Evaluating Charities for Your Philanthropy Plan

Though I’ve written about creating a philanthropy plan and exporting philanthropy, there was at least one issue integral to responsible, effective charitable giving that I touched on but didn’t delve into:  evaluating charities. I mentioned Guidestar and Charity Navigator, both of which provide necessary information such as the organization’s assets and liabilities, what it pays its top staff, how much is spent on overhead, and how much it gives away. But what do you do with that information? What are you looking for?

• How much does the charity spend to raise money?
• Where does it get its funding from? Private donations? Grants? Fundraising events? Subscriptions? How diverse is that total pie graph of resources?
• What percentage of its funds comes from each of the variety of sources?
• What is the compensation of the Executive Director or other leader in relation to the rest of the staff and in relation to other, similar nonprofits (similar in size, primarily, and size is measured by the total annual budget).
• Every nonprofit should have its most recent audited financial statements available for donors. (Or at least unaudited, and often in the form of an annual report.) Educate yourself about the basics of financial statements for non-profits and financial management for non-profits.

With regard to the program(s) your charitable dollars will fund, there’s an evaluation component here, as well.

• Does the program work, and if so, how do you know? The organization should have an evaluation section in their materials that maps out exactly why they designed their program the way they did, and how they measure success.
• They should provide (ideally), quantitative as well as qualitative evidence of their success, as well as how they got that evidence.

The composition of the board of directors can be helpful information also. Are they from a variety of industries? Are there both men and women on the board? Are there people from the nonprofit’s industry? Who are these professionals who are steering the organization (and who have a fiduciary responsibility to it)? Naturally, with a local organization, this piece of the puzzle is easier to deal with.

Another easy-to-deal-with piece is getting to know a local organization. You can visit, talk to the staff, make an appointment with the Executive Director or a board member and ask questions, and you can volunteer. There’s nothing like volunteering to get a sense of the overall health and effectiveness of a nonprofit. In addition, if you volunteer, give, get to know the organization, and perhaps help with legislative issues or lobbying  (if appropriate), you may be asked to join the board of directors, which is the ultimate compliment, and also the ultimate responsibility (financially and otherwise).

The same can be accomplished with national or regional organizations, it’s just a bit more time consuming to get to the same point, as travel is involved.

Whatever you choose to do, remember that it is your right as a donor to check on your investment. And if you deem its progress unacceptable, you have every right to never give it another penny.