Guidance for year-end giving

By Laura Otten

There are 1.6 million nonprofits in the United States, and this time of year - thanks to a combination of holiday altruism and tax deadlines - it can seem as if almost every one of them is appealing to you for money. The vast majority of these organizations do what they're supposed to do, providing a range of needed programs and services. But just as in other sectors, some don't.

Informed giving can help ensure that your chosen charities are ethical, efficient, and effective. All the information you need to rate a nonprofit's performance and worthiness, and to feel secure in your decisions, is readily available.

Two online tools can provide deep insight into an organization: its website, and Guidestar, which collates information on nonprofits from a variety of sources. And a brief call to your state's charities bureau can yield more valuable information - most importantly, whether it's registered. (Every printed charitable solicitation must have the bureau's phone number on it; if it's not there, don't even consider writing a check.)

For those making a significant gift and willing to commit the time, Guidestar provides a window into a nonprofit's operations.

Sources of funding, for example, are easily found on the 990 tax forms that Guidestar maintains. A nonprofit that lacks diverse funders is usually a bad investment. If an organization, or even one of its programs, relies on one person, foundation, or corporation for more than half its funding, it's at risk of becoming a shadow of itself or even shutting its doors.

An organization's website and Guidestar can also provide telling information about its board, the group with ultimate legal responsibility for everything the nonprofit does.

For example, how big is the board? Generally, a board of more than 25 indicates that some members are likely there for prestige or a big check, not to do the actual work that a governing board is supposed to do, including fiscal oversight.

And who's on the board? The charity's staff should not be; that makes for a huge conflict of interest and compromises oversight.

Are there any politicians on the board who may be guiding its use of funds, à la former State Sen. Vincent J. Fumo and others? Not all such relationships are bad, but they should be considered before writing a check.

Are the board members independent of the organization and of each other? Familial relationships at the board level, or between board and staff, create opportunities for harmful conflicts of interest.

Is the board diverse in background, professional experience, age, etc.? A homogenous board can increase the chances of groupthink, which is not a friend of good oversight and performance.

Board members who serve for too long can become complacent or forget that an organization doesn't belong to them. The same goes for executive directors.

An organization's 990 should list the salaries of its five highest-paid employees earning $100,000 or more. Check the gap between the executive director and the next highest-paid individual. And remember that low salaries are not necessarily a sign of good organizational health, as nonprofits need competitive wages to attract talent.

Finally, don't let cynicism overwhelm your philanthropic leanings. Instead, let passion guide you to an organization, and then give it the same scrutiny you would any major purchase. That will help ensure that you choose wisely from among the millions of worthwhile organizations that deserve your trust and support.