It's hard to know which charities are most deserving -- and yet questioning the merits of a nonprofit (Where is my dollar really going? Is this a scam?) can make you feel like a curmudgeon. We asked the tough questions so you won't have to.
By Kathryn Wallace
1. How can I make sure a charity is legit?
First determine if the organization is a nonprofit, meaning it's been granted tax-exempt 501(c)(3) status from the IRS (churches and nonprofits with less than $5,000 in revenue, however, don't have to register). But this shouldn't be the end of your research. "Just because a group is a bona fide charity doesn't mean it's going to use your donation wisely," says Sandra Miniutti, CFO for Charity Navigator, an organization that evaluates nonprofits.
Websites like CharityNavigator.org, Give.org (the Better Business Bureau's Wise Giving Alliance) and GuideStar.org compile data in a donor-friendly way to make it easier to vet some of the more than 1.4 million registered tax-exempt organizations that want your donation. On these websites, you'll find information on charities' spending habits (how much is going to administrative expenses?) and transparency (are they open about what they're doing with the money that actually goes to the cause?). And remember 35 percent -- That's about how much nonprofits should spend on admin and fundraising costs. The rest should go to charitable initiatives.
2. But I've got only $25. Is that enough to make a difference?
Yes, say all the experts! In fact, many donations come in small packages, so don't get hung up on the number. Give what you can.
3. Am I a jerk if I don't participate in the "give a dollar" campaign at the drugstore?
No, says Miniutti, who believes a scattershot approach to giving can be personally unsatisfying. "If you come up with a thoughtful plan of how much, how often, and to whom you'll give, you shouldn't feel guilty saying no to any other group," she advises. Of course, if you genuinely want to support the (preferably well-known) charity the store is promoting, even your lone dollar will help. In 2012, 63 campaigns across the country took in more than $358 million total at checkouts. And stores and restaurants often waive administrative fees, so your entire dollar will help those in need.
4. Am I really sponsoring an elephant?
Adopt a dolphin! A beehive! A square foot of the rainforest! These types of campaigns are appealing because they offer the promise of tangible results. But there are plenty of hucksters who prey on human sympathy, so find out how your donation will be used. Charity Navigator is implementing a "results reporting" component, so you can see how well a nonprofit tracks its impact. (Typically, you're not really sponsoring one animal or planting one tree; instead, your money goes into a pool of funds that support the cause.) Some groups make it easy to understand how you're helping: Charity: Water, for example, has maps of the clean water wells it builds around the globe.
5. Should I give all my charity dollars to one place or spread the wealth?
"By all means, give to as many organizations as you can with confidence," says Bennett Weiner, chief operating officer of the BBB Wise Giving Alliance. But be warned: If you diversify your giving, you're going to be on numerous mailing lists for renewal gifts, and similar charities may contact you as well (unless you tell them not to). Plus, the more groups you consider, the more time you'll need to spend on research.
6. How do I find the right local charity?
Homegrown organizations can require additional research because they may not be scrutinized as intensely as larger nonprofits. Miniutti's advice for avoiding scams: Make sure the governing board has at least five independent members who make up the voting majority. "You don't want to see a situation where the board includes the CEO's husband, daughter, and son-in-law," she says. Another option is to pick a national charity that works on the local level, like Donors Choose, which can direct your donation to a nearby classroom that needs it.