Imagine giving to a charity that claimed to provide pain medication to children suffering from cancer, transport patients to chemotherapy appointments and pay for hospice care for dying patients, only to find out your money was funneled into salaries and personal expenses that included dating site memberships, trips to Disney World and concert tickets.
Your trust would be shattered.
Would you give to another organization, or would your mistrust trickle out into the entire network of nonprofit charities, making you question the ethics of everyone out there? Would you blame yourself for not doing enough research before you invested your money?
These are very valid feelings for donors who find out the hard way that the people they thought were doing good work were, in fact, deceiving them. It’s what happened in 2016, when it was discovered that Children’s Cancer Fund of America Inc., The Breast Cancer Society Inc., Cancer Fund of America Inc. and Cancer Support Services Inc. were sham charities. The Federal Trade Commission (FTC) determined that of the $175 million raised by donors, only 3% of the funds raised went to charitable causes, making it the largest joint enforcement action ever undertaken by the FTC and state charity regulators.
A scandal like this is a huge blow to the nonprofit landscape, as it can often poison the entire pool, making donors wary about giving their money to anyone. As a donor, there are steps you can take to ensure your money is going to an organization operating from a place of integrity, impacting the individuals who most need it.
For organizations that rely on outside funding—and spotless reputations—you can let your ethics and mission lead the way, shining a light on your important work so donors trust you’re doing what you say and want to support your efforts.
How to Vet a Nonprofit Before You Donate
Perhaps one of the most important pieces of advice for donors is that it’s OK to take your time when choosing a nonprofit to support. Look at it like building a relationship. It takes time to get to know each other and trust that this person has your back. When it comes to choosing a nonprofit, you’d want to know the same thing: Do they have the community’s best interests in mind?
Nonprofits that practice ethical philanthropy, a way of establishing trust by showing the community their values and commitment to ethical behavior, have a clear advantage because they have no problem being transparent about the real-life issues that occur on their way to creating a powerful impact—even if, at times, it may be messy or full of challenges.
Jim Rice, the founder of Rice Energy Advisors in Johns Island, South Carolina, has been a lifelong donor to several nonprofits and service organizations and prioritizes giving when he has a clear sense of trust that his money is being used responsibly.
“A portion of giving, I think from an ethical perspective, is to trust [the nonprofit] to let them go do their job,” he says, adding that it’s similar to managing a company. “I think it’s really, really important from an ethical perspective of trusting the management and kind of what’s going on relative to success.”
To get to this place of trust, however, he believes a system of checks and balances before you even consider giving is important. Do your homework and find out where your money is going. Talk to board members. Talk to people in the community—find other donors and ask how long they’ve been giving and what results they’ve seen. If it’s work, go meet people who have directly benefited from funding. Talking to volunteers and community partners is also a great idea.
It can also be helpful to review charity ratings on sites like Charity Navigator, GuideStar and the BBB Wise Giving Alliance. Look at a nonprofit’s social media and check for news articles to see the day-to-day of what they’re doing.
Part of ethical giving involves being active in the process, Rice says, making sure you understand what’s happening.
“I know organizations that I’ve said ‘no,' I’m not giving to... I just was not comfortable regarding how that [organization] was potentially going to try to meet its mission,” he shares.
Nonprofit Vetting Checklist for Donors
A checklist can be very helpful for donors as they navigate a new relationship. Thompson Child and Family Focus, a nonprofit focused on clinical and prevention services for children across the Carolinas, has a list of suggestions for vetting a nonprofit before donating:
Mission and vision alignment: Make sure their mission and vision align with your personal values and goals. Understand what the organization stands for and how they accomplish their objectives.
Transparency and accountability: Look for organizations that openly share their financial reports, annual budgets and program outcomes, and review them all.
Impact and effectiveness: Look for case studies, success stories and statistics that illustrate the tangible difference a nonprofit is making.
Consistent leadership: Look for nonprofits with a consistent CEO because leadership continuity impacts a sustained vision and strategic direction, which can dictate an organization’s long-term success.
How Nonprofits Can Show Financial Transparency
When a donor asks a nonprofit, “Where does my money go?” the answer should be straightforward, and there should be multiple ways a nonprofit can communicate that answer. The Council of Nonprofits has a list of 12 ways nonprofits can demonstrate financial transparency, and if your organization is looking to build trust in your community, calling these things out in visible places in print and online material would be a good place to start. A nonprofit should be able to show:
How donor gifts will be and have been used
A board-approved executive compensation policy that clearly outlines salaries
A clear list of expenditures, including travel policy and fundraising expenses like postage and printing, staff time writing grant proposals, etc.
Copies of IRS Form 990, annual reports, audited financial statements, etc., are available for review
Internal complaint procedures and policies, such as a whistleblower policy, showing commitment to accountability and financial transparency
When it comes to practicing ethical philanthropy, Jen Muzia, executive director of the Ballard Food Bank in Seattle, believes that if an organization is passionate about its mission and knows its why and its values, being ethical should be part of the package.
“We’re here to address problems that are happening in our community, address the root causes and the systems that are part of that and help the donor understand that [as well as] the reason behind our work,” she says. “And I think most donors, when you see a mission alignment and value alignment, that is where you really see the community come together to solve problems.”
And while her job is to raise funds that address and fulfill Ballard Food Bank’s mission while also impacting the community, she believes transparency is key.
“Many of the issues that we’re addressing here are a direct result of systemic racism, and there’s other systemic injustices that lead to poverty,” she says. “And if I share these things with our donors, then I’m doing the job of stewarding correctly.”
Trust is another key piece of ethical philanthropy. Particularly when it comes to trusting that a nonprofit understands what’s needed to create impact.
“I’ve been asked, ‘can you do something new?' And I’m like, ‘actually [what] we are doing is innovative and creative, and the outcomes of this are positive,'” Muzia says. “And so, you know, I’m not going to go create something new to receive this. And so I think funders [should be] understanding and trusting that the nonprofit has expertise.”
The trust comes, of course, from being forthcoming about your financial practices and showing the real-life impact your nonprofit has in the community. These kinds of ethical practices set a nonprofit up for success and create a culture of donors who are excited to contribute.
Why Trust Leads to Long-Term Giving
When you build really strong relationships because you’ve seen where your money goes and you trust that it really goes there, Rice says giving is never just a one-hit wonder. When he’s invested in something, he commits himself, hoping to build a lasting connection.
It’s a philosophy that nonprofit leaders like Muzia are proud to see.
She says when she sees the deepest alignment between funding and mission was when money came not just with support but with soul. She’s grateful that she gets to see that kind of alignment between mission and heart every day.
People donate, she says, because they see a need and they see an issue, and they can make a difference. “And often those donations come with a sense of encouragement and the sense of passion and compassion for the mission of the work that you’re doing.... When nonprofits see those donations come in, they really do make an impact, and I think it makes us feel like the community is with us and solving issues that we’re facing.”
Featured image courtesy of Ground Picture/Shutterstock
This article was first published in the November 2025 issue of SUCCESS® digital edition. Get your FREE copy here.
