What to Consider When Making Charitable Donations

Whether you’re looking to spread some goodwill this holiday or to be more charitable in general, consider these five criteria when selecting a nonprofit.

Inquire about the charity’s spending ratio.
When you donate, you want your money to make a difference—not pay for office furniture for the charity’s director. A rule of thumb: The most efficient organizations spend at least 75 percent of their budgets on programs and services (this is referred to as the “spending ratio”), with the remainder going toward administration and fund-raising costs, says Debra Snider. Obviously, the higher the spending ratio, the better, since it illustrates the charity’s productivity.

You can easily find this information by looking at a nonprofit’s financial analysis on CharityNavigator.org. (The site updates charities’ financial data annually, and some accountability figures are updated monthly, so don’t worry that you’re not getting the most up-to-date information.) If you have further questions about how the group spends its money, contact it directly and ask to see the most recent annual report. Often it’s available on the organization’s website.

But what if the non-profit you’re interested in doesn’t meet the 75 percent spending ratio? Experts say the group might still be worth considering if it’s undergoing capital improvements, such as building a new office; if it’s a start-up, whose expenses are typically higher; or if it’s located in a big city, where administrative costs can eat up a bigger chunk of the overall budget. So you need to exercise judgment in these cases.

Look for accountability and transparency practices.
Well-run charities should be open about their management. “An organization should have a governing board that includes not just the CEO but at least five people who are independent of the charity to allow for complete critical analysis,” says Berger. The Better Business Bureau Wise Giving Alliance (give.org) and CharityNavigator.org evaluate charities on this criterion, presenting the information in easy-to-read checklists.

Most groups mention any religious associations in their mission statements but may be less forthcoming about political affiliations or any positions they’ve taken on legislation. If you’re concerned, look at the charity’s annual report, which should disclose how much money, if any, goes toward lobbying or political action.

Ask about results.
Most responsible midsize to large organizations use either self- or third-party assessments to evaluate their efficiency and effectiveness. (You can contact the charity to request the most recent one.) Take a jobs program, for example. You want to know not only that the group found positions for 100 people but also that one year later a realistic percentage—say, 50 percent—were still employed. And what if you’re interested in donating to a brand-new charity with bold ideas but not much of a track record? Elizabeth Gore suggests that you take a leap and send a check, as long as the group meets the other criteria on these pages. After all, she says, “some of those charities’ innovations could lead to revolutionary, long-term change.”

Real Simple’s Charity Experts

• Ken Berger, the president and chief executive officer of CharityNavigator.org, a nonprofit charity-rating organization and watchdog.
• Elizabeth Gore, the vice president of Global Partnerships for the United Nations Foundation (unfoundation.org), a nonprofit that works with the United Nations. (Real Simple is a media partner for the foundation’s Shot@Life campaign, which aims to vaccinate children worldwide.)
• Debra Snider, the vice president of operations for GuideStar.org, an informational database of nonprofit organizations.
• Vikki Spruill, the president and chief executive officer of the Council on Foundations, a nonprofit membership association of grant-making foundations and corporations.
• Bennett Weiner, the chief operating officer of the Better Business Bureau Wise Giving Alliance (give.org), a monitoring and standards-setting organization for charities.