Go to the source
An obvious place to turn for information is the charity itself. This means visiting the group’s main office or the schools, hospitals or community centers where it does its work to see what goes on. You might want to sit down with a program’s director to learn more about the organization.

Kaarin Knudson, communications manager for the Peninsula Community Foundation in San Mateo, California, says her organization encourages donors to ask charities for success stories. “You can do very numerically correct analysis, but that leaves out the real connection you want to have to the work they do,” she says.

Another issue to ask about, especially if a not-for-profit is small or relatively young, is succession planning for the organization’s key leaders. “Some of the best ideas get started because of one charismatic person,” notes Michael Smith, director of Wealth with Responsibility, an educational program within Deutsche Bank’s Private Wealth Management group. “When that’s the case, you have to ask, ‘Is there a structure in place that will survive if the person leaves?’”

Is it for real?
The next step is to make sure the organization has a clean record. You should check that the organization is registered as a not-for-profit with your state’s attorney general or secretary of state, that it files an annual “tax return” (IRS Form 990) and whether there have been any complaints against it. The 990 enumerates how much funding comes from memberships, donations and government supports, and gives details on how funds are allocated, including salary and expense account data for key managers and trustees. “Occasionally a donor will ask us to look into an organization, and we’ll find the attorney general has put out a warning about them,” notes Doug Stasek, director of gift planning for The Saint Paul Foundation and Minnesota Community Foundation.

How much information you’ll find online depends on where you live. In tech-friendly California, for example, you can get financial documents for many local charities right through the attorney general’s website. Other states provide contact information for donors to request hard copies. The National Association of State Charity Offices provides links to the appropriate websites for most states.

If your state hasn’t gone digital yet, GuideStar is an internet resource that can help you get the information you need. Guidestar provides IRS Form 990s and other information on 850,000 organizations for free.

Keeping it local
Across the country, some advisors say their clients are bypassing large national charities in favor of smaller, local organizations that enable donors to readily see both the need for funding and the difference their charitable dollars are making.

Stephen Goldbart, cofounder of the Money, Meaning, Choices Institute, a philanthropy advisory firm based outside San Francisco, cites the example of a couple who decided to shift their giving from national environmental groups to their local parks organization. One spouse also joined a public advisory group to learn more about park-related issues. “That connected them with the realities of that world,” Goldbart says. “They know what’s going on with their money, and they can influence how donations are used.”

Community foundations are a major resource for people looking to keep their charity close to home. Because they usually manage grant-making programs to local nonprofit organizations, they get to know local groups and needs. They typically collect donations for a general fund that provides grants to local not-for-profits. They often inform potential donors about the needs of particular local charities via newsletters or e-mail and advise the giving programs of donor-advised funds for individuals and family firms.

The best thing about community foundations is that they’re involved with not-for-profits in many different ways — they receive grant applications, check out organizations on behalf of donors and counsel not-for-profits on management and fund-raising issues. So much time spent talking to program directors, boards and other philanthropists enables foundation officers to keep an ear to the ground. “We can pass along information both formally and informally to our donors because we hear things that they might not,” says Steven Moore, gift-planning officer for The Columbus Foundation in Ohio.

In addition, some community foundations have locally focused databases that donors can use. For example, 86 percent of the Peninsula Foundation’s supporters use the Internet to manage their donor-advised funds. This San Mateo, California-based organization offers its donors a database of 400 local charities. In addition to standard financial data, it includes anecdotal information — all those “success stories” the foundation considers important — that might not be readily available elsewhere, according to Knudsen.

Meanwhile, the Baton Rouge Area Foundation is planning to roll out a database called ImpactMgr for its members this spring. This database uses a lot of easy-to-read graphics to provide snapshots of an organization. They show several years’ worth of revenue sources and spending patterns as well as specific measures of a charity’s progress toward its mission and goals.

You can find a community foundation near you by searching a member database that the Council on Foundations provides on its website.

Trusting your instincts

Finally, several advisors note that, while it’s important to know that an organization you’re investing in is responsible, effective and will be around long enough to put your donations to work, not-for-profits are seldom perfectly oiled machines. “We try to inform opinions and make sure donors have options, but I don’t want to provide so much analytical information that I kill their passion,” notes Moore. “Sometimes your passion for something and your instincts are worth pursuing.”

Enlightened self-interest can also be an important driver, and some risk taking can lead to great ends. What do you care about? Where can your dollars help? Trust your instincts.

Eileen Gunn is a freelance writer based in Brooklyn, New York.
Copyright CFA, 2004
Used with permission