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How to research a charitable organization

Don Quixote said "doing good to base fellows is like throwing water into the sea." With that in mind, you want to make sure the dollars you peel from your hard-won wad wind up in the hands of those who need charities, rather than those who run them. After all, Americans are extremely generous, with 1998 personal giving nearly $135 billion. But no one likes to give foolishly.

When contemplating a donation, you'll first want to make sure the organization isn't an out-and-out sham (see "stuff" box). But even legitimate groups should be investigated to be sure your money will be used wisely, and several watchdog organizations keep score.

  • Evaluating 400 charities, Manhattan-based National Charities Information Bureau helps contributors make sound giving decisions. Go to their Web site to see which charities meet NCIB's "Standards in Philanthropy," to order a more detailed report ($9.95 each), or to request NCIB's free "Wise Giving Guide."
  • The Philanthropic Advisory Service of the Better Business Bureau reviews the organizations for which they get the most requests. Their "Give But Give Wisely" newsletter is packed with information.
  • The American Institute of Philanthropy in Bethesda, Md., grades hundreds of charitable organizations. Their phone number is (301) 913-5200.

Keep the following in mind when evaluating a group for a potential donation:

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  • Tax status. To find out if an organization is tax-exempt, head to the IRS site. Click "search," and enter the name and location of the organization. If the IRS deems it eligible to receive tax-deductible contributions, it'll be in Publication 78, which will show up in your search.

Even if an organization has a tax exemption, that's no guarantee a donation is tax deductible. A tax ID number doesn't mean diddly in relation to your tax deductions. Make sure it's explicit that this donation is tax deductible -- unless you don't care.

  • The true cause. Names of organizations can be misleading. Be sure you know that your donation is going to a group that actually does work that you support.
  • Percentages. It costs money to run an organization and to raise funds. But you want as much of your donation as possible to go to the right people, endangered animal or cause, rather than some CEO's salary. The BBB recommends that at least 50 percent of a charity's proceeds go toward charitable work, rather than fund raising or administration, while the NCIB requires a more stringent 60 cents of each donated dollar go toward the cause. Be careful of a group that uses only a share of the profits for their good works -- that's different and nowhere near as generous.

Find this type of giving info from the above watchdogs, or by asking the charity directly. They are required to give you a look at their annual Form 990 tax return, which breaks down how an organization spends its revenue, from fund-raising events and salaries to actual charity. Avoid any charity that won't share this form.

Warning signs that a charity may not be legit
Look-alike name. Some less-than-wholesome organizations use names similar to a well-known charity.
P.O. Boxes. If you are unable to find a street address, forget about them.
High-pressure requests. Don't be pressured into making a quick decision.
Any group unwilling to provide information about its tax status or accounting.

You can also get this information directly from the IRS. Send $1 and the name of the organization to IRS Service Center, PO Box 9941, Ogden, UT 84201.

If an organization isn't followed by one of these watchdogs or is local to your area, fear not, good person. Ask the charity directly for its Form 990, and be particularly alert for the warning signs mentioned here. The charity's brochure should give you a clear idea of the charity's purpose, where the recipients are located and the proportion of its donations that goes toward good works and how much goes to other things.

One last caveat: No matter how legit and worthwhile the cause, don't forget to get a receipt for tax purposes.

-- Posted: Dec. 21, 1999

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