Give Wisely To Charity

When it comes to charitable giving, one person's cause can be another person's cringe.

That's why we compile our year-end evaluation of 200 large nonprofits from the perspective of a would-be donor on the basis of largely neutral numbers: financial efficiency ratios. They are telling, and a good place to start research, but we would be the first to admit that numbers don't tell the full story.

Assuming you itemize, tax preparers like those at H&R Block or Jackson Hewitt ensure you get a charitable deduction for your donation if the recipient has been approved by the Internal Revenue Service as a tax-exempt nonprofit. This is usually called a (501)(c)(3), and it's a status not too hard to achieve: 1.4 million such nonprofits abound around the U.S. The IRS maintains a reasonably current list online.

Our list of "America's Most (And Least) Efficient Charities" excludes colleges and other educational institutions for a simple reason: They generally don't solicit funds from the public at large but rather from their own alumni, who might not care much about things like excess fundraising costs, overhead and need. To this we say, fine, especially if you're satisfied with your education there. In our experience, colleges generally have higher fundraising efficiency--the percent of gifts left after subtracting the cost of generating them--than public charities but lower donor dependency--the percent of gifts less surplus--often thanks to large endowments.

On our list, the average fundraising efficiency--probably the most closely scrutinized ratio--is 89%, meaning that 11 cents of each $1 raised go to raising the funds. We long have recommended being wary about nonprofits whose fundraising efficiency falls below 70%.

But different kinds of nonprofits can have different norms for this statistic. For example, contributions to a dozen or so nonprofits on our list consist overwhelmingly of donated goods from big companies and governmental agencies. This group includes Gifts-In-Kind International, Feed the Children, Food for the Poor and AmeriCares. There is next to no cost in soliciting these relatively large gifts, which is why fundraising efficiencies here approach 100%. But that doesn't automatically make them more meritorious than nonprofits that have to solicit piecemeal and have lower fundraising efficiencies.

Internet technology and changes in federal tax rules--plus the realization by nonprofits that transparency encourages donations--make it easier than ever to get solid information about nonprofits. Upon request, most nonprofits will send you an audited financial statement, the latest IRS Form 990, which contains much information and provides the bulk of the data for our listings, as well as some promotional literature. Some post all this on the nonprofit's Web site. To figure out trends, you often can find old 990s at The Better Business Bureau's Wise Giving Alliance has a free Web site,, which pulls together data on hundreds of U.S. nonprofits. Evaluations of religious nonprofits, including many not required by law to file a Form 990, can be found at the Wall Watchers site,

Our data can be helpful to starting an evaluation of nonprofits not on the list. Say you're interested in contributing to a local food bank. Several large ones are on the list, and their ratios can provide an idea of the norms for such enterprises.

However, do not underestimate what you can find out about a nonprofit that interests you by hitting the phones, checking online databases of local newspapers and generally asking around. In the end it's your money, and you should treat making a charitable donation like making an investment.

A journalist for nearly five decades, I've written for Forbes since 1987. I've covered personal finance, taxes, retirement, nonprofits, scandals and other topics that interest me. I also am the author of a novel, OFFSIDE: A Mystery. Email me at: .