Know Your Charity

The Bible mentions the poor 221 times. In verses such as Proverbs 19:17 “Caring for the poor is lending to the LORD, you will be well repaid.” and Proverbs 21:13 “If you won’t help the poor, don’t expect to be heard when you cry out for help.” So we know it’s a great idea to give to the poor and one way to do that is through a registered charity. You have probably already given to non-profit organizations, either through a lump sum or in bits and pieces thrown into change jars and given to door-to-door fundraisers.

But here’s the important question: do you know how your chosen non-profit manages their money? If you’re not sure, you could be giving to a charity that wastes money on luxurious administrative salaries and board-member vacations rather than efficiently directing funding to the appropriate projects.

Here are a few tips to make sure your chosen charity does a good job with every dollar you give!

1. Check Charity Accountability Websites

Websites like Charity Navigator allow you to compare your non-profit with others, see where the money is going, and quickly access financial information and statements. Other charity accountability resources include Guidestar, GiveWell, the American Institute of Philanthropy’s “Charity Rating Report” (a paid resource, but well worth it), and even the Better Business Bureau’s Wise Giving Alliance.

2. Look at Official Sources

Charities are required to file an IRS form 990 in the USA, and this gives a detailed breakdown of where donations from each charity are going. You can see the amount the charity gives in grants, how much it spends on the highest-paid employees, and where your dollar goes. It’s not hard to read a form 990, so don’t be intimidated by this step; most people don’t bother, and your extra due diligence will pay off.

3. Find charities that will tell you more

If your charity doesn’t have a specific mission statement, it’s a red flag. It should give you information on where your money is going, and whether it will be used for any other projects. Sometimes, a charity will tell you on their website or when you talk to them that if they receive too many donations for a cause, any extra money may be used for other causes. Question them closely and be wary of charities that resist giving clear answers.

4. Make Sure it’s Tax-exempt

Legitimate charities should have tax-exempt status so you can deduct your donations on your income tax return. The key phrase to look for is section 501(c)(3) in the USA, and some international organizations also have IRS tax-exempt status through partner organizations.

5. Decide Whether to go Big or Stay Small

Small charities sometimes use donations more efficiently because they’re relying on every dollar to help them run the charity. In some cases, big charities end up spending more on media campaigns, advertising, executive salaries, and administrative costs. Particularly if you’re looking at disaster relief, consider both large and small charities as an option; some larger charities perform better in these situations because they have established networks, but other times, your donation gets lost on the way.

Donating to charity is a worthwhile way to spend money and helps people who are less fortunate. As your wealth grows, remember to share it with those who need it the most, but don’t let yourself be taken advantage of. Do your homework on your charity of choice and make sure they’re using your donations wisely.

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