How to Find Charities That Are Worthy of Your Contributions

In the wake of a natural disaster, terrorist attack or humanitarian crisis, its common and natural to donate to the charitable organization that are helping deal with the aftermath. Indeed, America's 2.3 million nonprofits -- and the individuals who in 2012 donated $228.93 billion to them -- can make a dramatic difference. But determining where your funds will be most useful -- and which organizations are most deserving -- can be a challenge.

"When there is a true humanitarian need, there is an impulse to respond," said J. Peter Pham, director of the Africa Center at Atlantic Council in Washington, D.C. "But you have to look at each organization, look at what they are actually doing and make an informed decision on a case by case basis, rather than simply respond to an emotional appeal."

Ask First, Donate Later

There are three key facets for grading a charity: its financial performance, its governance practices and its results. "Does the charity have a diverse board keeping an eye on things? Sufficient rainy day funds for when things get tough? A set of ethical best practices?" asked Sandra Miniutti, marketing vice president and chief financial officer of Charity Navigator. "And most importantly, can it deliver results? Not just the heart-warming stories that draw you to the cause in the first place, of one person's life impacted by their work, but consistent, documentable, reliable results?"

Several organizations evaluate charities. Charity Navigator evaluates more than 7,000 charities on financial transparency and accountability. GiveWell evaluates a large range of charities to provide recommendations on a select number doing great work in need of extra help. The Urban Institute provides resources and research on giving in America. GuideStar, among other things, collects nonprofits' tax forms.

Potential donors should look for specifics when reading a charity's annual report or requests for donations. One or two case studies without the context of the overall success of the program should raise red flags. When in doubt, call the charity and ask for more information.

%VIRTUAL-article-sponsoredlinks%Marcus Sarofim, a federal environmental scientist, does thorough research before making any donation. "I subscribe to the GiveWell movement of really discovering which charities are doing the best work, are putting the funds to the best use, have the highest level of transparency, rather than reacting to an emotional appeal when something terrible happens."

While responding to emergency requests for funding can help, it's better to identify the quality organizations working in relief before a disaster strikes, and make sure they're well funded when they need it the most. Or, set some funds aside to response to those types of appeals, when they come from trusted charities during a legitimate crisis.

"Take the time to find out causes you're really passionate about and do the research before making a donation," Minuitti said. "Don't wait for a charity to call you on the phone or stop you outside a supermarket."