Guide #1 from the series "Nonprofit Overhead Cost Project"
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
Note: This report is available in its entirety in the Portable Document Format (PDF).
Are you choosing the charities you donate to, or are they choosing you?
Are you responding to telephone and mail appeals you receive, or are you deciding what's important to you?
The information in this guide will help you make informed decisions about donating to charity.
Nonprofit Overhead Cost Project
This guide is based on information collected by the Nonprofit Overhead Cost Project. The goal of the project is to understand how nonprofits raise, spend, measure, and report funds for fundraising and administration, and to work with practitioners, policymakers, and the accounting profession to improve standards and practice in these areas. The project is a collaboration between the Center on Philanthropy at Indiana University and the Center on Nonprofits and Philanthropy at the Urban Institute. For more information on the project, see http://www.coststudy.org.
The Nonprofit Overhead Cost Project was supported by the Atlantic Philanthropies, the Ford Foundation, the Charles Stewart Mott Foundation, The David and Lucille Packard Foundation, and the Rockefeller Brothers Fund. Project researchers who contributed to the content of this guide are Kennard Wing, Mark A. Hager, Patrick M. Rooney, and Thomas Pollak.
Choosing a CHARITY
Are you choosing the charities you donate to, or are they choosing you? You'll get greater satisfaction from your donations, and more bang for your buck, if you take the time to choose the charities you support. But how do you do that?
Some are easy. Many people already know specific charities they want to support, such as their church, a school they attended, or an organization that personally helped them or someone they care about. But how do you find a charity you don't already know about?
Let's look at the wrong way to do it first. Charlie decided he wanted to help the homeless. He went to a website that allows donors to search databases of charities and rate them using financial criteria. He did a search and found all the organizations that have something to do with the homeless. He ranked the list based on which ones spent the least on administration and fundraising,
and sent a check off to the one with the lowest percentage.
Charlie started off right. He decided that he wanted to help the homeless. Charities are working on an incredible diversity of issues and problems. You can't support them all. You probably don't want to. So step one is to make a list of what you want your money to work on. Do you want to fight
poverty, racism, sexism, disease, hunger, or illiteracy? Do you want to support the arts, revitalize urban neighborhoods, educate youth, or prevent violence? Do you want to encourage people to vote, protect the environment or animals, promote healthy lifestyles, or any of a thousand other things? Pick your top priorities.
Once you know what you want your gifts to work on, you need to think about how you want to work on them. Research centers try to deepen our understanding of root causes and develop ways of solving or preventing a problem, such as discovering HIV and how it causes AIDS. Direct service organizations help individuals facing a particular set of problems with education, counseling, or other direct assistance, such as teaching the blind to read Braille. Advocacy organizations attempt to educate the general public and influence public policy in a particular area, such as overturning
zoning that excludes affordable housing from suburban neighborhoods. Charlie didn't take the time to think about how he wanted to help the homeless.
Even within these broad categories, different charities operate from very different philosophical and value bases. You'll have to make important choices. If you are concerned with
pregnancy and sexually transmitted diseases, for example, you must choose between agencies that promote abstinence and those that promote condom use. To help the urban poor, you have to choose between agencies trying to help people get out of a bad neighborhood, and those trying to improve the neighborhood. Even in the arts, there are theatre troupes that reach audiences effectively by taking liberties with Shakespeare, and others that consider that sacrilege. Despite the strong feelings on all sides, we usually don't know objectively whether one of the approaches is superior to the others. Learn all you can, then pick the one you believe in or the one that makes sense to you.
Charlie forgot to ask one more important question: is this organization making a difference? It's a tough one, because most charities don't have strong evidence regarding the impact they're having. The best you'll be able to do is investigate and form a judgment. Most organizations at least have statistics on the volume of work they do, and anecdotes about the impact they've made. Use those to form your judgment. By choosing a more effective organization, your donation will have more impact on the world.
A charity that passes your scrutiny this far is probably worthy of your support. If you haven't already done so, review its brochures, website, and annual report. Find out who's on the board of directors. Find out how much money the organization spends, where the money comes from, and how that money gets spent. If it's important to you, confirm that your gift is tax deductible (gifts to
some kinds of tax-exempt organizations are not tax deductible). You can get a lot of information about all charities at www.guidestar.org. In addition, there are other websites that provide information on smaller groups of charities. You can also learn about charities by talking to people.
At this point, you're confident it's a legitimate charity and will be a good steward of your gift. Go ahead, send a check. Keep records, donate regularly, donate as much as you can, and follow the progress of the charity.
Note: This report is available in its entirety in the Portable Document Format (PDF).
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