Learn more about the charities you give money to this holiday season

Dec 18, 2012

There are a lot of worthy (and, perhaps, not-so-worthy) charitable organizations asking for your support at this time of year. How should you decide which ones deserve your money?

One website that can help you is charitynavigator.org. It rates charities according to their financial health, accountability and transparency. Financial commentator Greg Heberlein and KPLU's Dave Meyer talk about the ratings on this week's Money Matters.

It seems as if the year’s end attracts the largest number of appeals from nonprofit organizations.  There are several reasons:  

  • Donors are more acutely aware that to get a tax deduction in April, now is the time to boost charitable deductions.
  • Donors are in the holiday gift-giving spirit.  
  • Donors have a better picture of how much they can afford on such discretionary spending.  
  • Guilt.

Donors often are concerned about how reputable a charity may be. They are especially focused on how much of their donation is erased by administrative costs.

Where can one find that information?  From a 10-year-old web site, itself a nonprofit: charitynavigator.org.

Charity Navigator evaluates publicly available tax information to rate more than 5,000 charities. It rates agencies by zero to four stars. It looks at 19 factors under two headings:  financial health for one and accountability and transparency for two.

You can search by the nonprofit’s actual name. You can also search by city. For example, there are 84 agencies listed under Seattle, 12 for Tacoma and seven for Everett.

Charity Navigator produces all sorts of lists.  One is the nation’s 10 most popularly viewed agency websites. No. 1 is the American Red Cross.  No. 2 is based in Federal Way, World Vision. Both get the top rating of four stars.

It seems the higher-rated nonprofits have the lowest administrative and fund-raising costs. The four-stars generally pay personnel between 2 and 3 percent of what they collect. Three-stars often fall into the 5- to 10-percent range.

Area agencies that serve the needy mostly land in the four-star category. Examples include Food Lifeline, Northwest Harvest and FareStart.  (By the way, Portland’s Mercy Corps is four-star.)

One agency that serves the spectrum, United Way of King County, also is a four-star organization.

Agencies that service primarily children generally receive three stars. Those include Children’s Hospital, Boys and Girls Clubs and Make-a-Wish.

Many arts groups fall in the three-star group. Among them, both the Tacoma and Seattle art museums and the Seattle Opera and Symphony. But three groups, with payrolls accounting for more than 10 percent of what they raise, slip into the two-star class. Those are A Contemporary Theater, Henry Art Gallery and KCTS Channel 9.

One big caveat: Charity Navigator doesn't rate every charity. So if your charity isn't listed, it's not a danger sign. The site doesn't rate private foundations or most religious organizations. If your charity doesn't make the list, try looking for it on the Washington Secretary of State's website.

Charity Navigator doesn’t tell you which nonprofits to support. There may be one with more overhead that hits you right in the heart. But it's a helpful guide, especially at year’s end.