Vetting Nonprofit Organizations and A Drawer Full Of Address Labels
We’ve all received those address labels in the mail. You know the holiday-themed ones from that charity you made a one-time donation to and now has your name on their mailing list FOREVER! You’re a charitable person, but you don’t need that many address labels!
Have you ever wondered how much those labels cost to make and their percentage of operating costs? While not all of us have the time to take a deep dive into address labels, we should take the time to vet the nonprofits we donate to, especially if you plan on donating a large sum of money or assets.
NONPROFIT DUE DILIGENCE
Your first step is to find the nonprofit in the IRS Tax Exempt database. Your second step is to check out the organization’s website. Does it state its mission effectively? A nonprofit’s mission should be clear on its goals, constituents, and delivery of services. Look for photos of recipients, testimonials, and recent press. If the charity’s website is comprised of a donate button, some stock photos, and looks like it was created by your forty-year-old cousin who lives in his mom’s moldy basement, then maybe look for another charity.
ANNUAL REPORTS AND FORM 990
Most large and some smaller nonprofits post their annual reports online. The annual report can include testimonials, impact stories, and a financial summary. The critical number to keep in mind is administrative and fundraising costs. Thoughts on what percentage of average administrative costs are reasonable can vary, but between 15-25% of the total budget is acceptable. Keep in mind that overhead is just one aspect of a nonprofit’s performance and should not be the only determining factor in making your decision.
If you like IRS returns (and let’s face it, who doesn’t), then review an organization’s Form 990. You can find recent 990 nonprofit returns on websites such as guidestar.org. You can gather a lot of information from the return, including the board of directors, staff salaries, grants received, donations, and expenses. Websites such as charitynavigator.org are good reference guides on nonprofits and even evaluate organizations on board composition, liabilities, expense ratios, and more.
FINAL THOUGHTS
At Abel Financial, we try to support organizations that are meaningful to our clients and to the causes we believe in. Recently, we highlighted a nonprofit that is led by one of our clients, Dr. Raul Caceres. It was important to support his cause, but what was more impactful was knowing how each dollar we donated was being put to work.
You should know the organization’s financial health, but if you really want to know about the performance of a nonprofit, then speak to a constituent which includes volunteers and service recipients. Don’t be afraid to talk to volunteers or become a volunteer yourself to see how things are run and connect with like-minded people who want to make a difference in the world.
THE VALUE OF WORKING WITH A FINANCIAL PLANNER
Financial Planning is not just about managing investment portfolios. More importantly, it is about having someone you trust to guide you when the unexpected occurs and to make sure your family has a trusted resource to rely on.
At Abel Financial Management, we are local, family-oriented, and truly independent financial planners with a mission to help you make smart decisions with your money. If you or someone you know has questions like these, we invite you to have a conversation with us. Email or call us at 410-307-1202.
https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations https://www.abel-financial.com/post/tiwanaku-project
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