July 6, 2014

Not All Charities Are Equally Trustworthy

The chains securing a Mazda MPV minivan being ...
The chains securing a Mazda MPV minivan being donated to a charitable organization to the flatbed of a tow tuck by its rear axle. (Photo credit: Wikipedia)
There are a near infinite number of ways to spend money to assist others. But because none of us have unlimited funds and not all charities are equal, it makes good sense that we might exercise some skepticism by critically evaluating charitable organizations when it comes to deciding where to donate our limited funds.

The big-name charitable organizations like the Red Cross, Doctors Without Borders, and the Humane Society are about as safe as it gets. We can easily figure out how they spend their money. Next, we have the thousands smaller (but still large) charities listed with Charity Navigator. It is fairly easy to find out what these charities are about, determine what percentage of one's contribution is used to cover administrative costs, see how effective they are at meeting their stated goals, etc. With organizations of this size, one can contribute to highly ranked charities with a reasonably high degree of confidence that they are trustworthy and will use the contributions they receive appropriately.

As we move down in size to consider charitable organizations that are too small to have been rated, the risk that our contributions may not be used appropriately increases. To be sure, there are many excellent small charitable organizations that deserve our support; however, comparing them and sorting the good ones from the sketchy ones is not always easy. This should be a concern, especially when we frequently hear about how little of the money we contribute actually goes to help those we are trying to help.

I regularly contribute to a small charitable organization in my community, and I am able to do so with a reasonable degree of confidence that my contributions are well utilized. This confidence comes from my familiarity with how the organizations work, the fact that I know people directly involved with the organizations, and my observations of the good they have done in the community. As long as one is willing to do some research first, it is certainly possible to give to a smaller organization without having to worry too much.

At the smallest level of all, we find opportunities to give to individuals or small groups who have not gone through the IRS approval process to earn nonprofit designation. We can give to the individual blogger who puts a PayPal button on his or her site and asks for donations to support all sorts of causes, many of which sound quite worthy. These make me nervous, and this is why you rarely see me promote such efforts here. I might still make the personal decision to support one myself every now and then, but I recognize the gamble I am making when I do so. I'm not terribly inclined to ask others to join my gamble. If I did and things went bad, I'd likely feel somewhat responsible.

Update: Shortly after posting this, a reader brought it to my attention that the Humane Society was recently downgraded by Charity Navigator. It appears that they have issued a donor advisory about the Humane Society. Good to know.

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