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Donating with Impact: A Guide to Responsible Charitable Giving

Author:
Editor: STEPS Staff
Reviewer: Dr. Froswa Booker-Drew

Est. Time: 14 mins

Do you want to give back to the community, but you’re unsure which charities deserve your time and resources? Before opening your wallet, review this guide to learn about responsible giving. Find out how to vet organizations, avoid fraud, and understand the impact of your donations.

A group of hands holding a red stone heart.

In 2023, Americans donated $319.04 billion to charities and nonprofits. The majority of these annual charitable donations (about two thirds in 2018) come from individuals, not foundations or corporations. With citizens giving so much of their own money to charities, it’s imperative to know how to donate responsibly. Conducting careful research before sending money to an organization helps you make sure your contribution is used for good ends, and it helps keep charities and nonprofits accountable, too.

This guide examines different philosophies and ethics of charitable giving and provides tips for evaluating charities and spotting suspicious organizations to help you make your best donation decision. You’ll also find a list of pre-vetted nonprofits, learn how to see the impacts of their donations and get advice from out expert, Dr. Froswa’ Booker-Drew, on giving responsibly.

Who Should You Donate To? 5 Philosophies of Ethical Giving

A good place to start thinking about who to support is actually to consider why you want to–or think you should–support them. There are different philosophies on the right way to make charitable donations. Ted Lechterman, a postdoctoral researcher at the Hertie School in Berlin, provides a great breakdown the five leading philosophies, which we’ve expanded upon below. Understanding the various motives behind giving can help you determine the best way to donate for you and ultimately decide which charities, causes and nonprofits to give to.

Compassionate Philanthropy

Definition

This is perhaps the most common philosophy of charitable giving. Compassionate philanthropy is essentially choosing an organization because you are passionate about its cause and believe it does good work. This give-from-the-heart belief suggests that the “right” organization to give to is highly personal.

Examples

Compassionate philanthropists might donate to their local animal shelter because they adopted their family pet from there and had a positive experience with that organization, or they may donate to their alma mater’s scholarship fund as a way of paying it forward. While these organizations and causes may not have the most significant impact on people or animals, the compassionate philanthropist feels good about their donation going to an organization close to their heart.

Giving to the Neediest

Definition

Giving to those with the highest need, regardless of the donor’s personal interests, is the basis of this philosophy. Need-based giving stresses the importance of relieving the suffering of those who are impacted most. This traditional ethic of charitable giving is rooted in Judaism, Islam and Christianity.

Examples

Giving to the neediest often involves donating to and working with impoverished people. A proponent of this philosophy might donate to organizations that do a lot of direct work with homeless populations or people suffering from hunger and malnourishment. The need-based donor might give their money to a group that provides free meals for those who would otherwise go without.

Effective Altruism

Definition

Effective altruism examines the cost-effectiveness of charity organizations and uses that information to determine which nonprofits can do the most good with their donation. This perspective was advanced by Peter Singer, a moral philosophy and bioethics professor at Princeton University, and generally takes a global approach, as these philanthropists seek the maximum impact of their dollar.

Examples

Effective altruists might choose to donate $100 to an organization that provides treated mosquito nets to a developing country, where that amount could provide 20 nets and help save at least 20 people from malaria. Those guided by this philosophy would more likely contribute to a children’s hospital in Asia than one in North America because the same donation could help more children abroad than domestically.

Giving as Reparations

Definition

This philosophy suggests that, with rampant social injustices, wealthy people are not entitled to all of their money, and it’s their responsibility to give the excess to public service organizations. Therefore, donors do not choose their charities based on personal viewpoints or interests. The idea, which was developed by political philosopher Chiara Cordelli, aims to provide more equity, since inequitable social structures lead to both excessive wealth on one hand and inadequate public services on the other.

Examples

Wealthy executives, celebrities and others with high earnings might make financial reparations by giving money to support legal rights for low-income immigrants or donating to education funds for kids in underserved areas, both of whom are deeply affected by systemic social injustices.

Support to Fight Unjust Policies

Definition

This philosophy states that donors should put their money toward organizations that work to dismantle social injustices. This often involves giving to groups that can enact small changes that help people along the way toward significantly larger ideals, like eradicating poverty or racism. Dr. Martin Luther King, Jr. was a proponent of this type charitable giving.

Examples

Donating to an advocacy group that focuses on initiatives addressing homelessness and basic needs insecurity or a nonprofit like Woke Vote, which connects with Black voters to empower them to vote on issues they care about and are affected by, would fall under this donating philosophy.

How to Evaluate Charities, Nonprofits, and Causes Before Giving

Because of the nature of their work, all nonprofits and charities can seem inherently good. However, it’s important to research and vet organizations before donating to make sure your money is used ethically and effectively. You not only need to make sure that the organization you’re considering is legitimate and non-fraudulent, you should also learn what kinds of people run the organizations, make comparisons to similar organizations, and determine how effectively your money will be used.

Tips for Independent Research

Doing your own research and carefully vetting organizations takes time and can get overwhelming, but these tips can help you in your search for the right charity or nonprofit.

  • Make sure it’s a registered 501(c)(3).You can and should check to make sure organizations you’re considering are registered with the IRS as 501(c)(3) organizations. This means they are verified nonprofits, and your donations may be tax-deductible. It’s good to check the organization’s IRS documents directly, as fraudulent organizations may falsely claim to be 501(c)(3)s on their websites.
  • See if the charity’s goals and values align with yours. Reading through an organization’s website or speaking with people who work for the organization can help you determine whether or not the charity has goals and interests worth supporting.
  • Determine whether or not its objectives are attainable. After determining that an organization has values and goals that align with your own, it’s important to make sure those goals are actually reasonable. Check annual reports and other measures of progress, like news articles, financial reports and independent assessments, to see how the organization is working toward its goals. If an organization has lofty goals but puts little money toward them, it may not be the best fit.
  • Examine annual reports. Because of the detailed and varied information that can be found in annual reports, this tip deserves a special callout. Annual reports typically summarize a charity’s accomplishments, revenue, expenditures and contributors for the past year. They may also include plans for the future, which can be valuable to prospective donors. Additionally, if an organization doesn’t make their annual reports easily accessible to the public, that may be a red flag.
  • See how transparent the organization is. Check to see how forthcoming a charity is with their organizational information. Tax documents, financial reports, goals, outcomes, allocation of resources reports and other information essential to making a responsible donation should be informative and easy to find.
  • Research the founders, board of directors or leadership team. Knowing who’s behind a nonprofit can help donors decide whether or not they want to support the organization. Consider their reputations, past actions and other projects to see if their values are in lockstep with their organizations’.
  • Look deeper than financial ratios to determine efficacy. It can be tempting to look solely at what percentage of money is spent on a charity’s programs versus fundraising and administration. They are important metrics, but they don’t provide a holistic picture of an organization. For instance, a new, small organization will have less programmatic spending while it’s just starting to establish itself and grow than a large nonprofit with steady donors and a longstanding reputation.
  • Compare with similar organizations. You should look into other organizations with similar causes and goals to see how the organization you’re considering compares. This can be affirming or can help you see if another charity is actually better-aligned with your interests and motives, and more deserving of your donation.

Online Resources for Vetting Charities and Organizations

While prospective donors are always encouraged to conduct their own research, these nonprofit and charity vetting resources can give you a head start in evaluating charities and organizations on your shortlist.

Charity Navigator Charity Navigator is the largest charity evaluator in the U.S. Their evaluations are largely guided by organizations’ financial management and transparency. Donors can search for specific organizations, browse by category or top 10 list and read through tips for donors.

GiveWell Rather than provide evaluations of hundreds of nonprofits, GiveWell does in-depth evaluations of a handful of organizations they believe are the best based on their evidence of effectiveness, cost-effectiveness, transparency and room for more funding.

CharityWatch CharityWatch evaluates and ranks organizations based on cost-effectiveness, efficiency, management and accountability. Users can browse by category or search for specific organizations, and they can see a variety of metrics, including how much it costs an organization to raise $100 and what percent of funds are spent on programs.

Animal Charity Evaluators This group focuses specifically on different types of animal-focused charities. Similar to GiveWell, Animal Charity Evaluators provides a list of top organizations based on their impact and ethics.

BBB Wise Giving Alliance The Better Business Bureau aims to help donors protect themselves and make responsible donation decisions by providing information on charity effectiveness, financial management, compliance, fundraising materials and tactics and other metrics. Donors can also review and file complaints against nonprofits.

ImpactMatters ImpactMatters vets nonprofits and helps donors find high-impact organizations. Donors can input a dollar amount they’d like to donate and see how various organizations would use that money, based on ImpactMatters projections and analyses.

Tiny Spark Podcast This podcast, which has been around since 2011 and was acquired by Nonprofit Quarterly in 2018, focuses specifically on the investigation of nonprofits and other philanthropic organizations. Donors can listen and stay up-to-date on issues in nonprofits and responsible donating.

Giver Beware: Scams, Charity Fraud, and Untrustworthy Organizations

People donate money to nonprofits with the best intentions, but they should be aware of potential charity scams and fraud. Keeping an eye out for fraudulent organizations protects you, keeps charities more accountable, and makes sure your money goes to legitimate causes.

Unfortunately, charity fraud isn’t always easy to spot. Fraud happens both externally, where donors are misled and give money to illegitimate organizations, and internally, which often involves mishandling of funds. Prospective donors should take extra care to watch for scams and frauds during the holiday season, when people are both short on time and overwhelmed by donation pleas, and after high-profile disasters and emergencies. Because of the urgent nature of disaster relief, people take less time to research organizations and are less suspicious of new charities.

Warning Signs for Charity Scams

Knowing some red flags that a call for donations is a scam or that an organization is fraudulent can help donors ensure their money goes to the right place.

  • The organization has no history. This doesn’t always mean an organization is fraudulent; people establish new, legitimate nonprofits every year. However, if you can’t find any history for an organization that’s asking you for money, especially if the organization claims they were established years ago and have helped thousands (or give some other historical indicator of reputation) be suspicious and conduct more research.
  • They request urgent donations via cash, wire transfer or gift card. Scam organizations often prey on potential donors by pressuring them into donating quickly so they can’t research or think things through. They often refuse donations by credit card or check, as these can be easily traced.
  • Their tax and financial documents are suspicious, not readily available, or nonexistent. Legitimate nonprofits that conduct themselves ethically should have no problem advertising and supplying tax forms, financial reports, reports of fund allocation and other financial documents.
  • Something is off about the name. Fake charities may choose names similar to well-known nonprofits in hopes of deceiving unsuspecting donors. It’s also good to check the spelling of an organization’s name throughout its website to make sure it’s consistent and matches the web address.
  • They thank you for a donation you didn’t make. Fake organizations often try to win trust–and money–by making it seem like you’ve donated to them before. They may send you a thank you email or letter and request another donation. When in doubt, check your financial statements and research the organization using the tips and tools in this guide.

Real-World Examples of Charity Scams and Fraud

1

Cancer charities redirect funds to friends.

2

Veterans of America sells donated goods for personal profit.

3

Law enforcement nonprofits spend the majority of contributions on aggressive funding tactics.

4

Wounded Warrior names cause deliberate confusion.

Ready to Give? Verified Charities and Nonprofits to Consider

This shortlist of vetted charities is by no means exhaustive, and these organizations may not be right for everyone. However, they do serve as good examples donors can look to when conducting their own research and making comparisons.

Education

New Visions for Public Schools
New Visions for Public Schools works to provide high quality education to New York students, regardless of race or class. Their efforts and strategies are driven by data and evolve with changing needs and findings. New Visions provides impact reports, annual reports, information on the board of directors and additional publications that document their work, all of which are easily accessible. The impact reports include evaluations by independent groups as well as studies conducted by the organization itself.

Animals

Animal Welfare Institute
Animal Welfare Institute aims to alleviate animal suffering in a wide range of capacities, like protecting pets from violence, fighting factory farms and pushing for the development of alternatives to using animals in laboratories. The organization is extremely transparent and spends around 91 percent of its funding on its programs.

Environment

The Conservation Fund
The Conservation Fund works to make economically viable solutions to environment and conservation issues. Keeping in line with their mission, The Conservation Fund is a cost-effective organization, using just $2 to raise $100, according to CharityWatch. Information on finances, partners, staff and leadership are available on The Conservation Fund for donors to examine.

Human Services

The American Red Cross
The American Red Cross has a long history and a positive reputation for providing aid to those suffering as a result of disasters and emergencies, among other services. Financial and organizational documents are available and include update reports for specific events, so donors can quickly see where their money is going. American Red Cross spends most of its money on its myriad programs.

Human & Civil Rights

National Immigration Law Center (NILC)
NILC works to defend the rights of low-income immigrants in the United States. Donors can peruse the organization’s strategic framework, which includes information on their goals, their ability to meet those goals, strategies means of measuring progress and past evidence of accomplishment. Annual reports and tax documents are accessible on the NILC website.

Health

Sightsavers
Sightsavers is a high-impact organization that helps treat and prevent sight loss and blindness and fights for disability rights around the world. The organization has an established performance strategy and a performance assessment system, and they do performance checks every six months to one year. Accountability and transparency documents are readily available online.

International

GiveDirectly
GiveDirectly is extremely high-impact, as donors give money directly to those in need. The majority of donations go to low-income families in developing countries via cash transfer, with a small portion going toward delivery costs, which includes salaries, rent and cash delivery infrastructure, and fundraising. GiveDirectly explains its financials clearly and in detail on its website and provides documentation.

How to See the Impact of Your Donations

After donating to an organization, it’s only natural to want to check in to see the effect your contribution is having. By assessing the impact of your donations, you can determine whether or not your money is being used effectively and if you’ve been donating to the best cause, given your charitable goals and interests. Here are some ways to measure the true impact of your charitable giving:

  • Check reports for cost-effectiveness hints. Annual reports can compile information about an organization’s accomplishments and spending from the previous year and goals for the future. Look for how much money it costs to successfully implement programs or meet goals.
  • Look for or request contribution allocation information. This information can show donors exactly where their money is being spent. Organizations may include breakdowns of their specific programs for a more detailed picture.
  • See if they have an evidence-backed program. An evidence-backed program is one that has established goals as well as specific tools and metrics to measure progress toward those goals. While not having an evidence-backed program in place doesn’t mean a charity isn’t doing things, it does make it harder for donors to see the effects of their contributions.
  • Look for data, not just anecdotes. Websites and annual reports are often filled with anecdotes and personal endorsements from people who have been positively affected by a given charity. These can be nice and sometimes helpful, but donors should look for meaningful data related to impact and spending.
  • Be critical of data presented. Donors should also keep in mind that not all data gives a holistic image of a nonprofit. Selection bias, for instance, or data from studies that are not representative of the whole, can skew perceptions of impact. Examine facts and statistics carefully, and ask for details if needed.
  • Examine both the short- and the long-term. Programs can successfully meet short-term goals while not making much progress toward long-term ones. Comparing goals, benchmarkers and annual reports from different years can help donors see if their donations are actually making an impact in helping an organization fulfill its overarching mission.

Responsible Giving Q&A with the Expert

Dr-Froswa-Booker-Drew

Dr. Froswa’
Booker-Drew

Froswa’ Booker-Drew is responsible for the development and implementation of the State Fair of Texas philanthropic giving and the department’s community and educational programming. She is responsible for the creation of several State Fair signature programs and is the Co-Founder of HERitage Giving Circle, the first African American Women’s Giving Circle in Texas. She works closely with nonprofits throughout Dallas and has spoken on building strong relationships between donors and organizations.

What are some major challenges that donors face that may keep them from donating responsibly, and how can they alleviate those challenges?

I do think that donors aren’t always aware of organizations that are doing great work. It is going to be important to do their research, and for many, they aren’t aware of how to begin or know where to look for information. Using GuideStar and Charity Navigator are often great resources to share mission statements and income, but these do not often share the entire picture of an organization. Working with community or local foundations can be another resource, since they can help identify potential agencies that they’ve vetted to receive donations. Still, these entities may not have smaller entities on their radar. Giving Days around the country are also another way to learn more about organizations that are doing work in your areas of interest.

In what ways is responsible giving mutually beneficial to nonprofits and donors?

Accountability is important for both the donor and the nonprofit. Donors need to be aware of how their investment is used, and nonprofits need relationships with their donors. Donors can be more than individuals who write checks. Donors can provide resources that include gifts in kind, technical assistance, volunteering and access to their social networks. When a nonprofit and donor work together to identify areas of interest for the donor and how they’d like to serve to fill a need of an agency, this type of partnership can benefit both.

For many donors, it may feel safer to contribute to large national nonprofits than to take a chance on small or lesser-known ones. What advice or insights do you have for people who aren’t sure where to put their money or how to find effective and ethical organizations in their local area?

Size does not necessarily mean effective. There are many larger nonprofits that have been under scrutiny because of their use of funds for excessive salaries or other improprieties. Just because a nonprofit is smaller does not mean they are not credible. Working with area foundations to see where they give can provide insight to work happening in your area. Reaching out to ethnic chambers and using your local newspapers, especially those that are community based, can offer some ideas about organizations doing great work.

In our current situation [with COVID-19], we are seeing a lot of disparities in our communities. I think this is a great time for donors to investigate organizations that are under-resourced serving in marginalized areas that are often impacted tremendously in disasters because of a lack of attention and available resources. They are on the ground doing the work and need our support.

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