People waste billions of dollars on inefficient, poorly run or downright fraudulent charities because they do not bother to research where their money is going. And even donations to legitimate causes can be squandered by last-minute, impulsive or scattershot giving, says Daniel Borochoff, president and founder of nonprofit watchdog Charity Watch. Given that so many people and causes need help, such waste cannot be tolerated. Here is what you might be doing wrong and how to do it right.
Give more to one charity, not less to several
Rather than responding to emotional appeals, determine what causes you are passionate about, says Sandra Minuitti, vice president of Charity Navigator, another watchdog. Then narrow the field further by thinking about how you want your money used. If you want to fight cancer, for example, do you want your money to go for advocacy and awareness? To fund research or treatment for people who cannot afford it?
Do your research
We are not talking about handing a few bucks to a homeless person but about giving money to the solicitors with clipboards outside Starbucks or the telemarketers who cold-call you. Until you do some research on a site like GuideStar, you do not really know where the money is going or how much is spent on fundraising. (A hint: Those solicitors outside Starbucks may be on commission.)
If much more than 25 percent of donations go to overhead, you may want to look for another charity, Minuitti says. Whatever you do, avoid telemarketers. On average, only one-third of the money donated this way gets through to the charity, Borochoff says.
Don't avoid charities just because the CEO is rich
Maybe you have done enough research to discover the nonprofit's leader makes six figures, and that left a bad taste in your mouth. Get over it. "Many donors have this unreasonable expectation that CEOs should volunteer their time," Minuitti says. "Salaries shouldn't be the only metric."
A better way to judge if a salary is excessive is to find out if the charity has a compensation committee that reviews what similar-sized nonprofits pay their top leaders. That committee should not include the CEO. Another safeguard is a board of directors with at least five independent voting members, Minuitti says. "Independent" means they are not related to or reporting to the CEO.
Give year-round. not just at the holidays
Many nonprofits get a big chunk of their money at year-end, when the holidays remind us how blessed we are — or how we need to reduce our taxes. But it is a lot easier on your wallet, and on the charities, to set up monthly payments that spread your generosity throughout the year. "Charities love these monthly gifts," Minuitti says. "It helps with their cash flow."