How to Choose a Charity

One of my financial goals is to build charity into my annual budget. Last year, as of mid-December, I had not given a penny to the less fortunate—not even a coin dropped into one of those convenience store Lucite boxes adorned with a picture of a child.

I have a dollar figure I’d like to donate, but my mind is overwhelmed with what to do with it. While I am all about selfless giving, I feel the urge to give now in order to take advantage of the tax breaks charity affords Americans. In the spirit of altruism, I remind myself that the more you give, the more you get.

It turns out that I am not alone in my quest to give. Americans are increasingly generous this year. In fact, 29 percent more U.S. households planned to increase their giving in 2011 over 2010, according to fundraising research consultancy Dunham and Company.

But even if you find you can afford to give to a good cause, it can be overwhelming to figure out where to donate. I don’t have a pet cause or a local organization that owns my heart.

In the past, I’ve relied on GuideStar, a database of nonprofit information and ratings. But combing through the more than 5,000 charities is overwhelming, so I turn to Columbus, Ohio–based nonprofit organization consultant Dani Robbins, who spent 20 years running domestic violence shelters and Boys & Girls Clubs.

“There are so many organizations out there, it can be hard for everyday people to figure out where to donate,” Robbins says. But after talking to those in the philanthropic world, there are a few steps you can take to ensure you feel confident about writing a check to charity.

Figure out what you’re passionate about.

You’re giving because it makes you feel good. Giving to something you care deeply about will only make you feel better, right? I headed to Charity Navigator, which has all kinds of cool lists like “10 Charities Expanding in a Hurry,” “Top 10 Charities That Do Not Rely on Special Events” and “10 Highly Paid CEOs at Low-Rated Charities.” The site also allows you to browse by category.

This year, I’m feeling grateful that I can raise my kids in a safe place, send them to a good daycare and feed them healthy food. So I click on “Children’s and Family Services” and start to get excited about what my money can do.

Think local.

“Your money goes further with small groups, and it can be exciting to make an impact in your own backyard,” says Barbara Sharpe, who has spent more than a dozen years in nonprofit fundraising, most recently with CARES, an AIDS resource organization in Kalamazoo, Michigan. “To make a sweeping generalization, national organizations generally effect change nationally while local ones do so locally,” Sharpe says.

For example, Feeding America doesn’t directly feed hungry people; it provides funds to local organizations that feed the hungry. Meanwhile, a local food bank directly feeds hungry people in your community.

And contributing to a local charity increases the chances you have firsthand information about the group. “With a local charity, you are more likely to know who the board members and administrators are, and the word-on-the street reputation,” Robbins says.

I went to JustGive.org, where I plugged in both my ZIP code and the word “children.” I was then suggested 100 organizations near my home in Queens, New York. The first that caught my eye was Hour Children, a nonprofit that supports families in which the mother is incarcerated. An acquaintance mentors through the charity, and I occasionally hear its name mentioned around the neighborhood. I’ve never heard a bad word associated with Hour Children.

Check them out, but don’t get carried away.

The standard advice is to ask a prospective recipient of your hard-earned money for a Form 990 — the document the IRS uses to assess nonprofit organizations and is available to the public. Sharpe points out that these forms are expensive for the organization to print and mail, and most people find them confusing and not very helpful.

A better bet is to see if a local charity is listed with the United Way. “There is a lengthy process that goes into applying for United Way funds, so if a nonprofit goes through all of that, chances are greater that they are a solid organization,” Sharpe says. I’m happy to find that Hour Children is affiliated with my local United Way.

Robbins adds that a simple Google search will cull up recent headlines, both good and bad. For my prospective charity, I get good and not-so-good news. One local newspaper headline reports that construction recently began on a $9.4 million affordable housing project that will be run by the nonprofit.

Looking good!

On the flip side, the group’s Yelp review is a mere 1.5 stars out of five. But upon reading the comments, one person griped about the organization’s parking practices, another didn’t like the way its thrift shop was run and a third reviewer praised the charity’s practice of accepting baby formula yet granted it a mere 3 stars.

I’m going with Robbins’ ultimate advice for choosing a charity: “Trust your gut.”

Make sure the charity is an official nonprofit.

Before I write a check, I ensure that the organization is registered as a 501(c)3, meaning it is federally recognized as a nonprofit and donors can write off contributions on their year-ended taxes. With all criteria met (a local charity with a great reputation, supporting a cause I care about), I am rushing off my check with a spirit of generosity and goodwill. Let’s hope it clears before I file my taxes.

“How to Choose a Charity” was written by Emma Johnson for RetailMeNot.com.