This article originally appeared in the Fall 2021 edition of the Smart Giver Newsletter. Not on our mailing list? Sign up here to receive the next edition in your mailbox.
Q: I’m interested in supporting a new nonprofit. As a Smart Giver, what should I be looking for?
As a lawyer for nonprofits, I help founders take their big ideas and turn them into real-life nonprofits. If I’m being honest, this is some of my favorite work. Why? Founders are visionaries. They’re passionate and knowledgeable about their mission from day one.
My law firm’s mission is “to empower nonprofits to achieve their missions by helping them do things right.” But let me tell you – it takes time to set up a strong and thriving nonprofit. While the Council has a policy to support new organizations through the review process, a nonprofit that’s just one or two years old still won’t have the Meets Standards® Seal on their website, as the Council’s Standards require a minimum of three years’ worth of financial data.
That doesn’t mean they aren’t a great organization, though. As a donor, how do you know if a newer nonprofit is a good one to support? Here are a few indicators that an organization is on the right track to meeting Standards:
They’re governed by a strong board of directors.
Even the smallest nonprofits need a board of directors of 3 or more people. They should also have bylaws and hold regular board meetings. You may see all of this on their website, but at minimum they should list their board of directors. Is the board credible? Diverse? Does it represent the community it serves? Unless it’s a family foundation, all the members shouldn’t be related. What does the board say to you about this organization?
They clearly communicate who they are and what they do.
Even if the website isn’t fancy, new nonprofits can use it to share information similar to what’s required by the Council’s Public Disclosure Accountability Standards®. Here’s what you should be able to find out on a one-year-old nonprofit’s website:
- Mission statement
- Descriptions of who they serve or where they work
- Clear descriptions of their programs
- List of the board of directors and key staff (if they have any)
- Balance sheet or other financial documents
- Indicators of credibility (like a membership badge from their local Council of Nonprofits, Mission Guardian, or GuideStar profile)
They have completed their required legal filings.
The Council’s Legal Compliance Accountability Standard® asks nonprofits to comply with relevant federal and state laws. Required filings can vary, so when researching a new nonprofit, start by looking for:
- A 990 with the IRS (although they can only file their 990 once they receive their tax-exempt status and complete their first year of operations)
- An active corporate registration in their state
- An active charitable registration in their state (if required)
Giving to a new nonprofit might feel like a risk. Sometimes it’s the best kind of gift you can make – an investment in an organization’s future! Speaking of an organization’s future, you can help guide them toward building a strong and accountable nonprofit from the get-go by referring them to Charities Review Council.
Together, we can support our favorite nonprofit causes as they grow into long-standing organizations focused on doing community good. Need sample language to help you get started with the referral? Check out the referral language on our website, or reach out to the Council at info@smartgivers.org or 651-224-7030.
