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Wednesday, June 17, 2020

The Importance of Research: Ensuring Your Support Goes Where You Intend

With the COVID-19 pandemic came an outpouring of philanthropic giving.  It is possibly one of the few silver linings to occur during a very difficult time.  Similarly, during the last three weeks, as our nation has been reckoning with racial injustice, there has been another significant wave of giving.  Americans are reaching deep into their pockets to support nonprofits of all sizes fighting for equality.

This week, a news outlet released a report, sharing that a number of corporations and individuals contributed to a 501(c)(3) nonprofit organization with a name that aligns with the Black Lives Matter movement without being formally associated with  #BlackLivesMatter Global Network. This has many donors questioning how this happened and what can be done to ensure their money goes where they intend.

This organization is one of many, as Charity Navigator currently has profiles for seven 501(c)(3) organizations with the keywords ‘Black Lives Matter’ in their names — these are pulled from the IRS’s Business Master File. With more than 1.6 million registered nonprofits in the U.S., it’s not uncommon for multiple organizations to have similar names or, in some cases, share the same name.  If a donor finds an organization in the I.R.S. Tax Exempt Organization database, their research should not end there.

So, what can donors do to ensure their support is directed to the intended organization? Here are six ways to help protect yourself:

  1. Ensure the organization is a registered 501(c)(3) nonprofit - these are the only organizations where donations are tax-deductible.  Ask the nonprofit for its Employer Identification Number (EIN) — all nonprofits have this unique nine-digit number assigned by the Internal Revenue Service. The EIN can be used to identify the organization and to conduct research, including reviewing information on Charity Navigator.
  2. Look for important trust indicators. Charity Navigator’s star ratings have long been considered the premier trust indicator of the nonprofit sector. We analyze the financial health and accountability and transparency of America’s largest and most well-known nonprofits. Additionally, there are other places to secure information, such as BBB Wise Giving Alliance and GreatNonprofits. 
  3. Most nonprofits make their financials available on their websites - at times these are rendered in an easy-to-read pie chart so that donors can see what portion of their donation goes toward programs. Both the financial statements and, for rated organizations, the pie charts can be found on Charity Navigator. The nonprofits should also provide visibility into how the nonprofit operates: Are they an advocacy organization? Do they provide direct services? Do donations fund research? Tax-exempt organizations should make the answer to these questions very clear.
  4. Legitimate 501(c)(3) charities should be filing a 990 with the I.R.S. annually. There are several versions of Form 990s - this is determined based on the type of nonprofit and the annual revenue.  If the nonprofit cannot provide recent copies of its 990, for example, if the organization was recently formed and you as a donor are having difficulty finding information on it, you may want to err on the side of caution.  Review these tips to avoid charity scams.
  5. Be wary of supporting personal fundraisers. As personal fundraisers (individuals raising money for themselves or others) are not coordinated with nonprofit organizations, there’s limited accountability into where the money goes. Additionally, donations are not tax-deductible. Charity Navigator encourages donors to support well-established nonprofits that come with the comfort of knowing support received is reported to the I.R.S. (90% of the organizations rated by Charity Navigator undergo a full audit by an independent third-party auditor - something that factors into our ratings).
  6. Use social media to your advantage. Beyond search engines, news travels quickly on social media. And although there should be caution in using social media as a definitive and sole record of fact, together, with supporting research from websites mentioned above, it may be a helpful source of information.

The team at Charity Navigator has been incredibly heartened by the millions of Americans opening up their hearts and wallets to support one another during these challenging times. We stand resolute behind our mission of making impactful philanthropy easier for all and encourage donors of all sizes to balance their eagerness to give with vigilance to ensure their donations are going to the organizations to which they originally intended.

Written by Stacy Steele, Director of Marketing and Communications, at Charity Navigator.

As a 501(c)(3) organization itself, Charity Navigator depends on public support to help donors make informed choices. Please consider investing in the future of Charity Navigator by making a donation today. Donate now >>

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