Nonprofit Vetting
There are many resources for finding nonprofits and ensuring they are legit. Here's a few favorites:
Check to make sure the organization has its nonprofit status as a 501(c)(3) and review financials (budget size, operating in black, salaries if that’s important to you).
Yelp of the nonprofit world. You should also review the nonprofit website that you’re interested in supporting: look for impact reports, check for goals and how programs align to achieve them, read anecdotal stories, learn about their leadership.
Ask Your Community
If you want to focus on a specific issue, but aren’t sure which nonprofit to donate to, ask your community. Talk to your friends/neighbors/colleagues/family/teachers. It’s helpful to have a familiar organization as a starting point.
Questions to Ask a Nonprofit:
- What are the goals of the nonprofit?
- What progress are they making toward them? (What programs do they run, are lives
being changed?)
- How do they know? (How do they measure progress...what does that look like?)
Note on nonprofit overhead: Remember, they are running a business and funds must be spent on operating costs (staffing, office space) just like any organization. If financial health is important to you, look at their documents (Form 990, Financials) and review what portion supports program (direct service) to get a sense for how they spend money. Ask them how they are funded (i.e. mix of individual donors, grants, corporations) to ensure they are working toward diversification.)
Potential Red Flags:
- Majority of funding is from one source.
- Revenue sources change drastically from year to year.
- The organization has a growing deficit from year to year.
- Budgeted income and expenses are not based on solid assumptions.
- Accounting and finance functions all lie with one person.
- The board is not involved in financial review or audit.
