- Budget for philanthropy. Look at your total assets as well as your income; you may find that you can afford to give more than you thought. Then make philanthropy part of your budget. And remember that there are ways to give beyond writing a check—donating on-line, volunteering, participating in a workplace-giving program, making in-kind contributions, donating stocks, or investing in a donor-advised fund.
- Clarify your values. Every donor's unique values shape his or her philanthropy. Before you open your checkbook, visit an on-line donation site, or volunteer your time, think about what is important to you. What issues concern you most—the environment? Education? Animal welfare? Health care?
- Identify your preferences. Ask yourself how a charity should approach the issues that concern you—through prevention? Public education? Immediate assistance? By striving for long-range solutions? Do you want to support a nonprofit that works locally, nationally, or internationally? Does size matter—do you want to support a small nonprofit or a larger one? Do you wish to support a start-up organization or a middle-aged or a well-established one?>
- Focus on the mission. Use the criteria you've established to search the GuideStar database at www.guidestar.org by keyword, city, state, zip code, category, nonprofit type, income range, activity code, or a combination of these fields. Your search will produce a list of charities that meet your criteria, and many of the entries will show a one-sentence description of the organizations' missions. Look at the descriptions to identify the nonprofits whose missions best fit your values.
- Eliminate organizations that don't meet your basic criteria. Now you have a list of charities that meet your basic preferences: missions you value, geographic areas you wish to support, and organization size. If a nonprofit's age is important to you, click on an organization's name and look for the "Year Founded" line near the bottom of the Summary page of its GuideStar Report. Eliminate all charities that don't meet your basic preferences.
- Evaluate how well the charity defines and achieves its goals. A nonprofit should have specific, measurable goals—"Reduce operating expenses 5 percent in fiscal year 2002"—rather than vague objectives—"Operate more efficiently." It should use concrete criteria—number of meals served, scholarships awarded, or research stipends granted—to describe its achievements. Access this information by clicking on the Goals & Results page of a charity's GuideStar Report or by examining Part III of its Form 990.
- Assess the charities' financial health. Use GuideStar financial summaries, images of a nonprofit's Form 990, and information on a charity's own Web site or in its fundraising appeals to decide whether donating to an organization is a good investment.
If a charity's liabilities exceed its assets, look more closely before deciding that the nonprofit is in financial trouble. The deficit may be a one-time occurrence, or the organization may already be taking steps to increase income or reduce expenses.
Also, a nonprofit whose assets greatly exceed its liabilities is not necessarily hoarding donors' contributions. For example, when a charity receives a grant, it must report the full amount the year it is awarded, even if the moneys will be paid out over several years. Thus, the charity can appear to have more income for the year than it actually received.
Charities should willingly explain any extenuating circumstances surrounding their finances. Many have done so in the "Financial Comments" section at the bottom of the Financials page of their GuideStar Reports.
- Compare charities doing similar work. People often compare nonprofits that have vastly different missions, and they frequently use ratios (fundraising ratios, administrative ratios, programs ratios) to evaluate diverse organizations. Charities with dissimilar missions, however, usually have different operating costs, and these differences are often reflected in their ratios. For example, the median program ratio for art museums is 68.1 percent, whereas the median program ratio for food banks is 94.4 percent.
- Get more information from the charity itself. If, once you have followed steps 1-8, the list of charities meeting your criteria is still longer than you wish, consider contacting the nonprofits directly. Sometimes a visit to a charity's Web site or a phone call to an organization itself will reveal exactly the information you need to decide whether you want to support it.
- Choose the charity or charities you want to support. It is easier to resist emotional appeals, feel good about the level of your charitable giving, and have confidence that you are supporting worthy organizations if you follow these steps. For more information and tutorials on using GuideStar and understanding IRS Form 990, see the Donor Resources section of the GuideStar Web site, www.guidestar.org.
About GuideStarGuideStar is the operating name and registered trademark of Philanthropic Research, Inc., a 501(c)(3) public charity located in Williamsburg, Virginia. GuideStar's mission is to revolutionize philanthropy and nonprofit practice with information. To that end, GuideStar has created and is constantly updating a database of information on all IRS-recognized 501(c) nonprofit organizations eligible to receive tax-deductible contributions. The GuideStar database currently comprises information on 1.7 million nonprofit organizations. Basic program and financial data about these organizations are available for free on the GuideStar Web site, www.guidestar.org.
News ContactSuzanne E. Coffman
Director of Communications
757-229-4631, ext. 27