Which Charity Should You Donate To?

6 Guidelines You Can Use For Vetting Charities and Nonprofits.

 

Figuring out which charity or nonprofit to donate to can be very difficult. As more and more information comes to light about how much money actually goes to causes various charities say they support, it raises a lot of questions about whether or not that dollar you donated actually did anything more than line the pockets of a corporation.

So that begs the question – how do you know which charities are reputable and which ones aren’t?

At Worldbuilders, we only work with charities that we’ve heavily vetted to make sure they not only support the cause they claim to, but they also contribute a large portion of their donations to that cause.

Here is a part of our vetting criteria that anyone can put to use when considering what charity to donate to.

 

1. Make Sure The Charity is Federally Registered.

 
In the US, charitable organizations that are recognized by the federal government are known as 501(c)3 organizations – a name they derive from the section of US tax code that regulates them. Indeed, 501(c)3 organizations are highly regulated entities, and strict rules apply to almost every aspect of their governance and activities. As such, in the US, a reputable charity will be registered as a 501(c)3. (We will note, however, that there are other forms of organizations that do good work, such as B-corps and 501(c)4: we’re not saying they are not worthwhile, just not our focus.)

501(c)3 status is a very particular tax and legal designation just for nonprofits that allows for donations to be tax deductible for federal income taxes. Most states also allow for state income tax deductions as well, but it can vary state to state. Many states also allow 501(c)3’s to be exempt from sales tax on purchases as well as exemptions from property taxes. Qualifying charities may also receive bulk rate postage discounts from the Post Office as well.

In order to quality as a 501(c)3, an organization must exist for one or more charitable purpose:

  • Religious
  • Scientific
  • Testing for Public Safety
  • Literary
  • Educational
  • Fostering of National or International Amateur Sports
  • Prevention of Cruelty to Animals and Children
  • Charitable

If you want more details about the requirements a 501(c)3 must meet, you can check out 501c3.org.

The IRS makes it fairly easy to search for an organization’s 501(c)3 status on their website here. So if you ever have any doubt about a particular nonprofit or charity, don’t hesitate to spend a few minutes looking into it.
 

2. Know The Type Of Charity You Are Donating To.

 
Understanding the types of charities can also be very helpful in determining how your money will be used and what type of impact your donation will have. Below are a few different categories as well as a brief description of how they function and serve their mission.

Public Charities.

Public charities generally receive a larger portion of financial support from the general public or the government. Public Charities usually have active programs and can be organizations like churches, animal welfare agencies, schools, hospitals, etc. They also generally have greater interactions with the public, and must receive at least 1/3 of their donated funds from a broad base of public support (individuals, companies, or other charities) as opposed to a small, concentrated group of individuals. Their governing body must also be made up of independent, unrelated individuals.

Worldbuilders is a Public Charity because we receive the majority of our financial support from the general public and are governed by a board of independent, unrelated individuals.

Private Foundation.

In some ways, Private Foundations are the opposite of Public Charities. They’re generally governed by members of a family or a very small group of individuals and derive most of their support from a small number of sources as well as investment income. Because they tend to be less open to the public (and generally don’t have any ongoing active programs), they are usually subject to additional operating restrictions and excise taxes if they fail to comply with those restrictions.

There’s more information about the different classifications on the IRS’s website here.

Those are some legal designations that differentiate different kinds of charities. Here are a couple other ways you can differentiate charities based on how they distribute their aid and how they enact their mission statement.

Pass-Through Charities.

Pass-Through Charities collect money through donations and ‘pass it through’ to the organizations that have a more direct impact. Pass-Through Charities are an effective means of raising awareness around a topic or garnering interest from a specific group of people.

Direct-Action Charities.

Direct-Action Charities work directly with the beneficiaries of donated resources and/or funds, whether it be instilling educational projects, creating income through livestock purchases, creating access to clean water, working directly with LGBTQIA+ community members, etc.

Oftentimes, Pass-Through Charities raise awareness for and pass funds through to Direct Action Charities.

For Example. Worldbuilders is primarily a Pass-Through Charity (though we do have a couple direct-action projects, including our BookDrop2020 initiative and our Masked Hero Initiative). We primarily raise awareness for other charities and action groups that work directly towards initiatives and causes that reflect our mission statement. A list of some of the charities we’ve worked with in the past is in the latter half of this blog post, and most of the charities listed there are Direct-Action Charities.
 

3. Beware Of The Overhead Myth.

 
There is a myth in the nonprofit world that a charity’s effectiveness should be measured by the ratio of overhead costs to funds donated. While the idea behind this is well intentioned, in practice it can really cast an unnecessarily negative light on ethical and effective charities.

For example. A charity that operates primarily on volunteer labor will have a different admin costs-to-donations ratio than a charity that operates primarily on employee labor. Both may be just as effective at accomplishing their mission, but their ratios would probably be quite different.

This can be especially common with small local charities, as they often leverage the power of volunteer work. Their ability to work directly within their own community allows them to understand the needs of the community and as a result, have the largest impact. These types of organizations don’t often have the press that large organizations do (and as a result, can get overlooked) but they are passionate and know the underlying problems of issues they want to tackle in their communities.

In light of this phenomenon, in 2013, three charity evaluation organizations – GuideStar, BBB Wise Giving Alliance, and Charity Navigator – wrote an open letter explaining that,

“…While overhead can help us identify cases of fraud or gross mismanagement and serve as a part of an organization’s dashboard of financial management metrics, it tells us nothing about the results of your work (i.e., how you meet your mission)” (emphasis added).

That being said, and as noted above, it can still be a great idea to do some looking on how a charity spends their money. Besides talking with a charity directly (which we always recommend for understanding how transparent they are with their donors, which is discussed more later in this article), there are other ways you can research a charity’s finances. As the Overhead Myth letter says,

“Organizations need to employ effective performance management systems and recognize that financial management is not just about audits and Forms 990, it is also about understanding the cost of achieving their missions.”

In case you’re not familiar with it, Form 990 is a form that charities are legally required to file, and it reports their total income, administrative costs, what money went towards funding a project, etc. They are supposed to be made public on a nonprofit’s website so any interested donor can get a better understanding of how a charity allocates their funds. If you’re unable to find it on a charity’s website, they’re also available via the government here.

It should be noted, however, that these are financial reports, and still do not give the full picture: it is absolutely crucial to talk with someone professionally involved with the nonprofit finances before drawing conclusions about any given charity. We cannot stress this enough, as too many charities have lost substantial funding (and in turn, ability to do good in the world) because of the perpetuation of the overhead myth.

Another important thing to keep in mind when looking through this documentation is where the charity (or rather, its employees) is based. For example. A charity Executive Director in a small town will probably make a vastly different salary than an Executive Director in New York, simply due to costs of living. Worldbuilders firmly believes that a charity needs to take care of its own people, and that starts with paying them a living wage. So make sure to take into account a few nuances with each charity you research, talk with someone that works at that charity, and take the time to understand that the needs of one charity will be different than another and will look different on paper as a result.

You can read the letters from the organizations and more information about the harm that can come from the Overhead Myth here.

We also invite you to take some time to watch the TED Talk below, as it illustrates the harmful effects of the overhead myth and covers many of the nuances we discuss here.

 


 

 

4. Understand a Charity’s Mission and Make Sure Their Purpose Matches Their Mission.

 
Do some research about charities that serve a particular cause you want to support. Take some time to fully understand not only their mission, but also how they enact that mission. How do they distribute their aid? Is it a one-time donation, do they do ongoing work within various communities? Is their labor primarily volunteer-based or do they have a staff of people that perform the work? Do they give beneficiaries long-term solutions vs. short-term fixes? Getting a clear picture of how a charity serves their purpose will allow you to understand how effectively your donations are being used.

For Worldbuilders personally, since we are a pass-through charity, we tend to focus on and work primarily with charities that have strong humanitarian efforts with lasting impacts. We highlight and work with charities that are more likely to have longer lasting impacts and provide more permanent solutions than projects and charities with short-term solutions where beneficiaries are left with unfinished projects or little resources.

Once you understand their mission, do a little bit of digging and see what types of projects the charity has done in the past. Do they align with the charity’s mission? Charities that are good about curating their projects to make sure they stay on-mission are generally better managed and more ethical than ones that aren’t. It’s a good indicator that they genuinely care about the mission they undertook when becoming a charity.
 

5. Make Sure The Charity is Transparent and Communicative.

 
One of the biggest themes so far is transparency and making sure donors have easy access to understanding how a charity functions. It shouldn’t be a surprise that reputable charities are generally more communicative with their donors. This could be about anything – details about a project, questions about finances, etc. Are they taking the time to answer their donors’ questions? Look at their social media accounts and do some Googling; if people have raised questions in the past, is the charity paying attention and taking the time to answer those questions (or at least making it clear how a donor should get in touch to ask further questions)? If a charity is secretive or elusive, that doesn’t bode well for building trust between charity and donors.
 

6. Beware Of White Saviorism.

 
This topic truly deserves its own blog post, which we will be writing at a later date. However, we would also be remiss if we didn’t mention it here.

White Saviorism is essentially the idea that it’s the job of the white person to “save” underprivileged people of color. It is perpetuated by self-serving desires as opposed to altruistic ones.

What it looks like in practice is extremely varied, but can take the form of international adoption (people thinking they need to adopt children from overseas to “save” them); foreign volunteers (or “voluntourists”) doing work that can be done by local people, organizations, and governments; exotifying local communities and/or cultures and exploiting them through posting imagery on social media and other publications; perpetuating the mindset of “poor but happy” people, and so on. This is by no means an exhaustive list, but should at least give you an idea of what White Saviorism looks like.

The roots of White Saviorism stem from colonialism, and as a result, has direct relation to how many charities conduct themselves today.

When vetting any particular charity, ask yourself: are the main beneficiaries people of color, especially those living overseas? If so, are the main actors providing aid white? Does their website or social media feature images of voluntourists taking pictures of locals during everyday life activities, or content that perpetuates the “poor but happy” mantra? Does their website or social media indicate that the only way a community or people will get the help they need is if benevolent white westerners bestow upon them gifts/resources/food/money/etc.?

For Worldbuilders, we only work with overseas charities if there is a large involvement between the charity and the local community, and if that charity empowers local populations to solve their own problems. A great example of one of these charities is one that we’ve worked with for years – Heifer International. Heifer works extremely hard to support communities in a sustainable way and invest in local farmers and their communities. This could be by providing livestock, which can be sold for profit (such as milk or eggs); bees, which increase pollination and provide honey as a cash crop; biogas stoves, which cuts down on the amount of time a family has to spend gathering firewood; and much more. They work directly with each community to thoroughly assess their needs and determine which type of aid will be most beneficial, and then provide the tools and training needed for those communities to be successful. There have been mistakes made along the way, but Heifer has taken the time and resources to learn from them and move forward more effectively. No charity is perfect, but Heifer makes a sincere effort in taking responsibility for and correcting past missteps. As a result, Heifer is a great example of a charity that has a large impact without exploiting local populations.

Now that we’ve talked a little bit about what sort of traits to look for in a charity, we’ll tell you some of the charities we’ve vetted and worked with in the past that we really love.

Portage County Literacy Council.

The Portage County Literacy Council is a local charity within Wisconsin – specifically just Portage County (the county that Worldbuilders is based in). They work to help local adults learn to read so they can better help themselves (whether it be doing simple errands or even during things like doctor appointments) and participate in the community. You can read more about our sponsorship of the Portage County Literacy Council here.
Project HOPE. Project HOPE is a global organization working on the front lines of world health challenges. They work directly with communities they serve (which includes health care workers and local public health infrastructures) to ensure sustainable change. With the onset of COVID, their work has been more crucial than ever. You can read more about Project HOPE and our work with them on our blog post here.

BYP100.

BYP100 – or Black Youth Project 100 – is a member-based organization comprised of Black youth activists working towards justice and freedom for all Black people. Their main focus is developing transformative leadership, advocacy, and political education through the lens of Black queer feminists. You can read more about what BYP100 does on their website here.

FirstBook.

Worldbuilders has partnered with FirstBook for years. FirstBook believes that education plays a key role in getting children out of poverty. Since 1992, they have distributed 200 million books and educational resources to schools and programs that serve low-income communities in the US and Canada. Since Worldbuilders is a very book- and author-focused charity, this is a cause close to our hearts and supports our missions and goals perfectly. You can read more about FirstBook on their website here.

Project HOPE.

Project HOPE is a global organization working on the front lines of world health challenges. They work directly with communities they serve (which includes health care workers and local public health infrastructures) to ensure sustainable change. With the onset of COVID, their work has been more crucial than ever. You can read more about Project HOPE and our work with them on our blog post here.

Heifer International.

We’ve already discussed Heifer International briefly, as they are an organization that Worldbuilders gives to regularly. Heifer International works directly with local communities to determine what resources will serve them best. They provide not only the resources, but also the training needed to properly utilize those materials. Many of their aid comes in the form of animals and livestock. For example: a goat can produce milk that can be sold for a profit. Chickens produce eggs that can be sold. Bees produce wax and honey. By providing members of the community with goats, chickens, or bees, they give them the ability to create their own economic stability. This type of assistance creates the type of long-term sustainable change that one-time donations don’t. You can find out more about Heifer International on their website here.
 

A Word Of Caution.

 
The above guidelines are not hard and fast rules: they are guidelines meant to help guide you in finding ethical charities. Use these guidelines as starting points, but use your best judgement when evaluating any charity.
 

What To Do Next.

 
Whatever cause you’re considering donating to, take the information above and take some time to research the charities that serve that cause. Or, you can pull from our shortlist above – all of these charities meet our criteria as ethical charities and have a high impact on the communities they serve.

And of course, you can always donate directly to us – Worldbuilders. At Worldbuilders, our mission is to champion smart charities that focus on social and economic equality and systemic issues of race and gender, and ending oppression. All donations that pass from us to the charities we support also support this goal.

You can either give a one-time donation or become a recurring donor – for as little as $1 a month.

Check out our donation options on our website here.