How to Vet a Charity Before Donating

Why Vetting Matters

Americans donate over $500 billion annually to nonprofits. While the vast majority of organizations are legitimate, some operate inefficiently or lack transparency. Taking 5 minutes to check a charity's financials can ensure your donation makes maximum impact.

Step 1: Check Their Tax-Exempt Status

Every legitimate charity has an EIN (Employer Identification Number). You can verify their status on CharityScored's verify page or the IRS Tax Exempt Organization Search. If they can't provide an EIN, that's a concern.

Step 2: Look at Program Spending Ratio

This is the most important metric. It tells you what percentage of every dollar actually goes to programs (vs. overhead, fundraising, or administration).

• 85%+ — Excellent. Most of your donation funds programs.
• 75-85% — Good. Standard for well-run organizations.
• 65-75% — Fair. Higher overhead, but not necessarily problematic.
• Below 65% — Warrants further investigation.

Step 3: Check Executive Compensation

High CEO pay isn't automatically bad — large organizations need experienced leaders. But context matters:

• Compare to similar-sized organizations in the same category
• Look at CEO pay as a percentage of total expenses
• Anything over 10% of total expenses deserves scrutiny

Step 4: Review Revenue Stability

Organizations with stable or growing revenue are typically healthier than those with volatile income. Look for:

• Consistent filing year over year
• Revenue that supports their stated mission size
• Assets sufficient to sustain operations

Step 5: Look for Red Flags

Warning signs that warrant further research:

• No recent 990 filing (more than 2 years old)
• Program ratio below 50%
• CEO comp exceeding 15% of expenses
• Vague mission or unclear program descriptions
• Pressure to donate immediately without time to research

What Trust Scores Don't Tell You

Financial metrics are important but not everything. A high trust score means strong financial transparency — it doesn't guarantee:

• Program quality or effectiveness
• Ethical leadership
• Alignment with your values
• Impact per dollar donated

Always combine quantitative data with qualitative research about the organization's mission and approach.