American Institute of Philanthropy Offers Reliable Information on Nonprofits

Are you confused about which organizations deserve your charitable contributions? With over 1.8 million nonprofit organizations competing for your money, sometimes it's tough to know which group will make best use of your donation. Fortunately, there's help in sight.

The American Institute of Philanthropy (AIP) is a nonprofit watchdog service that offers information to the public on just how efficient a particular charity is. Their publication, Charity Rating Guide and Watchdog Report, evaluates 500 national nonprofits based on their tax records and audits and gives them a "grade" from A to F. The Institute takes into consideration two areas of concern:

First is how much of the budget goes into the actual program itself -- that is, how much goes to the "cause" of the charity, rather than into administrative or overhead costs. 70% is considered "good" -- less than that, and the charity may be spending too much on overhead.

Secondly, the AIP considers how much the organization has to spend in fundraising in order to raise $100 of funds. $35 costs per $100 of donations is considered acceptable -- more than that and the AIP is likely to rate them down.

Although it doesn't go into the A through F "grade", the AIP also considers in its evaluation how much the nonprofit actually needs your donation. An organization with high reserves of available assets could presumably operate for quite a while without any fresh donations. The AIP regards three years or more of reserves as excessive, and also offers this information in a separate chart.

You can obtain a sample copy of the report by mail (or, 3 issues a year if you join the organization and pay the $40 membership fee), but if you're in a hurry, there's a great deal of information on their website, www.charitywatch.org. The website provides the names, ratings, and contact phone numbers for several of the top-rated nonprofits in each of 36 categories (such as Cancer, Child Protection, Homelessness, Human Rights, African-American, American Indian, Literacy, Drug and Alcohol Abuse, etc.)