4 Level Charity Evaluation System

BY SHARON LIPINSKI

DISCOVER THE

GiveLive. Love

CHAPTER 1

WelcomeA donation starts with the heart, but a good do-nation happens when you use your head.

For a long time, I didn’t feel comfortable evaluat-ing a charity. I just didn’t really know where to look or what to ask. So, I researched how to re-search!

With a lot of effort and practice, I created a 4 Level Evaluation System. I’ll walk you through each level, and before you know it, you’ll also be able to quickly and confidently evaluate chari-ties.

Level 1 is the only level you really should do every time. The other levels you can choose based on how much money you’re giving and how much time you want to invest.

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Level 1: The Basics

To give away money is an easy matter and in any man's

power. But to decide to whom to give it and how large

and when, and for what purpose and how, is neither in

every man's power nor an easy matter. Aristotle

Level 1: 4 Basic Questions

Special thanks to Lucy Bernholtz for the first three of these great basic questions.

1. What does the charity do? In very simple and clear lan-guage, describe the problem the charity is trying to solve.

2. How do they do it? There are lots of ways to solve any issue, how is this charity doing it?

3. How do they know they are making a difference? This questions jump starts your critical thinking process. Does this charity know if they’re making a difference? Are they assuming their work makes a difference or are they track-ing the results of their work? Are they tracking the right measurements?

4. Is that something I want to support? Why? While there are thousands of worthy causes out there, you are just one person. When you choose to support one charity with your time and money, it takes away from another charity you could support. Is this the cause and charity you want to support? Do you like what they do and how they do it? Do you believe they are making an impact on the problem?

For example, my Veterans Giving Circle believes that veterans deserve to live happy, healthy lives, and so we choose chari-ties that give veterans the psychological and economic tools to recover from their injuries and excel in life.

Here’s our evaluation of Give An Hour.

1. Give an Hour provides free and anonymous mental health services to veterans and their family.

2. They do it by finding mental health professionals who want to donate their time and matching them with veterans who need help.

3. They know they’re making a difference because their 6,400 licensed mental health professionals have given more than 70,000 hours of free services.

4. 70,000 hours is a lot of mental health services, so clearly there is both need and demand. Because their mental health professionals are licensed, I feel confident that good service is being provided to those in need. Yes, I want to support them because supporting veterans is one of my top causes.

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Level 2: Reputation Research

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Think of giving not as a duty, but as a privilege.

John Rockefeller

Level 2: Reputation Research

Not all charities are created equal. Some doing amazing work, while some struggle with leadership, implementation and vi-sion. Some are working on programs that don’t make a differ-ence. And a few are embezzling or wasting your donations.

To avoid bad charities, your best bet is to do 3 different types of reputation research.

1st, Check On-Line Sources

A number of website compile information on charities, and are invaluable resources for finding out the scoop on a charity you’re considering.

Give Well

Give Well recognizes that different charities are doing dif-ferent work and should be evaluated according to the im-pact they are trying to make. They provide a list of evalua-tion questions that vary according to the non-profit’s fo-cus.

For example, are you interested in supporting a non-profit that promotes micro-finance? Give Well suggests that you ask, “What practices are there for preventing clients from taking on too much debt? Do you monitor whether such practices are effective at preventing over-indebtedness?”

Charity Navigator

Charity Navigator's rating system examines two broad ar-eas of a charity's performance: their Financial Health and their Accountability & Transparency. Their ratings show how efficiently they believe a charity will use our dona-tions today, how well it has sustained its programs and services over time, and their level of commitment to good governance, best practices and openness with information.

Better Business Bureau

The Better Business Bureau evaluates a charity according to 20 different standards within 4 main categories: 1. How they govern their organization. 2. How they spend their money 3. How truthfully they represent their work, and 4. How willing they are to disclose basic information to the public. They give their seal of approval to charities meet-ing all 20 standards.

Guidestar

Guidestar is the place to find your charity’s tax returns and impact statements. Guidestar provides their own seal to in-dicate a charity’s commitment to transparency.

Philanthropedia

Philanthropedia surveys experts like foundation profession-als, researchers, and nonprofit senior staff. Those experts

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have an average of 8-20+ years of experience in their sec-tor who then recommend charities. (The experts are not allowed to recommend the charity they work at at.)

Their reviews look at the charities impact, transparency, and organizational strengths. You can choose a topic that interests you, such as micro-finance or women, and then browse through their recommend charities in that field.

2nd, Google the CharityIn addition to researching a charity at the above resources, do a broader search that may turn up articles and blog posts that are different or more recent than these organiza-tions have included in their reports.

Google the charity’s name with the word “problem”, “con-cern”, “controversy” and/or “criticism”. Are there any news articles or blog posts that give you pause?

You might find nothing. You might discover issues that other people care about but don’t concern you.

If you do discover an issue that bothers you, it’s time to do more research. You may even want to call the charity and talk to them about your discovery. In the end, you can still choose to donate to this charity or find another charity do-ing similar work but with a better reputation.

3rd, Google the Charity’s WorkYou’ve found some information about the charity itself, but what about their work? Are the programs they run

making a difference? Are they helping people? Are they hurting people?

Google the charity’s type of work with the words “criti-cism”, “problem” and “controversy”.

If you had done this with charities that run orphanages, you would discover that orphanages are deeply problem-atic institutions that often do more harm than good.

Just like googling the charity, you might not find anything that concerns you, and you can donate to this charity with confidence. Or you may just discover an issue that requires further research.

In the end, you can still choose to donate to this charity or you may decide to support a different charity doing an en-tirely different line of work.

Conclusion

Despite your best efforts, you may not discover something harmful that comes to light in the future. But more often than not, you’ll find you’ve chosen a good charity by doing this research ahead of time.

You’ve done far more than the vast majority of people who just give their money and hope it makes a difference. If some-thing comes to light later, use is it as a learning experience to make a better donation next time. What did you miss? Where else should you look? What else should you ask?

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Level 3: Impact Evaluation

Being myself no stranger to suffering, I have learned to relieve the sufferings of others. Virgil

Level 3: Impact Evaluation

If you have the time and desire, proceed to this level. Your do-nation should have an impact on the problem; otherwise, you’re just wasting your money.

These 5 questions are your pathway to a deeper understand-ing of the charity you want to donate to and the problem you want to address. Special thanks to Sean Stannard-Stockton’s blog for these invaluable questions.

1. On what research or evidence did the charity design its programs?

Helping people isn’t always intuitive. In fact, sometimes it’s down right counter intuitive. Fortunately, there are studies and reports about what has and hasn’t worked. It doesn’t mean a charity can’t try something new, but if they’re not bothering to check what’s already been done, how do they even know if it’s new? Will they just be wast-ing money?

2. What information does the charity collect about the results of its programs?

3. How does the charity systematically analyze the infor-mation it collects?

4. How has the charity adjusted its activities in response to new information?

The only way to objectively determine if a program is working is to measure results. If it works great. If not, it’s got to change. If they’re collecting information but not do-ing anything with it, that’s not much better than not col-lecting it all.

5. Does the charity have an absolute focus on producing results?

If they don’t have an absolute focus on producing results, there’s a charity out there that does, and I owe it to myself and to the world, to get my money in the hands of the people who are going to the most with it.Charity Research Level 4

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GiveLive Love

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Level 4: Financial Review

It is more difficult to give money away intelligently than to earn it in the first place. Andrew Carnegie

Level 4: Financial Review

The IRS Form 990 is the tax document charities file with the IRS and can you give you a picture of their financial situation. A 990-PF means the charity is a private founda-tion, 990-EZ is a simpler 2 page return for charities with less than $500,000 in income and assets less than $1.25 million. The 990-N is a simple eight-question return for charities with less than $25,000 income. Religious chari-ties are exempt from filing a 990 at all.

If you’re considering a charity that files a 990 N or is ex-empt from filing, call. Ask them,

1. Where does your income come from?

2. How do you spend it?

3. How has your financial situation changed over the past few years?

4. How do you feel about the financial future of your charity?

If the charity, you’re considering files the 990 or the 990EZ, review the last three years.

1. What patterns do you notice?

2. Is revenue going up or down (line 12)?

3. Do they typically run a deficit (line 19)?

4. Do they have assets to withstand tough times (line 22)?

5. Are they heavy on a primary funding source that could leave them vulnerable if those sources dried up (Sec-tion VIII and for large donors/private foundations check Schedule B Part 1)

6. Are there at least 5 board members most of whom are not paid (Section VII)?

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GiveLive Love

Level 1: Basic

What does the charity do?

How do they do it?

How do they know they are making a difference?

Is it something I want to support? Why?

Level 2: Reputation Research

Check on-line sources: Philanthropedia, Give Well, Charity Navigator, Better Business Bureau, Guidestar, or Charity Rater. What do you find?

Google the charity’s name with the word “problem”, “con-cern”, “controversy” and/or “criticism”. What do you find?

Google the charity’s work (ex. orphanage, food aid, micro-finance, etc.) with the word “problem”, “concern”, “contro-versy” and/or “criticism”. What do you find?

Level 3: Impact Evaluation

On what research or evidence did the charity design its pro-grams?

What information does the charity collect about the re-sults of its programs?

How does the charity systematically analyze the informa-tion it collects?

How has the charity adjusted its activities in response to new information?

Does the charity have an absolute focus on producing re-sults?

Level 4: Financial Review

Does this charity file 990’s (check the Guidestar website)?

If no, ask, “Where does your income come from? How do you spend it? How has your financial situation changed over the past few years? How do you feel about the finan-cial future of your charity?”

If the charity files a 990, review the last three years. Over the last three years, what patterns do you notice? Is reve-nue going up or down (line 12)? Do they typically run a deficit (line 19)? Do they have assets to withstand tough times (line 22)? Are they heavy on a primary funding source that could leave them vulnerable if those sources dried up (Section VIII and for large donors/private founda-tions check Schedule B Part 1) Are there at least 5 board members most of whom are not paid (Section VII)?

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Charity Evaluation Cheat Sheet

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Bonus! Charity Overhead Explained

It's more rewarding to watching money change the world than to watch it accumulate. Gloria Steinem

I want my donation to go to the people the charity is helping and not to the charity.

Many people want their donation to go directly to the peo-ple being helped under the impression that charities with high Overhead Ratios are wasting their money.

First, what is overhead ratio? The overhead ratio is meant to measure how much of a donation is spent on the pro-grams versus administrative (salaries, office space, etc) and fundraising costs. Theoretically, the lower the number, the more money that’s being spent directly on programs which means your donation is having a greater impact.

Unfortunately, there are two problems with using Over-head ratios to evaluate a charity.

1. Overhead ratios don’t tell you about impact.

You could donate to a charity with a low overhead, but if the program doesn’t work, your donation is wasted. Addi-tionally, charities need to invest in tools and expertise to be effective. Your donation may make more of an impact

with a charity with a high overhead ratio who had in-vested in technology that better identified those who needed help. A charity that doesn't have the tools and ex-pertise could be helping people who don't even need help!

2. All overhead ratios are different.

An estimated 75% of charities calculate their overhead ra-tios incorrectly, so it’s almost impossible to understand how any one charity is calculating their ratio and how it compares to another charity. You can't compare apples to apples, so overhead ratios are nearly useless.

Conclusion

Ignore overhead ratio. Use this 4 Level Charity Evaluation System to discover good charities doing good work. When you choose to support that charity, know you are support-ing the what and the how of that work. That means pay-ing the employees, the office space, the software programs and anything else that lets that charity do their world changing work even better.

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GiveLive Love

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What Can I Do Next?

What we think or what we know or what we believe is, in the end, of little consequence. The only consequence is what we do. John Ruskin

Get a Donation Team

Who says you have to donate alone? A giving circle is a group of people who pool their donations because together you lev-erage your time, money, and intellectual resources to make better donations in a fraction of the time.

There are hundreds of giving circles around the country donat-ing more than $100 million every year!

Start Your Own

It’s not that hard! I outline four simple steps in my “Giving Cir-cles E-book” along with checklists and action plans. Check it out here.

Even easier! Join an Existing Giving Circle!

You can start making a difference today by joining a giving cir-cle that’s already working around a cause you care about.

Click here to browse the existing circles.

Ask Me to Speak

This ebook is just a fraction of the information I can share with you.

I can help you...

• and your organization get the biggest bang for your dollar.

• feel even better about where and how you make a differ-ence in the world through your charitable gifts.

• discover the connection between giving and happiness and how to find meaning and purpose by giving to yourself, to others, and to the world.

• avoid the giving pitfalls so you don’t become exhausted, an-gry, or resentful about giving too much.

You will leave my presentations inspired about your ability to make an impact on the causes you care most about, because you will be armed with tools to make it happen again and again!

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GiveLive Love

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About Me: Generosity Expert and Donation Defender

I founded Change Gangs: Virtual Giving Circles because I be-lieve your donation is a big deal, and I want to close the gap between the size of your wallet and the size of the impact you can make on your favorite cause.

I am the nationwide expert on Giving Circles and have cre-ated the largest electronic repository of information docu-menting the tools, strategies, and accomplishments of some of America’s 800 giving circles.

I help people negotiate the giving pitfalls to make sure they give themselves what they need to be healthy in mind, body, and spirit so that they can help other. Read more at Living Generously Every Day.

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