Connect Love

How To Ensure A Nonprofit Is Actually Making The Most Of Your Money

Lindsay Tigar  |  October 11, 2022

Your money matters to the charities you support — here's how to make sure your donation ends up in the right pockets.

During the festive last quarter of the year, we all stay busy attending parties, joining with our closest friends and family in celebration, and unwrapping gifts. It’s also a time when we find ourselves especially thankful for all we’ve enjoyed during the year, and we may consider donating to a non-profit. While there’s certainly a tax incentive to giving back that stands to benefit us come April 15th, most donors truly care about how their money is being used, who it helps and what it funds. (For example, money for programs = a very good thing. Money for a fat CEO salary = trouble. Today, it’s more important than ever to understand how a non-profit allocates its spending so you can make certain your hard-earned dollars are reaching the communities and causes you care about. Here’s what to know before you donate 

Repeat After Us: 501c3 

This may seem straightforward, but before you write the check, double — and triple — check that your non-profit is a true non-profit. This means they must be set up as a 501c3 nonprofits with the federal government. Any other company claiming to be a nonprofit that does not have this designation is, simply put, a fraud. And this designation matters not only because it’s the only way for you to receive the tax credit from your donation, but also because it means the organization is operating as a true charity, explains Peter Klein, the founder and chief investment officer of ALINE Wealth

So, exactly how do you check on this? Klein recommends various resources, including Guidestar, a charity vetting website, or you can simply ask the nonprofit for their 501c3 certificate and tax ID number. We also like Charity Navigator, which scores larger charities in the country and enables you to see exactly how much of their annual donations goes towards funding the people and programs you care most about. 

Don’t Stop With The Financial Research 

Once you’re clear on an organization’s non-profit status, set aside a block of time to research their work. Most organizations have loads of information on their website, including their past work, impact reports, even a detailed look at how donations are divvied among staff and the communities or causes they serve, Klein says. You may also consider checking out an organization’s social media pages to see when they were last active, and read their reviews on Guidestar or Charity Watch. Much like you would ask a neighbor for a plumber recommendation, consider asking around to like-minded individuals you know and trust to see if they have an experience to share with the non-profit, good or bad. 

If none of these things exist — a website, social media handles, or a profile on Guidestar or Charity Watch, then that’s your red flag to steer clear. 

Insist on Transparency

The most reputable and trustworthy non-profits don’t keep quiet about their spending. In all cases, any charity you are considering donating to should not just be taking your money, explains Steve Loose, a board member and chief investment officer at The Goodness Web. Instead, they need to keep you apprised of how it is being used and the difference it is making. This is typically done through an annual report published online for public consumption. 

Whether you’re looking to a local, national or international charity, someone should be available to answer your questions. Klein says it can be incredibly helpful to have frank discussions with the charity’s staff and leadership. These questions can help you better understand where your donation is going and how — exactly — it is being used. 

Not sure what to ask? Klein recommends a few starting points that will paint a thorough picture:

  • What are their long-term plans? 
  • How do they see their work in solving the issues they are working on? 
  • What’s their game plan? 
  • Do they have the financial resources to get it done?  

Look For Organizations That Are Measuring Results

Once you have a good sense of an organization’s efforts to serve the community and address the issues they’re focused on, it’s time to seek input from those they serve. Maybe you are passionate about ending homelessness or giving women access to female reproductive healthcare, for example. If you truly want to know if an organization is delivering on their promises, ask the people they serve. Some questions Klein recommends asking include:

  • Have they been responsive?  
  • Are they focused on the most important issues? 
  • Do they listen to the community to which they serve?  

You can also swing these inquiries back to the organizations by requesting data, explains Loose. “It can be really challenging to find this information — particularly in the mental health field — but it isn’t impossible,” he continues. “Ask organizations what they use to measure results, and whether there is a specific number of lives improved for every dollar of investment they make. You can also ask if they select and conduct due diligence on their partners.”

Volunteer When You Can  

Keep in mind that if you want to support a local charity, you don’t need to use your dollars. Some of us may not have any to spare, and that’s okay. We recommend the same level of vetting a charity before you get involved, even if you aren’t giving money, because you’re giving your time, something arguably even more valuable. Volunteering your time and expertise can drive a significant impact — and it can help you feel involved if you don’t have the budget available to give back financially. “It’s a great way to meet the staff and other volunteers,” Klein says. “Plus, you may uncover other ways to help, and get a firsthand look at how donations are being spent.”

Read More:

JOIN US: How are you giving back this year? Join us in the private HerMoney Facebook group and share your best philanthropic philosophies— and pick up a few new ones!

Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.

Next Article: