Know How Your Charitable Donations Will Be Spent Before You Give [Charity]

Giving to charity can be a surprisingly difficult task. Sure, you may have a cause you'd like to support, but you'll often find large disparities between how various charitable organizations actually spend their money. Our info expert Clay Johnson explains how to use publicly available data to make better decisions about your charitable giving.

Part of my book, The Information Diet, is about how to use publicly available data to make better decisions. It's about ways to bypass the spin and the marketing, and how to make healthier choices around the information you consume.

Whether you're looking to lower your 2011 tax bill, or looking to give a little back after the holidays, it's now the season for giving to charity. But how do you know if your money is doing any good? Charities might say that they "give 80 cents of every dollar to" [support whatever cause they you're in to], but if that 80 cents is going to fund some other non-profit who is spending 80 cents on the money that *it* receives, then your money is being poorly spent.

It's sad to say, but sometimes non-profits and charities aren't what they're cracked up to be. And if you're not careful, you can give your money to an organization that won't make the most use of your money. Fortunately you can evaluate a charity about as easily as you can the features of a flat-screen TV using publicly available data.

Every substantial charity that does business in the United States must file an IRS Form 990 that contains a lot of operational details about how the organization spends its money. They're far superior than a charity's annual report because there's less marketing inside of it, and more brass tacks.

You can generally get a 990 form by searching around for it. You can search for "990 Lance Armstrong Foundation" for instance, and find yourself with at this site, with a history of the foundation's recent 990s. GuideStar also provides 990s for most non-profits, but requires a free registration to do so.

The first thing I look for in a 990 form is whether or not a non-profit spends a lot of money giving grants. If the non-profit is giving a substantial amount of its revenues as grants out to other organizations, then taking a look at those organizations and figuring out whether or not to give directly to them is an option worth considering. That may help your dollars get closer to the source of the problem you're trying to solve with your money, giving them more impact.

The second thing I look for in a 990 is executive compensation. If a non-profit is giving a substantial portion of its revenues to its executives, then it's not for me. I want my dollars going to solve problems not to line pockets. Use good judgement and com parables here ? if the directors of the non-profit you're thinking of donating to are paying themselves far more than the directors of comparable non-profits, maybe you should give elsewhere.

Accounting isn't the only method of evaluation though ? it's also whether or not the practices of your non-profit are actually doing any good. GiveWell.org is an organization that tries to do much of this non-profit research for you. They even provide a great set of questions for many charities you may be interested in giving to, along with their own research.

Sometimes though a 990 and an evaluation won't do. There are some charities that are small, just getting their start, and either aren't old enough to have a 990, or big enough to be evaluated by an organization like GiveWell. Newer organizations tend to be "fiscally sponsored" by larger ones, and usually you can tell who those larger organizations are because that's who you have to write your check to.

One way to evaluate those smaller organizations is to check out the sponsor organization, but another is to actually contact the executive director of the organization. The smaller organizations probably don't get a lot of attention, so they'll usually get back to you on your questions.

Don't let your charitable giving go to waste. While your heartstrings might get tugged in one direction or another, taking a few minutes to do some basic evaluations can do a lot of good. It helps to make sure that the charities out there that are doing good get rewarded, and the charities out there that aren't don't.

Photo by Feng Yu/Shutterstock.

Source: http://feeds.gawker.com/~r/lifehacker/full/~3/6TbSTZZqhWk/know-how-your-charitable-donations-will-be-spent-before-you-give

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