Missions and deeds
When you are ready to learn more about a specific charity, start with the mission statement. Your first concern is whether the mission is in line with your charitable goals.
A good mission statement is brief, easy to understand, and clearly articulates both the primary purpose of the organization and the community it seeks to serve.
Where to find the mission statement
If the nonprofit organization has a web site, start there. Look on the home page or in sections that provide background information on the organization's purpose, programs, or history.
We provide some tools and resources which may help you to research the organization.
You can always contact the charity directly and request its annual report.
Do the deeds fulfill the mission?
An organization's programs should be derived directly from its mission statement.
- Do the nonprofit's programs clearly address the purpose spelled out in its mission?
- Does the organization measure and communicate the impact of those programs? For example, if the mission is to provide job skills, does the organization track and report how many individuals signed up for job training, how many completed the training program, and how often that training resulted in employment?
- What role will your charitable dollars play in supporting these programs and, ultimately, in fulfilling the mission?
The board of trustees serves as a charity's guiding force in virtually all respects — its funding, policies, programs, and operations.
Nonprofit boards serve a valuable civic role in our society, and membership is much more than an honorary appointment. A board of trustees oversees all areas of an organization, including the following:
- Fiduciary. The board's most visible role is making sure that an organization has the necessary funds for operations and programs. Trustees are obligated to protect and account for all assets and approve all fundraising efforts.
- Legal. The board must ensure that the charity operates in the public interest, in keeping with its mission.
- Management. Board members are responsible for the management of the organization and, collectively, have the power to hire or remove the chief executive or executive director.
- Vision. The board sets the vision and tone required to cultivate goodwill among donors and the general public.
Governance and composition
- Size. The optimal size of a nonprofit board depends on the needs and purpose of the individual charity. A larger board size may be an indication that the board serves as an important networking arm of the organization's fundraising efforts. Smaller boards could reflect more limited financial resources, or that the board does not serve in a fundraising role.
- On mid-size and larger boards, leadership typically rests with an executive committee, including a chairperson, vice chairpersons, treasurer, and secretary. The executive committee may exercise the powers of the board when the full board is not meeting.
- Credentials. Board members should be chosen for their expertise and other resources. One way to assess their credentials is to identify professional designations or business and academic affiliations that would serve the organization.
- Compensation. Most board members of charitable organizations are not compensated, although they may be reimbursed for incidental costs such as travel expenses. The chief executive officer, however, frequently is a paid staff member.
- Term length. Tenure of board members varies from organization to organization. Some charities impose a two-consecutive-term limit and require a one-year hiatus between reappointments. Others stagger terms of service to keep the board fresh while not depriving it of veteran leadership.
- Conflicts of interest. A conflict may exist when the personal interests of any trustee or family member may be seen as clashing with the welfare of the charity. Some superficial conflicts, however, may not be easily avoidable. If you have concerns, ask the charity about its efforts to address conflict of interest.
Financial reports provide important information about a charity's financial health — and how it chooses to spend its money.
For larger charities, much of this information is available in annual reports and newsletters or online via websites.
For smaller charities, especially those that are close to home, your best bet may be to contact them directly. Not only will you receive the information you're requesting, but you'll also get firsthand experience in how the organization responds to its donors.
Where to find information
The purpose of your financial review is to determine whether a charity is worthy of your support, either as a donor or a volunteer. A fairly simple review of specific financial documents should tell you what you need to know.
- IRS Form 990. This is perhaps the most consistent and accessible source of information on virtually any nonprofit with annual gross receipts of $25,000 or more.1 Form 990 includes the organization's balance sheet detailing assets and liabilities, its annual revenue and expenses, the composition of its board, the salaries of its executives, and descriptions of its mission and programs.
- Audited financial statements. These reflect an organization's financial standing at a specific point in time. Look at the charity's sources of income (where its money comes from), expenditures (where its money goes), assets (real property), liabilities (debt), and whether it has endowment income.
- Current operating budget. Unlike financial statements, which are prepared by an outside auditor, an operating budget is an internal working document used to help a charity predict its current financial needs. By comparing the current budget to the audited financial statements, you will see how the charity is progressing and may notice trends from one year to the next.
- Letter of Determination. This document confirms an institution's charitable status and classifies its activities according to IRS-mandated categories. Like a Form 990, the Letter of Determination must be made available upon request.