Donating with Impact:
A Guide to Responsible Charitable Giving
Resources for vetting organizations, tips for catching charity fraud, and advice for making donations that matter.
Dr. Froswa Booker-Drew
Froswa’ Booker-Drew is responsible for the development and implementation of the State Fair of Texas' philanthropic giving and the department’s community and educational programming as the Director of Community Affairs and Strategic Alliances. She is responsible for the creation of several State Fair signature programs and is the Co-Founder of HERitage Giving Circle, the first African American Women’s Giving Circle in Texas. She works closely with nonprofits throughout Dallas and has spoken on building strong relationships between donors and organizations.
In 2018, Americans donated $427.71 billion to charities and nonprofits. The majority of these annual charitable donations (about two thirds in 2018) come from individuals, not foundations or corporations. With citizens giving so much of their own money to charities, it’s imperative to know how to donate responsibly. Conducting careful research before sending money to an organization helps you make sure your contribution is used for good ends, and it helps keep charities and nonprofits accountable, too.
This guide examines different philosophies and ethics of charitable giving and provides tips for evaluating charities and spotting suspicious organizations to help you make your best donation decision. You’ll also find a list of pre-vetted nonprofits, learn how to see the impacts of their donations and get advice from out expert, Dr. Froswa’ Booker-Drew, on giving responsibly.
Who Should You Donate To? 5 Philosophies of Ethical Giving
A good place to start thinking about who to support is actually to consider why you want to–or think you should–support them. There are different philosophies on the right way to make charitable donations. Ted Lechterman, a postdoctoral researcher at the Hertie School in Berlin, provides a great breakdown the five leading philosophies, which we’ve expanded upon below. Understanding the various motives behind giving can help you determine the best way to donate for you and ultimately decide which charities, causes and nonprofits to give to.
How to Evaluate Charities, Nonprofits, and Causes Before Giving
Because of the nature of their work, all nonprofits and charities can seem inherently good. However, it’s important to research and vet organizations before donating to make sure your money is used ethically and effectively. You not only need to make sure that the organization you’re considering is legitimate and non-fraudulent, you should also learn what kinds of people run the organizations, make comparisons to similar organizations, and determine how effectively your money will be used.
Tips for Independent Research
Doing your own research and carefully vetting organizations takes time and can get overwhelming, but these tips can help you in your search for the right charity or nonprofit.
- Make sure it’s a registered 501(c)(3).You can and should check to make sure organizations you’re considering are registered with the IRS as 501(c)(3) organizations. This means they are verified nonprofits, and your donations may be tax-deductible. It’s good to check the organization’s IRS documents directly, as fraudulent organizations may falsely claim to be 501(c)(3)s on their websites.
- See if the charity’s goals and values align with yours. Reading through an organization’s website or speaking with people who work for the organization can help you determine whether or not the charity has goals and interests worth supporting.
- Determine whether or not its objectives are attainable. After determining that an organization has values and goals that align with your own, it’s important to make sure those goals are actually reasonable. Check annual reports and other measures of progress, like news articles, financial reports and independent assessments, to see how the organization is working toward its goals. If an organization has lofty goals but puts little money toward them, it may not be the best fit.
- Examine annual reports. Because of the detailed and varied information that can be found in annual reports, this tip deserves a special callout. Annual reports typically summarize a charity’s accomplishments, revenue, expenditures and contributors for the past year. They may also include plans for the future, which can be valuable to prospective donors. Additionally, if an organization doesn’t make their annual reports easily accessible to the public, that may be a red flag.
- See how transparent the organization is. Check to see how forthcoming a charity is with their organizational information. Tax documents, financial reports, goals, outcomes, allocation of resources reports and other information essential to making a responsible donation should be informative and easy to find.
- Research the founders, board of directors or leadership team. Knowing who’s behind a nonprofit can help donors decide whether or not they want to support the organization. Consider their reputations, past actions and other projects to see if their values are in lockstep with their organizations’.
- Look deeper than financial ratios to determine efficacy. It can be tempting to look solely at what percentage of money is spent on a charity’s programs versus fundraising and administration. They are important metrics, but they don’t provide a holistic picture of an organization. For instance, a new, small organization will have less programmatic spending while it’s just starting to establish itself and grow than a large nonprofit with steady donors and a longstanding reputation.
- Compare with similar organizations. You should look into other organizations with similar causes and goals to see how the organization you’re considering compares. This can be affirming or can help you see if another charity is actually better-aligned with your interests and motives, and more deserving of your donation.
Online Resources for Vetting Charities and Organizations
While prospective donors are always encouraged to conduct their own research, these nonprofit and charity vetting resources can give you a head start in evaluating charities and organizations on your shortlist.
Charity NavigatorCharity Navigator is the largest charity evaluator in the U.S. Their evaluations are largely guided by organizations’ financial management and transparency. Donors can search for specific organizations, browse by category or top 10 list and read through tips for donors.
GiveWellRather than provide evaluations of hundreds of nonprofits, GiveWell does in-depth evaluations of a handful of organizations they believe are the best based on their evidence of effectiveness, cost-effectiveness, transparency and room for more funding.
CharityWatchCharityWatch evaluates and ranks organizations based on cost-effectiveness, efficiency, management and accountability. Users can browse by category or search for specific organizations, and they can see a variety of metrics, including how much it costs an organization to raise $100 and what percent of funds are spent on programs.
Animal Charity EvaluatorsThis group focuses specifically on different types of animal-focused charities. Similar to GiveWell, Animal Charity Evaluators provides a list of top organizations based on their impact and ethics.
BBB Wise Giving AllianceThe Better Business Bureau aims to help donors protect themselves and make responsible donation decisions by providing information on charity effectiveness, financial management, compliance, fundraising materials and tactics and other metrics. Donors can also review and file complaints against nonprofits.
ImpactMattersImpactMatters vets nonprofits and helps donors find high-impact organizations. Donors can input a dollar amount they’d like to donate and see how various organizations would use that money, based on ImpactMatters projections and analyses.
Tiny Spark PodcastThis podcast, which has been around since 2011 and was acquired by Nonprofit Quarterly in 2018, focuses specifically on the investigation of nonprofits and other philanthropic organizations. Donors can listen and stay up-to-date on issues in nonprofits and responsible donating.
Giver Beware: Scams, Charity Fraud, and Untrustworthy Organizations
People donate money to nonprofits with the best intentions, but they should be aware of potential charity scams and fraud. Keeping an eye out for fraudulent organizations protects you, keeps charities more accountable, and makes sure your money goes to legitimate causes.
Unfortunately, charity fraud isn’t always easy to spot. Fraud happens both externally, where donors are misled and give money to illegitimate organizations, and internally, which often involves mishandling of funds. Prospective donors should take extra care to watch for scams and frauds during the holiday season, when people are both short on time and overwhelmed by donation pleas, and after high-profile disasters and emergencies. Because of the urgent nature of disaster relief, people take less time to research organizations and are less suspicious of new charities.
Warning Signs for Charity Scams
Knowing some red flags that a call for donations is a scam or that an organization is fraudulent can help donors ensure their money goes to the right place.
- The organization has no history. This doesn’t always mean an organization is fraudulent; people establish new, legitimate nonprofits every year. However, if you can’t find any history for an organization that’s asking you for money, especially if the organization claims they were established years ago and have helped thousands (or give some other historical indicator of reputation) be suspicious and conduct more research.
- They request urgent donations via cash, wire transfer or gift card. Scam organizations often prey on potential donors by pressuring them into donating quickly so they can’t research or think things through. They often refuse donations by credit card or check, as these can be easily traced.
- Their tax and financial documents are suspicious, not readily available, or nonexistent. Legitimate nonprofits that conduct themselves ethically should have no problem advertising and supplying tax forms, financial reports, reports of fund allocation and other financial documents.
- Something is off about the name. Fake charities may choose names similar to well-known nonprofits in hopes of deceiving unsuspecting donors. It’s also good to check the spelling of an organization’s name throughout its website to make sure it’s consistent and matches the web address.
- They thank you for a donation you didn’t make. Fake organizations often try to win trust–and money–by making it seem like you’ve donated to them before. They may send you a thank you email or letter and request another donation. When in doubt, check your financial statements and research the organization using the tips and tools in this guide.
Real-World Examples of Charity Scams and Fraud
Ready to Give? Verified Charities and Nonprofits to Consider
This shortlist of vetted charities is by no means exhaustive, and these organizations may not be right for everyone. However, they do serve as good examples donors can look to when conducting their own research and making comparisons.