Responsible giving doesn't only involve making sure to help those in need, but also ensuring that you perform your proper research by evaluating the charity. Proper evaluation will help you to make sure that your funds are being used in the way you wish them to be and can help you leave the impact you desire. There are many ways to vet charities, such as performing online research to help you identify charities that focus on your desired causes. But if you want some tips on where to start, below are a few to help you get started.
Evaluate the Charity's Mission Statement
Once you have narrowed down the charities, start by looking at each of their mission statements. Do their goals align with what you hope to accomplish? Do you feel that the money you will provide them will help them to fulfill their mission statement? A mission statement is often the first impression a charity will give, and most legitimate ones will have a strong one that sets forth their goals for starting the charity.
Check Out Their Numbers
Drill down on their numbers to see exactly how their programs and services have helped those in the community they wish to serve. While there is an amount of money that needs to go to administrative functions, you will likely want to see that the money you donate is going to fund needed programs that make the impact you are looking to accomplish. See how many people they have truly helped. Look at whether their amount of aid has increased each year or seen a decrease. Then look at these numbers in relation to their size and budget to see if everything lines up.
Review Their Financial Information
Another important part of the evaluation process is looking at the financial situation of the charity. First, you want to see how transparent they are when it comes to their financial situation. You will also want to take a look at their budget to see if it has increased or decreased and to verify that the expenses line up. You will also want to verify their tax-exempt status.
While gathering the facts is important before choosing to donate your money, if the charity is smaller, it may take longer to provide you with the information you need. This does not mean they are necessarily hiding something, but smaller organizations tend to be stretched pretty thin, and they usually will not be able to get to donor requests as quickly as larger organizations. But these small organizations often have the greatest need, so they are worth taking the time to look at.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
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