A recent article in The Wall Street Journal suggests we should vet our charitable giving as much, if not more, than we do our investments in stocks or mutual funds.
This is particularly true of situations such as the Nepal earthquake. According to Charity Navigator vice president Sandra Miniutti, traffic to the site tripled to about 100,000 in the week after the earthquake. The outpouring of generosity is encouraging, but also potentially problematic, with individual “victims” on social media and some crowdfunding endeavors that aren’t entirely legitimate.
There are ways to avoid being hoodwinked, however. Because most charities are eligible for tax-deductible contributions, they are required to make public information about their finances and governance. That means more solid information for would-be donators to judge whether or not the charity is a good investment.
Furthermore, finding and sorting through this information is much easier these days with all the options online, such as Charity Navigator and GuideStar, which offer in-depth information about charities, their financial status, and how they use the donations they receive.
The trick is to note the charity’s financial disclosures as reported on their Tax Form 990, which most charities are required to file (except for churches). Some charities have their 990s available at their offices, and many make them available online.
Some individual states have other requirements for reporting tax information, so it’s worth it to check with your state about what rules a charity must follow as well. In New York, for example, the state publishes information about charities’ sources of government funding that you wouldn’t be able to find on the IRS 990 form.
The long and short of it is, while donating to charities is a fantastic and generous thing to do, it’s always worth your while to research who will be receiving your money and what they intend to do with it. If you’re not certain, get the extra background information to ensure that your donation counts!