It’s the Most Flummoxing Time of the Year

Thanksgiving is now in the rear-view, leaves have all-but-dropped, and temperatures are following suit. And like clockwork, businesses large and small are advertising their own drops: lower prices on goods and gifts, just in time for the winter holiday season. As consumer purchasing heats up, Americans are also opening their wallets—and their hearts—to charitable causes.

The weeks between Thanksgiving and the end of the year are prime time for charitable giving, as the holiday season and the end of the tax year combine, and Americans look for ways to drop their tax burden and increase their deductions. Over 30 percent of annual giving is completed in December with 10 percent in just the final few days of the year. Between mass mailings, phone solicitations, and in-person fundraisers, requests for charitable giving come from an ever-increasing number of sources and organizations; From 1988 to 2019, the number of registered nonprofit organizations nearly doubled, and individual charitable giving increased by a similar proportion.

With such a proliferation of organizations, it is hard to separate the legitimate charities from bogus cash grabs. Charitable organizations are not typically regulated by the Federal Trade Commission and the Internal Revenue Service has struggled to regulate registered nonprofits. In 2019, the IRS reported that nearly half of registered organizations organized as tax-exempt nonprofits did not actually qualify for that status, leading one commentator to proclaim: “There’s Never Been a Better Time to Be a Scammy Nonprofit.”

Fortunately, organizations like Charity Navigator, Better Business Bureau's "Wise Giving Alliance", and Charity Watch provide resources for potential donors looking to check out the organizations asking for their support. These organizations comb through data, including tax forms and other financial documents, in order to make their assessments of which organizations to rate highly.

One thing to keep an eye out for: how much of an organization’s funds go toward “program expenses.” The ratio of program expenses-to-overhead, often expressed as a percentage of money spent on program goals, gives donors insight into how their money is being spent—and how efficiently. Most watchdogs look for ratios over 65 percent, with higher ratios meaning more money going toward program goals and higher ratings.

Each of these watchdogs publishes ratings for nonprofit organizations based on a variety of criteria meant to evaluate the nonprofit’s governance, effectiveness, and financial stewardship. In addition, these watchdogs publish guides to help donors ensure they donate their money to reputable organizations. The best advice for donors looking to give wisely—and give generously—is to use the watchdogs, look up the organizations where you’re sending your money, and trust your intuition. Remember: “No act of kindness, no matter how small, is ever wasted.” Happy holidays!