The Better Business Bureau Wise Giving Alliance
evaluates charities on 20 standards of accountability, issuing detailed reports on finances and organization. Charity Navigator
simplifies things by rating charities based on how efficiently they use their money. Both are good ways to check up on the charity of your choice. You can also call the IRS (877-829-5500) to verify the group's tax-exempt status.
Find Out How They Spend the Money
Legitimate charities gladly share information on where your donation will go, says Charity Navigator president Trent Stamp. His group's free reports reveal CEO salaries and how much of the money goes to fund-raising and other expenses. A charity should spend at least 75 percent of its budget on programs directly related to its cause, says Stamp.
Check the Name Twice
Before you open your checkbook, make sure you're giving to the organization you think you are, says Stamp. Dodgy charities can capitalize on the reputation of legitimate ones by using a soundalike name. For instance, Stamp's group gives the Children's Defense Fund four stars, and the Children's Charity Fund zero. But even legitimate groups can fall short: The American Cancer Society earns just two stars from Charity Navigator. "Only 69 cents on the dollar goes to programs, and that's well below their peers," Stamp says. By contrast, the National Cancer Coalition spends 96 percent of its money on cause-related programs.
Beware of Charity Tie-In Products
Don't assume that buying a product with a charity's stamp can substitute for a direct donation. "For most products, it's just pennies on the dollar that actually reach the charity," says Stamp. "That might make you feel better, but it can be the equivalent of throwing a penny in a donation jar."