How to vet nonprofits and Haiti relief groups

January 19, 2010

The situation in Haiti is dire and relief money is desperately needed. But already there are stories of dubious and outright fraudulent charities trying to cash in on the tragedy.

With that in mind, here are some tools that I use as a journalist to get a sense of how a charity is performing. They should provide more than enough for donors looking to protect themselves from scams.

Charity Navigator(may require a free registration)

Better Business Bureau Charity Reviews

Florida Gift Giver Guide

Foundation Center

Most of the links are pretty self-explanatory; Search for your charity of choice. If your charity’s not there, it doesn’t necessarily mean that it’s illegitimate. But is it worth risking your hard-earned money?

So how do you use these tools?

What you’re looking for, in general, are four things: total expenditures, management or administrative costs, fundraising costs and program costs. Most charity watchdogs, such as the aforementioned Charity Navigator or the American Institute of Philanthropy, suggest that a minimum of 65 to 75 percent of a nonprofit’s money be spent on program costs. The more the better. That ensures that donated money is going to the charity’s mission, as opposed to its employees and management.

I’ll use the Better Business Bureau’s evaluation of the American Red Cross, one of the biggest relief groups in Haiti, as an example.

Let’s take a look at a screenshot of the bureau’s expense analysis:

As you can see, the group well exceeds the suggested spending percentages by putting 90% of its funds toward program costs. It’s probably a pretty safe bet.

Though taking a general look at a charity’s expenditures is not a fool-proof method of evaluating a charity, it should weed out the majority of shady nonprofits. For most people, that’s all the vetting required.

There’s more that can be done by taking an in-depth look at a charity’s IRS 990 form and I can delve into the ins and outs of 990s in the future, if anyone is interested. 990s can be obtained upon request from any legitimate charity or by download at Charity Navigator and the Foundation Center, generally for free.

Sure it takes a little work to properly vet a charity, but it’s the only way to ensure that your money is going to the people who need it most — not opportunists looking to line their own pockets.

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