How Philanthropy Works

Checking out a Charity

Experts assert that a legitimate and efficient charity should be using 50 to 60 cents of each dollar it receives to conduct the actual charitable work and use the remaining funds to pay for administrative, marketing and other operational expenses.

To find out how efficient a charity is, you can start by checking out the organization with the local charity registration office (usually a division of the state attorney general's office) and with your local Better Business Bureau. Keep in mind that licensing does not equal governmental endorsement of the charity.

There are also numerous non-commercial organizations, such as the Council of Better Business Bureaus, The Foundation Center and GuideStar (Philanthropic Research, Inc.'s Web site), as well as professional organizations for nonprofit administrators. It's always helpful to read up on what's going on in the world of philanthropy -- check out some of the philanthropy journals (such as Philanthropy News Digest) online and in the library.

You can actually check to see the amount of your dollar that goes directly to charitable work on that organization's required annual Form 990 Web sites for both Philanthropic Research, Inc. and the National Center for Charitable Statistics make available the latest 990 forms for private foundations and public charities.

Charities and foundations are required to complete this form once a year, and this information must be made available to potential donors upon request. (Many forthcoming charities actually post their financial information on their Web sites.)

The specific information on these forms and in a charity's annual report will give you a good idea of how the charity works, who governs it (most have directors and boards) and where and how it spends money to address its concerns and run its operation. In these reports, you should be able to see the major expense categories, including program services, management/operation and fund raising.

  • Program service costs - Research grants made to scientists, food sent to feed hungry families or public information brochures aimed at explaining a disease
  • Management/operational costs - Expenses associated with the day-to-day operation of the charity, including rent, office supplies and salaries of administrative staff
  • Fundraising costs - Printing and mailing of appeals, advertising and fees paid to professional fund-raisers

Generally, according to BBB Wise Giving Alliance Charitable Standards, at least half of the charity's total income should be spent on programs and at least half of public contributions should be spent on the programs described in advertisements and appeals. No more than 35 percent of the contributions should be spent on fundraising, and no more than half of the charity's total income should go to administrative and fundraising costs. If it seems that a charity's administrative or fundraising costs are too high, there could be extenuating circumstances. For example, it's natural for a new charity to have higher fundraising costs than an established one.


All charities solicit support in various ways, using in-person, phone, Internet and direct-mail methods. Any information you receive should clearly identify the charity and state its purpose.

It has become common practice in modern fundraising for charities to share, swap and sell lists of donors. For example, when you give to a charity, your name and address may be exchanged, borrowed or sold to other nonprofits or even to for-profit companies. Charities who do this say that not only do these activities provide additional income, but they also help them to locate new donors and to reach a broader group with mailings about important issues. According to the Better Business Bureau, a major charity mailing may involve up to millions of letters -- something that often requires the use of many different mailing lists.

If you don't want your name on these mailing lists, there are a couple of steps you can take. Increasingly, because of the way many people react to unsolicited mail, charities are disclosing their mailing list policies and providing an opportunity on their printed donor cards or Internet forms for you to ask that your name not be shared.

If you're already getting more mail solicitations than you want, you can write to the organizations and request that your name be removed from their mailing lists. This may or may not work -- keep a copy of the letter, and if you feel you're being harassed (by mail, phone or in person), contact the BBB Wise Giving Alliance for suggestions and assistance.