83ºF

Red flags for how charities spend your money

Why you should do your homework before making a donation

ORLANDO, Fla. – December is the busiest months for charitable donations with reportedly 30 percent of all annual giving occurring during this time of year.

[WEB EXTRA: Charity Navigator | Charity Watch ]

"Americans give approximately $335 billion a year to charity and non profits," said Daniel Borochoff with Charity Watch. 

The group provides in depth analysis on hundreds of the nation's top charities with the goal of helping potential contributors make informed decisions. 

Charity Navigator also provides a star rating system for some of the nation's larger charities. 

Getting a group's 990 that is filed with the IRS is a good starting point to determine how the charity is spending money.  The form breaks down how much money is spent on program expenses versus management and fundraising.  

Charity analysts look to see that the program expense percentage meets a certain threshold, usually somewhere upwards of 60 percent. 

If the group's 990 is not available somewhere online and the group will not give you a copy of it on request, that is a red flag. 

But Borochoff warned against only relying on numbers and ratings alone to assess a charity.

"People would like to make charities simple but really they're not, so if you grab numbers off of a tax form it could be garbage in, garbage out," he said.

He recommended also asking the group for their financial audits which many have available on their websites.

He said a big red flag is when a charity has hired an outside solicitation or fundraising company to raise money.