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Ask Jean Thursday: Choosing a Charity

mailbagmondayQuestion: My wife’s birthday is coming up and she asked that I donate to a charity in her name instead of buying a gift. How can I be sure that the charity I choose is legitimate?

-Jack, Connecticut

Answer: Despite tough economic times, Americans are still finding ways to donate to charity. According to the Giving USA Foundation’s Annual Report on Philanthropy, Americans donated $229.3 billion in 2008.

Unfortunately though, there are a number of false charities looking to capitalize on the good nature of those looking to donate their hard earned cash. Thankfully, there are websites out there designed to help you vet charities you’re considering donating to. Here are a few of my favorites:

Charity Navigator: An independent charity evaluator, Charity Navigator offers information on over 5,400 charities in the United States. Charity Navigator assesses charities based on two factors: how responsibly it functions from day to day and how they expect the charity to be able to sustain their programs in the future.

Guidestar: Guidestar combines information provided by the actual charities with data from several other sources. View a charity’s profile to find out about it’s mission, leaders, goals, programs, accomplishments and needs.

The Better Business Bureau Wise Giving Alliance: A part of the Better Business Bureau, the Wise Giving Alliance produces reports on nationally soliciting charitable organizations. They also publish the Wise Giving Guide, a quarterly report of the Alliance’s latest national charity evaluations. You can get a complimentary copy by clicking here.

The American Institute of Philanthropy: A nonprofit charity watchdog service that researches, evaluates and grades charities across the United States. Some of their information is available online, but with a donation of $40 or more, you’ll receive their Charity Rating Guide and Watchdog Report, which is published tri-annually. You can receive a sample copy of the report for $3 by clicking here.

Once you’ve researched the charity you’d like to donate to through one of the above sites, it’s a good idea to pick up and talk to the charity directly. Here are a few questions that should definitely be asked:

When were you established? When choosing a charity, you’ll want to select one that has a proven track record. If the charity was created recently in response to a major disaster, proceed with caution. “I would say it is very risky to give to a start up nonprofit that is created to respond to a major disaster. Other start ups are a little less risky,” says Charity Navigator’s Vice President of Marketing Sandra Minnuti. “At Charity Navigator we do not rate charities until they have been in existence at least 4 – 5 years. This gives the charity time to get established and for us to have a track record to examine,” she adds.

How much of my donation will go to helping others? According to the American Institute of Philanthropy, in most cases, 60% or more of your donation dollars should go to program services.

Do you have information you can mail me? Almost any legitimate charity will have information they can mail to prospective donors. If the charity you’re talking with doesn’t, consider it a major red flag.

Does the IRS recognize you as a charity? If the charity in question isn’t recognized by the IRS, you wont’ be able to legally claim your donation as a tax deduction. “You want proof of their nonprofit status. You should ask the charity to send you copies of their three most recently filed Forms 990. By law charities are required to provide those filings to anyone making a request in person or in writing,” advises Minnuti.

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