How do I know if this Charity is Fiscally Responsible?
The following are questions that you can ask to determine which charities are using your donation responsibly:
1. What do you know about this organization?
First, find out all you can about the organization: what is the name, what is their purpose, what programs and activities do they sponsor? Also, check the following websites to make sure that the organizations are registered with your state and are allowed to be contacting you for donations.
If a phone solicitor is calling you, ask them directly about the organization and if they have any informational material that they can send you or if they have a website.
Missouri Secretary of State Database:
Use this database to check that the business is registered as a nonprofit organization.
http://www.statelocalgov.net/50states-secretary-state.cfm (Other States)
Missouri Attorney General's Office:
MO Attorney General maintains a list of organizations that are allowed to solicit donations by phone. Some of the organizations are listed on their website, if you cannot find an organization on the list call the Check a Charity Program Administrator: 573-751-3321.
2. Does the organization have a Federally Recognized 501(c)(3) tax-exempt status?
An organization that has the 501(c)(3) status, means that the organization is recognized by the Federal Government as being organized for the public benefit and has been given tax-exempt status. This means that in most cases the organization does not pay taxes on the money that is given to them, and the donor is allowed to write that donation off on their taxes. In exchange for this status, the organization must follow rules that are set by the government and file a yearly tax return if the organization's gross receipts exceed $25,000, making their financial information available to the public. Churches and Schools can also have tax exempt status, but do not have to file an annual tax return. Not all organizations will have 501(c)(3) status, and you may still donate to them, but, they do not have to follow federal guidelines and make their activities known. In addition there are many different kinds of 501(c)(3) Nonprofit organizations and the amount of your donation that qualifies for exemption varies.
IRS Publication 78: lists all organizations that are eligible to receive tax-deductible charitable contributions and how much is exempt. You can search for your charity through the IRS site: http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check
Or search Publication 78 by using Guidestar's Charity Check: This is a staff-Mediated Website contact Spencer Road Reference Desk (636)441-0794.
3. How much of your donation will go to programming and services that the charity provides, and how much will go to general administration and fundraising expenses? Additionally, is the organization financially responsible?
Ask if the phone solicitor is a professional fundraiser: The caller has to tell you if they are being paid to solicit donations for an organization. If they are, ask them what percentage of your donation do they receive and how much goes to programming.
Follow up by checking the organization's financial statements to determine if you agree with their spending.
You can use Guidestar, Foundation Center, or the Economic Research Institute (ERI) all which are organizations that offer free online searching for Nonprofits and retrieves any 501(c)(3) financial statements (the IRS 990 form) that are available.
Economic Research Institute (ERI): http://www.eri-nonprofit-salaries.com/
Foundation Center: http://lnp.foundationcenter.org/
All 501(c)(3) organizations that make over $25,000 must file the IRS 990 or 990-EZ form. The 990-EZ form can be filed if the organization has gross receipts less than $100,000. No matter which tax form the organization files it will allow you to find out the following:
|Organization type:||Nonprofit||Nonprofit <$100,000||Private Foundation|
|Amount of Public and Government Support||Part I : Line 1 a - d||Part I : Lines 1 & 2||Part I : Line 1 & Sch B|
|Total Revenue||Part I : Line 12||Part I : Line 9||Part I : Line 12|
|Total Expenses||Part I : Line 17||Part I : Line 17||Part I : Line 26|
|Functional Expenses (Salaries, Programs, Fundraising)||Part II : Lines 22 - 44||Part VI-A : a & b||Part II : Lines 1 - 31|
|Lobbying Expenditures||Part VI : Line 85 b & d||Part III : Line 1||Part VII-A : Lines 1 a & b (& statement of activities)|
|The Better Business Bureau (www.give.org) suggests that organizations should spend at least 65% of total expenses on programming (Total Expenditures on Program Services / Total Expenses)||(Part I : Line 13 / Part I : Line 17) * 100 = % Spent on Programming, want to see >65%
||(Part III : Line 32 / Part I : Line 17) * 100 = % Spent on Programming
||(Part I: Line 25 / Part I : Line 26) * 100 = % Given out as Contributions|
|The BBB also suggests that no more than 35% of public contributions are spent on fundraising. (Fundraising Expenses / Public Contributions)||(Part I : Line 15 / Part 1 : Line 1a + 1b) * 100 = % of contributions spent on fundraising
4. Is the structure of the organization strong?
IRS guidelines (Publication 557) suggests that Organizations have at least five board members. The Better Business Bureau's standards suggest that Board members should hold a least 3 meetings per year, no more than one or 10% of board members that are being compensated should serve as a voting members of the board, and the chair or treasurer of the board should not be receiving compensation. The 990 IRS forms does show salaries of the top executives and board members of the organization.
|990 EZ||990||990 PF|
|List of Officers, Directors, Trustees, and Key Employees||Part IV||Part V or as an attachment at the back of the tax return||Part VIII : Line 1
|Salaries of Top Executives||Sch A : Part I||Part II : Lines 25 - 29; & Sch A : Part I : Line 12||Part I : Lines 13 - 15 & Part VIII : Line 2|
5. What do others say about the organization?
There are many publications and watchdog Internet sites that review nonprofit organizations to make charitable giving decisions easier for the consumer.
Charity Rating Guide & Watchdog Report: (Available only at the Spencer Road Branch)
The Charity Rating Guide & Watchdog Report, is a monthly publication put out by the American Institute of Philanthropy and evaluates over 500 national charities. The American Institute of Philanthropy's Website contains a list of top-rated charities (http://www.charitywatch.org/).
BBB Wise Giving Guide: (Available only at the Spencer Road Branch)
The BBB Wise Giving Guide is published quarterly by the Better Business Bureau, in order to help donors make informed giving decisions. The guide includes evaluations of National Charities, as well as include articles on charity accountability issues.
American Institute of Philanthropy (AIP):
Better Business Bureau - Tips on Charitable Giving (Financial Analysis): http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=e6920967-8ebd-4a31-9986-de07de38e7bc
Better Business Bureau - Eastern Missouri & Southern Illinois (Financial Analysis):
http://www.stlouis.bbb.org/ (For Local Organizations)
Internal Revenue Service:
Idealist: Resources for Nonprofit Organizations:
http://www.idealist.org/info/Nonprofits/Overview (Watchdog Agencies FAQ)
National Committee for Responsive Philanthropy: