How to Evaluate a Charity

Like Jean Chatzky, I always thought that you evaluated a charity's effectiveness by the percentage (should be high) that it spent on actual programs and the percentage (should be low) it spends on other things like salaries and fundraising. But she says that that method isn't exactly accurate because these ratios don't really get at how effective a program is and the ratios are easy to manipulate. Instead, she suggests the following method for evaluating a charity:

"Compare organizations that have similar missions," explains Trent Stamp, president of Charity Navigator. "The worst food bank spends 90¢ of every dollar on its programs because, basically, there are no administrative costs."

One reason givers rely on the program ratio is that it's easily available. But there are other data points on the 990 that are just as important. Revenue growth combined with growth in spending on programs from year to year signals a financially healthy organization, for example.

Well-run organizations welcome questions. Some, says Rosqueta, may have compiled "impact assessment" reports at the request of large potential donors in the past and may be willing to share them with you. If not, ask for annual reports or copies of client or volunteer evaluations.

In other words, you need to dig into the numbers a bit and do some research to find out what the organization is actually accomplishing. It's a good thought as many people round out their year-end giving this week.

Comments

[That One Caveman]

One of my subjective tests is if it's advertised on commercial TV. I don't want my donation "wasted" on heart-wrenching advertisements featuring one of the "kids I could sponsor for 47 cents a day." I want the money actually going to the kids and not being spent on the film crew, the location crew, the actors, the producers, the ad execs, the network execs, etc.

[John Grazier]

Why not invest in art? You get the satisfaction and pleasure of living with something you may feel is interesting or beautiful; and it's possible that if you choose the right artist, you may eventually own a work of art that has appreciated in value! Possibly appreciated exponentially! The art market is on fire, it's so hot. It is replacing the stock market as an investment tool for many. At least, if you buy a work of art that you love, it's yours to enjoy for the rest of your life.... and it might well prove to be a better investment than stocks or bonds.