Case in point, the recent viral sensation that was and is the ALS Ice Bucket Challenge. In a few short weeks the ALS Association saw a flood of ice water turn into a flood of donations raising over $100 million compared to $2.8 million in 2013 according to Time. But with the potential for any new cause to pop up on your newsfeed on any given day, how do you sort the legitimately good causes from the organizations that might not use your money as effectively? Use this guide to find out.
Measuring the Need
An important question to ask is if the cause at hand is a major problem that needs to be addressed. A charity that knits coats for homeless dogs may not be as pressing to give to as one that aims to fund biomedical research on a debilitating disease.
Finding Their Form 990
It turns out, every US-based charity is responsible for filling and making publically available what is called an IRS Form 990. Yes that’s right, it is the taxman to the rescue. All you need to do to find the Form 990 for most charitable organizations is to type the name of the charity and “Form 990” into your favourite search engine. If you run into any problems finding the one you are looking for you can also sign up for a free registration at a website called GuideStar where you can find financial info for most major charities.
Income v. Expenses
Once you have the 990, all you have to do is know what to look for. Thankfully, most of the useful information is summarized in a few lines on Page 1 of the document. Line 12 denotes the organizations total revenue for the previous year and Lines 13 through 19 explain how they spent that money.
Administration Fees
Every organization will have some administrative costs associated with its operation, but are those fees in proportion to the good they are doing. Line 16b of Form 990 tells you how much the charity spent last year on fundraising fees, which is a good indication of efficiency when compared to overall revenues.
What Do They Spend on Grants?
Specifically Line 13 is the dollar amount given out by the charity in grants and other similar funds. This is the money that goes to do the good work the charity is known for. The higher the number on Line 13 compared to the number on Line 12, the more of your money goes towards working on the cause you were interested in when you donated.
How Much Do Their Executives Make?
Another handy feature of Form 990 is that Page 8 outlines the salaries of the organizations highest paid employees. This allows you to quickly and easily see how much of the fundraising money from the organization goes into the pockets of the people doing the fundraising.
What Do They Spend on Marketing and Other Contract Work?
The bottom of Page 8 also gives the dollar amounts spent on private contractors for things like marketing and media productions. Take a look and ask yourself if the numbers are acceptable to you in terms of what the charity is spending money on. Really that is all there is to it. If the charity you are interested in is not based in the US things can be a little trickier, but not much. A quick search using the charity’s name and “financial information” will generally give you what you need. For example, the detailed income and expenses for the Canadian David Suzuki Foundation can be found online here. If you’re interested in seeing what a real Form 990 looks like, this link will take you to the form for the ALS Association. And there you have it. You will be well prepared to do your research on the next viral cause that captures the global imagination. Happy giving! Featured photo credit: Howard Lake via flickr.com
