How to tell good charities from bad

Be wary of pleas for veterans. The bad guys know that sympathy is high for those fighting our wars and are more than willing to turn that against us by making heart-rending appeals for bogus causes. If you want to benefit veterans, consider donating to one of the charities that rates an "A" from the philanthropy institute:

• Armed Services YMCA of the USA.

• Fisher House Foundation.

• Homes for Our Troops.

• Intrepid Fallen Heroes Fund.

• National Military Family Association.

Avoid car donation charities. This is another really awful idea for virtually everyone except the for-profit junkyards and auction houses that process the cars -- and that benefit handsomely from your donation. The charities receive as little as $100 per car, and the IRS has significantly tightened the rules on how much you can deduct (you're usually limited to whatever the car sells for at auction, which may not be much).

Of course, you may not get a write-off at all; only people who itemize their deductions can take a tax break from donating their cars. That means most taxpayers aren't eligible, since they take the standard deduction.

• Talk back: Are you giving less or more to charity this year?

Pick from the philanthropy institute's "top-rated" list. The institute is probably the hardest to please of the charity watchdogs. You can find its list of top-rated charities online.

Still reading? If you've hung around this long, you may have the tenacity needed to thoroughly investigate a charity on your own. But don't expect the process to be simple.

How you can investigate on your own

Your first step is to make sure you know the charity's exact name and the address of its headquarters. It's easy to get confused by sound-alike names.

For years, I thought Save the Children was the sponsorship charity that flunked watchdog standards, when, in reality, it's Feed the Children that ran afoul of the philanthropy institute. You wouldn't want to confuse the Cancer Fund of America, which recently settled a deceptive marketing case with the state of Georgia, and the Cancer Research Institute, which gets high marks from charity monitors.

A genuine charity or law-abiding fundraiser should be willing to send you the information you request, and most will send you their latest IRS Form 990 filings on demand. If a charity balks, you can pretty much strike it from your list of potential beneficiaries.

"A legitimate charity will be happy" to provide information about itself, said Bennett Weiner, the chief operating officer for the BBB alliance. "The questionable ones won't. They just go on to the next caller."

How to get charity data quickly and cheaply

Charities are allowed to charge a nominal fee to copy their 990s. If you want a cheaper or faster look, here are a few places to try:

• GuideStar has data on more than 850,000 IRS-recognized nonprofits and posts 990s for many. Access to 990s is available with free registration.

• The California Attorney General's Office has online records for many charities and commercial fundraisers.

• The IRS doesn't have 990s available online, but you can write to the agency's Ogden, Utah, service center and request them, Weiner said. While you're waiting for the report to arrive, you can check Publication 78 to make sure the charity is properly registered as a tax-exempt entity.

As I've noted, you may not get the straight scoop about fundraising from a Form 990, but you should be able to see in general how a charity says it is spending its money -- and how much it pays its top five officers.

Borochoff also recommended asking the charity for a copy of an audited financial statement. These, he contends, are tougher to fudge than a 990, although they also may be tougher for a layperson to decipher.

What if you decide you could use some help? Here are some possible sources:

• The American Institute of Philanthropy's Charity Rating Guide gives letter grades (A through F) to 500 of the better-known nonprofits and is available for $3. Send a check to the organization at P.O. Box 578460, Chicago, IL 60657.

• The BBB's Wise Giving Alliance has reports for more than 600 charities on its Web site. As I said, the BBB standards are often looser than philanthropy institute's, and there are no letter grades. Charities either meet the BBB standards or they don't.

• GuideStar offers financial summaries and other data to help consumers investigate and compare charities, but it is not a charity watchdog. GuideStar's position is that donors can use its databases to decide for themselves.

Liz Pulliam Weston's latest book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published Dec. 11, 2008

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