Donors

Evaluating Nonprofits - Questions to Ask

1. Is the nonprofit registered as a tax-exempt organization under IRS Code 501(c)(3) or a Governmental Entity?

If in doubt, ask the organization for a copy of their IRS tax-exempt determination letter certifying their nonprofit status, or do your own research by visiting the IRS website, www.irs.gov and search for Publication 78. Confirming that the nonprofit is a recognized 501(c)(3) or a Governmental Entity assures you that your financial contribution is tax deductible.

2. Does the nonprofit have a vision, mission and strategic plan defining objectives to meet short and long-term goals?

As the old saying goes, “What can be measured, can be managed.” In order for you, the donor, to be assured that progress is being made towards its mission, a nonprofit should have a written, measurable strategy defining short and long-term objectives to implement its vision and mission. Consistently monitor and review your favorite nonprofit’s strategic or operational plan and the success of its implementation. Does the nonprofit demonstrate progress toward their defined goals? Monitoring the measurable outcomes of a nonprofit’s strategic plan is an effective means of evaluating the success of its mission.

3. Does the Nonprofit Demonstrate Efficiency and Effectiveness?

Do the nonprofit’s programs and expenses make sense to you? Research the nonprofit’s financial information to determine what percentage of its overall budget is spent on fundraising, administration and mission. Are these figures in line with your judgement as to efficiency? Is the nonprofit effectively delivering outcomes in line with its mission and what is the relationship between outcomes and what is spent on mission?

4. Does the nonprofit have the capacity for long-term sustainability?

Before you make a long-term financial commitment to your favorite nonprofit, you need to be assured that it has the capacity, or at least a plan, for long-term sustainability. Your nonprofit investment will make a greater impact with organizations that are positioned for long-term success. Investigate the growth patterns of the organization in the past five years. Have they demonstrated steady, sustained growth? What are its major funding sources? Is there a long-term commitment from its major funders? If you are satisfied with the answers to these important questions, you will be able to more confidently invest your financial support knowing that it will make a long-term impact.