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Where Should You Donate?
When It Comes to Choosing Charities, Those Who Want to Give Wisely Get Careful

By Terri Rupar
Washington Post Staff Writer
Sunday, November 18, 2007

At a bar in Adams Morgan on a recent Saturday night, Miss D.C. USA was cracking jokes onstage when she was joined by Mahmoud Ahmadinejad, Mike Ditka, Ron Burgundy from "Anchorman" and Milton from "Office Space" -- or, at least, their mustachioed look-alikes.

Young revelers had paid a $10 cover to get into the bar for a charity event called the Glorious ManPageant. The evening was organized by the Society of Mature Adults Seeking to Help, Entertain and Donate, known as SMASHED. It raised $3,500 that went to Capital Queen for a Day, a local organization that sends beauty pageant contestants out to hospitals to host special events for pediatric cancer patients.

While many of the patrons showed up mostly for the mustaches and beers, SMASHED was quite serious about where their contributions would go. It takes a careful look at the groups it singles out for donations. Kate Larned, 29, a charity coordinator for SMASHED, said the organization compiles as much information as possible on each charity it chooses.

With about 1 million charities worldwide, it's important to carefully vet the organizations you select for your donations. Matching your heart to the right group can be complicated and time-consuming. And giving to a charity that turns out not to satisfy your goals or, worse, makes off with your money can sour the experience.

When examining a charity, you want to know how it uses its money, how much of the contribution goes to helping and what portion to overhead, whether salaries are in line with those at similar charities, and how healthy the organization is. Many resources exist to aid you in your research, and a lot of them are just a mouse click away.

The first step in choosing a charity is to clarify your goals, said Melissa Berman, chief executive of Rockefeller Philanthropy Advisors, which helps foundations and other large donors decide where to put their money.

If you care about education for poor children, for example, how would want your charity to go about tackling it? Through charter schools? Pre-kindergarten education? "Think about finding the solution," Berman said.

An organization that closely mirrors your ideal approach will probably bring you the most satisfaction. Carefully weigh the charity's strategy. Compare it with that of other groups. Once you've given your money, it's too late to think about what you want your money to do.

Donors should look at an organization's leadership, its board governance and its impact on the community, said Audrey Alvarado, executive director of the National Council of Nonprofit Associations, which represents state and regional nonprofit organizations. Talk to people who have been served by the charity, she suggests.

It is worthwhile to take a close look at a charity's financial picture. If you find high solicitation costs or a lack of willingness to share financial information, for example, those should be warning flags.

Donors usually compare how much money flows into administrative costs -- salaries, overhead and solicitation -- and how much is devoted to programs. But sorting out what funds go where is not always easy. "I don't think we have a clear definition about what's really administrative and what's really program costs," Berman said.

Both Berman and Alvarado advise donors to consider an array of issues related to a chosen charity in addition to the financials. Alvarado suggests taking a look at whether the charity is sustainable and whether compensation is in line with norms. Keep in mind, she says, administrative costs tend to take up less of a larger organization's budget than a smaller one's. Organizations that are just starting or have taken a hit recently -- such as those helping people hurt by Hurricane Katrina -- may also have higher administrative costs.

Siobhan Miller was at SMASHED's Glorious ManPageant, cheering on her brother, who had grown the facial hair and dressed the part of the stapler-obsessed Milton from "Office Space." She gave extra money at the pageant because she likes the cause. Miller pays attention to much of what the experts suggest: She prefers organizations that work in her community -- ones whose work she can see -- and she checks out their overhead.

In the Washington area, donors can check out the Catalogue for Philanthropy, which evaluates and profiles 55 to 70 nonprofits each year. The catalogue has been published for the past five years by the Harman Family Foundation. For inclusion, organizations must be based in the area and have budgets of less than $2 million.

The charities apply to be featured and then are evaluated by people from area foundations, advocacy programs and government. They often already know about the charities they're reviewing, or about similar ones, so they have standards for comparison.

The evaluators look at the work the charities do, their cost effectiveness, their importance in their community and financial transparency. The Catalogue for Philanthropy checks the charities' status with the Internal Revenue Service and their financial situation. As a final step, an accountant looks into the charities' books.

The Internet also provides a wealth of information for donors wishing to check out a charity.

Thirty-eight percent of people who make a donation consult an online resource to learn more about the organization, according to a study by Virilion, formerly Mindshare Interactive Campaigns. Most are seeking information about how the charity spends its money; 47 percent of those people say that they're looking to find out what the charity accomplished last year.

GuideStar ( http://www.guidestar.org) collects the forms that charities file with the IRS, called Form 990. It publishes them on its site, along with basic information about the charity's mission, leadership and goals. GuideStar does not provide ratings or scores for charities.

Charity Navigator ( http://charitynavigator.org) goes further. It evaluates more than 5,000 of the largest charities, which account for 80 percent of giving in the United States, said Sandra Miniutti, Charity Navigator's vice president of marketing.

"We like to think of ourselves as the Consumer Reports of the nonprofit world," Miniutti said.

The site deals solely with the financial health of the nonprofits, based on the IRS Form 990s: how much of expenses are programs or services, and how revenue and expenses change over time. "Just like for-profit companies, expenses go up every year" for charities, Miniutti said. Charity Navigator wants to see that organizations are keeping up with inflation and have rainy-day funds.

"But beyond that, it's up to the donor to actually check out the charity," she said.

Charity Navigator was founded by a large donation from philanthropists and now solicits donations from foundations, corporations or individuals. Its reports are free.

The American Institute of Philanthropy, which runs http://www.charitywatch.org, also evaluates nonprofit organizations. Daniel Borochoff, the president and founder of the group, said what differentiates his group is that it does a full financial analysis, looking at where cash goes and asking charities questions if it thinks they're being vague.

The AIP looks at the Form 990, the charity's audit and its annual report to get a complete picture of its activities.

"It's the difference between kicking the tires and taking the car out for a test-drive," Borochoff said.

Borochoff said some charities are able to disguise solicitations as a program. For example, some include an educational message in a mailed solicitation, making the solicitation cost into a program cost. The AIP tells people how much the charity spends on programs that are not solicitation-related, Borochoff said.

The AIP, a nonprofit itself, relies on individual donors and charges for its charity guide, though it offers free samples.

The BBB Wise Giving Alliance, formed in 2001 by the National Charities Information Bureau and the Council of Better Business Bureaus' Foundation, looks at more than just administrative costs. It considers truthfulness, privacy policies and governance as part of its 20 standards.

The BBB Wise Giving Alliance reports on more than 1,100 organizations, based on requests from potential donors. H. Art Taylor, chief executive of the organization, said charities can have reasonable administrative or overhead costs but still not meet other criteria.

"Charities are a lot more than what they spend on program and administrative costs," he said.

The BBB Wise Giving Alliance uses audited financial statements, solicitation materials, governing documents, policies and annual reports. Its reports are free. Charities that meet its standards can pay a fee to use the BBB Wise Giving Alliance seal on their Web sites and solicitation materials.

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