Then media reports revealed that only 31% of the Invisible Children’s Organization donations went directly to the cause. Some sources started to question whether the organization manipulated facts in the video, and the Better Business Bureau publicly criticized the organization for refusing to provide information necessary to determine if it meets the Bureau’s Standards for Charity Accountability.

Without passing judgment one way or another on the organization, KONY2012 and the resulting media backlash about the legitimacy and “worthiness” of the organization nevertheless raises an important question: prior to making a donation, how do you evaluate a charity? After all, with so many worthy causes and people in need throughout the world, it is important to know that the charity you choose to contribute to is legitimate and is using your donation appropriately.

How to To Evaluate a Charity

  • Evaluate the Charity’s Accounting: All charities are required to fill out an IRS Form 990—a form that breaks down how a charity spends its money. You can usually find a charity’s 990 with a simple Google search; however, if such a search is unsuccessful you can sign up for the free service GuideStar which will have the 990 form, as well as other documents, for the majority of registered charities. In Part IX of the 990, you will see a breakdown of a charity’s expenses. It is generally a red flag if the charity is spending as much on non-direct services (expenses such as travel, executive salaries, fund raising, etc.) as it does on direct services and grants. It is also generally a red flag if a charity’s revenues have increased but the charity’s spending on direct services and grants have not proportionally increased.
  • Evaluate the Charity’s Practices Beyond Accounting: Use the free research tools on GiveWell, a site which uses a rigorous, multifaceted review process to evaluate charities. You can also see how your charity stacks up against the Better Business Bureau’s Standards for Charity Accountability, available here. Organizations that comply with the Bureau’s accountability standards  have provided documentation that they meet basic standards: in how they govern their organization, in the ways they spend their money, in the truthfulness of their representations, and in their willingness to disclose basic information to the public.
  • DIY Evaluation—”Interview” the Charity: One way to take ownership of the evaluation process is to “interview” the charities you are interested in. On GiveWell, you can find suggested questions to help your evaluation using the site’s Charity Evaluation Questions, available here. There are sample questions for a myriad of causes, broken down by sub-types, that you can use as a starting point for your evaluation.
  • Check Out Comparable Charities: For example, if you are interested in breast cancer charities, evaluate several breast cancer charities and then see how they stack up against each other.

Tips for Giving Wisely to Charity

  • Don’t succumb to pressure to contribute on the spot. Likewise, don’t succumb to a charity’s emotional appeals. You need time to evaluate the charity and contemplate your decision before making a donation.
  • Do not give out your credit card information on the phone or on an unsecured website.
  • Do not donate to a charity based on its familiar name. Sometimes a questionable charity will use a name that closely resembles an established charity to trick potential donors.
  • Beware of charities who give you gifts. Many charities will send you a solicitation in the mail along with a gift such as a key chain or a calender because giving gifts has been shown to increase donations. However, do not feel that you have to make a donation just because you keep the gift. It is against the law for a charity to require a donation for unsolicited gifts. Also, a charity that spends money on such gifts will have high fundraising expenses—money that could be going directly to the cause.
  • For tax purposes, keep a record of your donations. Keep in mind that not all donations to “tax exempt” charities are “tax deductible” (many tax exempt charities engage in lobbying or political activity which keeps them from receiving tax-deductible donations). “Tax exempt” means the charity doesn’t have to pay taxes. “Tax deductible” means that donors to the charity can deduct donations on his or her federal income tax return. Click here to search the IRS’s list of organizations eligible to receive tax-deductible contributions.
Charity Watchdog: How to Evaluate a Charity and Give Wisely