Who gets our donation dollars?

The freer is society, the more responsibility it must take for fellow citizens. To that end we have charities, filling gaps for those who need more help to survive or thrive, and supporting those areas of life, such as arts and religion, which are not self-sustaining but feed the human soul.

Most charitable donors are middle class, without much to spare. Even those more fortunate like to know their donations will be well-used. In the case of local charities, it's much easier to be assured of that. One can directly participate by volunteering or serving on boards, or speak with friends who do.

But what of those dollars sent to charities farther away? What about money raised by third parties? IRS tax-exempt status provides little assurance, as they approve 99 percent of 501(c)(3) applications. Donors might be surprised at the low relative value of their dollars.

Chicago-based Charity Watch (formerly the American Institute of Philanthropy) publishes a rating guide and watchdog report to help people sift the wheat from the chaff. Charity Navigator breaks down expenditures, with a free searchable database.

Some of the 600 rated organizations are suspect in their entirety, such as "Good Charity, Inc." Their meager three-member board of directors consists of owners and staff of the for-profit telemarketing company who solicits Good Charity's donations, according to Charity Watch's user-friendly May 2013 report.

Consider marketing contracts with charities generally. While generally less incestuous than Good Charity's, in effect those outside fundraising companies (think address label mailings and phone calls at dinner time) and their associated costs often take a big chunk - up to 60 percent of the donation. For a $25 donation it's hardly worth the stamp.

I write "in effect," because it's complicated. Part of how this happens is clever accounting to appear more efficient. The rules of financial reporting say that if a solicitation includes an "action step" - an informative element - it can claim it is educating the public. That means those fundraising costs may be categorized differently as a "program expense," so the charity can report more of your donated dollar as going toward serving the mission, rather than to outside marketers. An included phrase as obvious as "don't drink and drive" or "abuse hurts" may do the trick.

According to Charity Navigator, a respected financial evaluator of 6,000 charities since 2001, the better charities have donor privacy policies, opt-out provisions, and other protections from unwanted solicitations. Their Web site is a good general guide for the savvy donor.

Charity Watch rates them with grades of "A" through "F." Factors include the cost to raise $100, transparency, levels of assets held in reserve, and what percent of funds is spent on actual programs. The Wildlife Conservation Society got an "A"; the ASPCA, a "C-." The American Breast Cancer Foundation: "F." The Breast Cancer Research Foundation: "A+." Yes, they gave themselves an "A" rating with 83 percent of each dollar spent on their mission.

So what do concerned donors do? Don't pay more simply to be solicited. Check the charity's rating at CharityNavigator.org or CharityWatch.org (donation required; site soon to be re-launched) and when possible, eliminate the middleman and give directly to the nonprofit. Of course, one can always simply focus on local nonprofits, who aren't likely to get donations from Chicago.

Thanks to reader Tad Leach for the tip.

Sholeh Patrick, J.D., is a columnist for the Hagadone News Network. Contact her at [email protected].

Sholeh Patrick