How to evaluate not-for-profit organizations before you give

BY DAVE MCGOWAN

You just received a request to make a gift to a not-for-profit organization and, while you are interested in and believe in the cause, you wonder if your charitable gift would be a good investment. So, how will you know? Well, there are many factors, financial and otherwise.

The first place to go is the organization’s website. Is it comprehensive and up to date? Does it list the organization’s paid and volunteer leaders, describe its programs, present its financial statements/audited reports, annual reports, and include its current strategic plan?

Also, look for the organization’s Form 990, Return of Organization Exempt from Income Tax, which can be found by searching on propublica.org under its Nonprofit Explorer. This is where you can see the net income or loss (under “Summary” in Part I), top salaries being paid (under “Compensation” in Part VII), and the percentage of expenses dedicated to programs vs. the costs of fundraising and administration (under “Statement of Functional Expenses” in Part IX).

As for the latter, there are many misconceptions. Any organization, for-profit or not-for-profit, needs to spend money on people, activities, and items not directly related to the provision of products and services. For a not-for-profit, the target should be 15–25%, with 75-85% going to program delivery.

Look at multiple years, as the organization may have a particular year that is considered an outlier. All-volunteer organizations may have lower fundraising and administrative costs than large, national organizations, which can capitalize on efficiencies. Start-ups may have above-average costs of fundraising and administration as they begin setting up and growing the business.

Still looking for an assist? Here are some not-for-profit watchdog groups: candid.org, charitynavigator.org, give.org, givewell.org, and charitywatch.org. Their recommendation for the maximum cost of fundraising and administration is 35%. Several of them also offer ratings of not-for-profit organizations.

Additionally, what would one of my articles be without a nod to your local community foundation?! It will know the local organizations well and can help you make informed decisions. I’m proud to report that DuPage Foundation’s fiscal year ending June 30, 2025, had a cost of fundraising and administration of 8%!

Of course, there is nothing like reaching out directly to the not-for-profit you are considering supporting. How responsive, informative, and transparent are the organization’s representatives? If it’s a local organization and you are considering a more significant gift, there is nothing like a face-to-face meeting with the organization’s principals in your discernment process.

At the end of the day, the ultimate criterion for supporting an organization should be its success in meeting its mission.