How can you make sure your dollars are used effectively to support worthwhile causes?

Just as you would spend time chosing among personal investment options, it pays to put some effort into selecting among charities.

“Most people aren’t good about researching charities,” said Chuck McLean, a vice president at GuideStar, an information service that tracks non-profits. “But when you give to a charity that’s not effective or efficient, it directs money away from groups that can do the most good.”

With that in mind, here are some suggestions for investigating non-profits:

Look for substance.

With so many good causes to support, everyone can find something of interest. Let the inspiring stories get you interested, but then check for signs that a non-profit group is achieving results. Good charities are transparent, which means that they explain what they do and provide meaningful measures of their achievements.

But it can take some sleuthing. “Unlike businesses that can point to the bottom line, non-profits often produce things that are less tangible,” said Penelope Cagney of the Cagney Co., a Phoenix consulting firm. At a minimum, you should be able to get a good feel for a group by scanning its website and reading its annual report, she said.

Check the numbers.

Go beyond the website and annual report, and especially the promotional brochures and mailers. For more detailed financial information, look at a group’s Form 990, a report that larger non-profits must file with the Internal Revenue Service (even though they don’t pay taxes). These are typically available on request and might be posted on the group’s website.

Analyzing the numbers can be difficult. Sandra Miniutti, chief financial officer at the Charity Navigator website, offers some tips. As a general rule, she suggests favoring groups that earmark at least 75percent of their spending to program services, rather than administration or fund-raising.

She also suggests being wary of groups that pay high salaries to top leaders. While this, too, can be hard to evaluate, “It’s unreasonable to see (CEO) salaries over $1million or even $500,000,” she said.

As a caveat, it’s important to compare similar types of groups. Food banks, for example, tend to pay lower executive salaries and funnel much more spending into program services than, say, medical-research entities or museums.

Evaluate the people.

Leadership is a key component of non-profit groups, as with other types of entities, and this, too, is difficult to evaluate. Steve Seleznow, president and CEO of the Arizona Community Foundation, said favorable signs include top executives who have stayed on the job several years and have managed to expand or grow their groups over time — not just in financial measures but in the number of clients served, success in tackling problems or whatever the measurement.

He also suggests evaluating the board of directors, looking for individuals who are prominent and respected in the community.

Kick the tires.

A big part of the research effort, especially with smaller charities, involves making sure a group is legitimate. Drop by the office to see how it operates on a daily basis. Consider volunteering for the group, which also can be a way to help if you’re short on cash to donate. You often can uncover red flags through quick Internet searches. Independent research groups such as Charity Navigator offer ratings on thousands of larger non-profits.

“We have close knowledge of most non-profits across the state,” Seleznow said. It’s a good sign when foundations throw some support behind various charities.

Also, make sure your group has filed necessary paperwork with the IRS. If it hasn’t, the tax deductibility of your donation could be in jeopardy. The IRS provides a donation-eligibility list. Go to “search for charities” under the “charities and non-profits” section at

For more information read the full article at