Expanding Your Knowledge About the Charities You Want to Support

Whether you know exactly where and how you'd like to give or you're exploring new grant making options, there are resources available to help guide your decisions. The investigative process can be creative, informative, and fun - and all donors can participate by using some of the resources described in this article.

Every nonprofit organization has a basic portfolio of information to help donors understand its vision, accomplishments, and capacity. This portfolio includes a mission statement, program descriptions, audited financial statements, current operating budget, board and staff information, an IRS Letter of Determination, and, for most, a Form 990. In addition, some nonprofit organizations produce helpful annual reports or newsletters, and a growing number have websites that provide these types of information.

Tools & Resources

A good starting point for assessing an organization is its mission statement. A mission statement should articulate the organization's main purpose and identify the community it seeks to serve. Look for a brief, clear statement that is easy to understand.

An organization's programs should be derived directly from its mission statement. When assessing programs - whether they involve building houses, providing meals, producing plays, providing legal aid to the poor, protecting religious freedom, or some other type of work - be sure they match the organization's mission statement. Visible, measurable program accomplishments help prospective donors determine how effective an institution is and whether their charitable investment is likely to have the impact they seek.

An organization's financial health may be important in defining if and how much you may wish to recommend. Audited financial statements reflect an organization's financial standing at a specific point in time. Look at the institution's sources of income (where its money comes from), expenditures (where its money goes), assets (real property), liabilities (debt), and whether it has endowment income.

Next you may wish to review the organization's current operating budget. While financial statements are prepared by an external auditor, an operating budget is an internal working document used to help an organization predict its current financial needs. Most organizations will provide a copy of the current budget on request. Compare the audited financials to the current budget to better understand how the organization is progressing. You may notice trends from one year to the next.

Another useful tool is the Letter of Determination. This document confirms an institution's charitable status and classifies its activities according to IRS-mandated categories. Like a Form 990, the Letter of Determination must be made available to potential donors if requested.

Many donors consider an organization's Board of Trustees to be an important indicator of stability and well-being. Donors often look for Boards that include members with diverse skills from a variety of professional backgrounds. To help familiarize yourself with an organization's Board, inquire about its financial support, training, meeting frequency, and committee assignments.

Getting Started

Where do you find all this information? For larger organizations, much can be found in their annual reports or over the Internet. For smaller, less established charities, you're best off reaching out to them directly. Perhaps the most consistent and accessible source of information - for any nonprofit with an annual budget of $25,000 or more - is IRS Form 990. Form 990 includes the organization's balance sheet detailing assets and liabilities, its annual revenue and expenses, the composition of its Board, the salaries of its executives, and descriptions of its mission and programs. To access thousands of Form 990s, visit GuideStar®, one of many online resources for evaluating charities.

Whether you look to the library, the Internet, or opt to contact nonprofits directly, be sure to enjoy the process of investigation. There is no right or wrong way to proceed, and even if your research ultimately steers you in a different direction, you will have broadened your understanding of the many nuances of charitable giving.

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