How to Choose Legitimate Charities

Expert guidance on evaluating charities, spotting scams, and ensuring your donations make real impact

Back to Charitable Giving

Why Charity Research Matters

Not all charities are created equal. Some use donations effectively to further their mission, while others waste money on excessive overhead, administrative costs, or worse—are outright scams. With over 1.5 million registered nonprofits in the U.S., choosing the right charity requires research and due diligence to ensure your generosity creates maximum impact.

Charity Fraud Statistics

  • Americans lose over $300 million annually to charity scams
  • Fraud increases 30% during disaster relief and holiday season
  • 1 in 5 donors has given to a fake charity
  • Average loss per victim: $750

Step 1: Verify Legal Status

Check IRS Tax-Exempt Status

IRS Tax Exempt Organization Search

Website: IRS.gov/charities-non-profits

Search tool: Tax Exempt Organization Search (TEOS)

What to verify:

  • 501(c)(3) tax-exempt status
  • Current registration (not revoked)
  • Legal organization name and EIN
  • Classification (public charity vs private foundation)
  • Deductibility status

Red flag: Charity not found in IRS database

State Registration

  • Most states require charities to register before soliciting donations
  • Check your state's Attorney General or Secretary of State website
  • Verify active registration status
  • Review any complaints or enforcement actions
  • Confirm charity is authorized to operate in your state

Step 2: Research Charity Performance

Top Charity Watchdog Organizations

Charity Navigator

Website: CharityNavigator.org

Ratings: 0-4 stars

Evaluates:

  • Financial health
  • Accountability
  • Transparency
  • Results reporting

Best for: Large, established charities

GuideStar/Candid

Website: GuideStar.org

Ratings: Bronze to Platinum seals

Provides:

  • IRS Form 990 filings
  • Financial statements
  • Program descriptions
  • Leadership information

Best for: Detailed financial research

CharityWatch

Website: CharityWatch.org

Ratings: Letter grades (A+ to F)

Focuses on:

  • Cost to raise $100
  • Program spending percentage
  • CEO compensation
  • Asset reserves

Best for: Financial efficiency analysis

BBB Wise Giving Alliance

Website: Give.org

Ratings: Meets/Does Not Meet Standards

Standards:

  • 20 accountability standards
  • Governance structure
  • Solicitation practices
  • Financial reporting

Best for: Trust and credibility check

Step 3: Evaluate Financial Health

Key Financial Metrics

Program Spending Ratio

What it measures: Percentage of budget spent on programs vs overhead

Formula: Program Expenses ÷ Total Expenses × 100

Benchmarks:

  • Excellent: 75%+ on programs
  • Good: 65-75% on programs
  • Fair: 60-65% on programs
  • Poor: Below 60% on programs

Example: $8M on programs, $10M total = 80% (excellent)

Fundraising Efficiency

What it measures: Cost to raise $100

Formula: Fundraising Expenses ÷ Total Contributions × $100

Benchmarks:

  • Excellent: Less than $10 to raise $100
  • Good: $10-$20 to raise $100
  • Fair: $20-$30 to raise $100
  • Poor: More than $30 to raise $100

Administrative Costs

  • Reasonable range: 10-20% of budget
  • Includes: Management salaries, rent, utilities, technology
  • Context matters: Newer charities may have higher admin costs initially
  • Red flag: Admin costs over 30%

Financial Stability Indicators

  • Working capital ratio: Can charity cover 9-12 months of expenses?
  • Revenue diversity: Multiple funding sources, not reliant on one donor
  • Consistent growth: Stable or growing budget over time
  • Cash reserves: Healthy reserves for emergencies

Step 4: Assess Transparency and Accountability

Signs of a Transparent Charity

  • ☑ Annual report publicly available
  • ☑ IRS Form 990 accessible on website
  • ☑ Audited financial statements published
  • ☑ Board of directors listed with names and affiliations
  • ☑ Executive compensation disclosed
  • ☑ Program descriptions detailed and specific
  • ☑ Impact metrics and outcomes reported
  • ☑ Clear mission statement
  • ☑ Contact information prominently displayed
  • ☑ Donation process transparent

Governance Red Flags

  • No independent board members (all family or paid staff)
  • Board meets infrequently or not at all
  • No conflict of interest policy
  • No whistleblower protection policy
  • Excessive CEO compensation (compare to similar-sized charities)
  • Board members receiving compensation for board service

Step 5: Evaluate Impact and Effectiveness

Questions to Ask

  • What problem is the charity solving? Clear, specific mission
  • How do they measure success? Concrete metrics and outcomes
  • What are their programs? Detailed description of activities
  • Who do they serve? Geographic area, demographics, beneficiaries
  • What are their results? Evidence of impact, not just activity
  • How do they compare? Effectiveness vs similar organizations

Look for Evidence-Based Programs

  • Programs backed by research and data
  • Regular program evaluations
  • Third-party impact assessments
  • Logic models showing inputs to outcomes
  • Adaptation based on results

Common Charity Scams and How to Spot Them

Red Flags of Charity Fraud

Warning Signs

  • High-pressure tactics: "Donate now or miss out!"
  • Vague mission: Can't explain what they actually do
  • Name sounds like famous charity: Intentionally similar to confuse
  • Requests cash or gift cards: Untraceable payment methods
  • Thanks for previous donation you never made
  • Won't provide written information
  • Caller ID shows "Unknown" or spoofed number
  • Refuses to answer questions about spending
  • No website or website looks unprofessional
  • Not registered with IRS or state

Common Scam Tactics

Disaster Relief Scams

Fake charities appear immediately after disasters

  • Use emotional appeals with images of suffering
  • Create websites with URLs similar to real charities
  • Claim 100% of donations go to victims (impossible)
  • Protection: Donate to established disaster relief organizations

Government Imposters

Scammers pose as government agencies

  • Claim to collect for police, firefighters, veterans
  • Use official-sounding names
  • Suggest donation is required or expected
  • Protection: Government doesn't solicit donations; research any charity

Phishing Email Scams

Emails impersonating legitimate charities

  • Links to fake donation pages that steal credit cards
  • Urgent subject lines to create panic
  • Poor grammar and spelling
  • Protection: Go directly to charity website, don't click email links

Questions to Ask Before Donating

Pre-Donation Checklist

  1. What is your mission? Should be clear and specific
  2. Can you send written information? Legitimate charities will provide materials
  3. What is your EIN? Use this to verify IRS status
  4. How much of my donation goes to programs? Should know their program ratio
  5. Can I see your Form 990? Legitimate charities will share
  6. Who is on your board? Should have independent board members
  7. What are your program outcomes? Should measure impact
  8. Are you registered in my state? Required for solicitation

Specific Charity Categories

Religious Organizations

  • Automatically tax-exempt, don't need to file Form 990
  • Less financial transparency available
  • Rely on congregation oversight and trust
  • Donations still tax-deductible
  • Research denomination and local church leadership

International Charities

  • Verify U.S. 501(c)(3) status for deductibility
  • Research international operations and oversight
  • Check for country-specific challenges
  • Verify actual presence in claimed regions
  • Higher due diligence needed

Small/Local Charities

  • May not be rated by national watchdogs
  • Form 990 still available if over $50,000 revenue
  • Visit in person if possible
  • Talk to beneficiaries and volunteers
  • Check local news and community reputation

Making Your Donation Decision

Compare Similar Charities

Don't evaluate in isolation—compare charities addressing the same issue:

  • Which has better financial efficiency?
  • Which shows stronger outcomes?
  • Which has more transparent reporting?
  • Which has better watchdog ratings?
  • Which aligns best with your values?

Consider Your Giving Strategy

Broad Impact

Large, established charities

Pros: Proven track record, transparent, rated by watchdogs

Cons: Less personal connection

Local Connection

Community-based organizations

Pros: See impact firsthand, support local causes

Cons: Limited ratings data

High-Impact Focus

Evidence-based, outcome-focused

Pros: Measurable results, cost-effectiveness

Cons: May seem less emotionally compelling

Safe Donation Practices

How to Donate Safely

  • Never give cash: Untraceable and risky
  • Don't provide SSN: Charities don't need this
  • Use credit card: Offers fraud protection
  • Go to charity website directly: Don't click email links
  • Keep records: Save receipts and acknowledgments
  • Take your time: Don't let pressure rush your decision

Online Donation Safety

  • Look for "https://" and lock icon in browser
  • Verify website URL is correct (watch for typos)
  • Check for trust seals (VeriSign, BBB Accredited Charity)
  • Use secure payment processors (PayPal, Stripe)
  • Avoid public Wi-Fi for donations

Your Due Diligence Makes a Difference

Choosing a legitimate, effective charity ensures your generosity creates real impact. Spend 15-30 minutes researching before donating. Check IRS status, review watchdog ratings, evaluate financials, and verify transparency. Your careful selection rewards good charities and discourages fraud and waste.