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Pamela Yip: Check out charities before donating to them

McClatchy-Tribune Information Services

January 5, 2015


The holiday season beckons us to show others extra-special kindness, especially when it comes to organizations that help the less fortunate.

You can tell by the appeals from charities in your mailbox. The sheer volume received around Christmas means that consumers have to figure out how to divvy up their limited charity dollars.

But itís because this season evokes emotion that you canít let down your guard when it comes to those who tug at your heartstrings for your charitable donations.

Why do appeals increase at year-end? According to the nonprofit Charity Navigator, which evaluates charities, itís because the year-end holidays are a time "of religious and moral reflection" that inspires many people to reach out to those who are less fortunate.

While most charities do good work and channel their funds toward helping others, youíve got to be careful of those masquerading as charities whose only aim is to take advantage of you.

Even with legitimate charities, you have to ensure that their work matches what you want to accomplish with your dollars.

Here are some tips:

Follow your philanthropic passions. According to Charity Navigator, there are about 1 million charities in the U.S. The group urges people not to settle for an organization that isnít a match for their beliefs and goals. "Take the time to find it and confirm ó not just assume ó it offers the programs and services that match your charitable interests," Charity Navigator says.

Ensure the charity is efficient, ethical and effective. Before you give to any charity this holiday season, be sure to check the charityís fiscal health, Charity Navigator says.

According to the nonprofit, "Financially healthy organizations ó those that are both financially efficient and sustainable ó have greater flexibility and freedom to pursue their charitable mission."

A critical document to review is the organizationís Form 990, which most federally tax-exempt organizations must file with the IRS each year. It provides information on the organizationís mission, programs, and finances.

On the Form 990, first look on Page 2, where the charity describes its Program Service Accomplishments.

"This can give a donor (an idea of) how the charity allocates its efforts and expenditures among its main programs," said Michelle Monse, president of the Carl B. & Florence E. King Foundation in Dallas, a private foundation.

Then go to Page 10, Part IX, for the Statement of Functional Expenses.

"Filers are supposed to break down their total expenses by the portions devoted to program services, management/general, and fundraising," Monse said. "You have to look at line 25 and do your own math to get the ratios."

Donors should expect the bulk of their money to go toward actual charitable activities, rather than to fundraising and administrative costs.

But you must be realistic, Charity Navigator says.

"Recognize that 100 percent of your gift cannot go toward the charityís programs," the group says. For example, each charity must pay for basic infrastructure costs such as postage, utility and insurance expenses.

The group urges people to instead donate to "efficient charities" that spend at least 75 percent of their budget on programs and services, 15 percent on administration and 10 percent on fundraising.

"After all, the charityís ability to bring about long-lasting and meaningful change in the world is the key reason for their existence and for your donation," Charity Navigator says.

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AT A GLANCE: Form 990

Most federally tax- exempt organizations must file Form 990 with the IRS each year. It provides information on the organizationís mission, programs, and finances.

Not every charity is required to file a Form 990. Churches, state institutions and nonprofits that havenít received tax-exempt status from the IRS donít have to file.

An organization that files a Form 990 is required by law to let you view the document.

You can also find Form 990s at charitynavigator.org and guidestar.org. GuideStar is a nonprofit organization that collects and organizes information on charities.