In the weeks since the 9.0 earthquake hit northern Japan, people around the world have been opening their checkbooks in an effort to help. It has been comforting to see so many people care and show their support in a time of need — in one weekend, the American Red Cross, alone, raised 34 million in aid for the Japanese tsunami effort, even before Japan was asking for any outside assistance. But where does all the money go, and how helpful is it to the victims of the disasters?

Sometimes a charitable donation is the best thing we can do from where we are, but if we don’t make smart funding decisions, it might actually hinder recovery efforts. For instance, if too much money is earmarked for one specific cause, poorly conceived projects can get funded and money is wasted. A recent article from the New York Times “A Charitable Rush, With Little Direction” led me to a couple of excellent websites working to educate donors about the best types of charitable donations.

Good Intentions, for example, has set up a site to “provide readers with the knowledge, tools, and resources they need to ensure their donations match their good intentions.” After perusing their site and learning quite a bit, I asked if I could share some of the content with viewers on Care2. Take their “True or False” quiz over the next couple pages to determine your charity-giving IQ.

T or F?: The best aid organizations have low administration costs.

False – Low administration costs is not an indicator of the quality of the charity of the quality of the aid it provides. Rating organizations based on administration costs can cause them to implement projects that have inherently low administration costs regardless of whether or not those projects are what’s most needed. It might also cause them to understaff and underresource their projects hurting their changes of success.

T or F?: It’s a good idea to earmark or restrict your funds so your donation is well spent.

 False – Earmarking funds often leads to wasted aid. Earmarking requires an organization to spend money even if the funds are far in excess of what is actually needed. Examples of this are mini-mansions and empty orphanages built after the tsunami. Earmarking also means that “sexy” projects such as sending in volunteer teams of doctors are far easier to fund than “nonsexy” projects such as helping people with the documentation needed to access government health care programs.

T or F?: Donating used clothing or medicine after a disaster is a great way to help while also recycling items that you no longer need.

False – Most goods are available locally even after a disaster. Donated goods are far more expensive to ship than to buy locally and can clog ports preventing other relief items from clearing customs. Donated goods often go unused because they are inappropriate to the local climate, culture, or religion.

T or F?: Orphanages are always a good thing to support.

False - Orphanages are one of the most expensive way to care for children and according to the UN should be the last resort rather than the obvious solution. In addition, many children in orphanages are not actually orphans but have living parents or relatives. It would be cheaper and better for the child and the family if they received support to help them care for their own children rather giving them up to orphanages.

T or F?: The United Nations oversees and monitors international aid and development projects.

False - There is generally no real oversight or regulation of aid work. Two attempts to create a regulatory body under the League of Nations and the United Nations (U.N.) have failed. It is up to the beleaguered government receiving aid to track, coordinate, evaluate, and regulate the hundreds of charities pouring into their country. Most countries receiving aid do not have the manpower, resources, or regulations in place to do this.

T or F?: Nonprofits are not allowed to make any profit from their work.

False – Nonprofits are allowed to make a profit from their work. The profit just has to be reinvested in their work and not paid out as dividends to shareholders or board members. Nonprofits can pay staff competitive wages and bonuses, make investments, purchase real estate, and pay for other expenses crucial for a professional and sustainable organization.

T or F? A new nonprofit organization is registered every 15 minutes in the US.

True – On average a new nonprofit is registered every 10 – 15 minutes in the United States. Currently there are over 1.2 million registered nonprofits. Registering a nonprofit is a relatively simple process. Once registered there is very little governmental oversight, therefore the funding decisions that donors make do matter. Before donating make sure the organization is following professional practices and leading quality programs.

T or F?: Large, well-known organizations are a better bet to fund than smaller, less well-known organizations.

False – Whether an organization is competent and well run is not related to its size. Donors can never assume that large, household name organizations are following best practices or that small organizations are not professional.

This information is not intended to overwhelm, confuse or deter people from helping. Instead, it is to empower people to make their aid the most effective. Guidestar offers some tips when giving to disaster relief and recovery: Determine what kind of programs deserve your support. Do a little research, and ask questions. Does the organization have the same values and priorities as you? Does the organization measure its accomplishments and offer that information? There are many great nonprofits out there. Research and see which feel like a good fit for you.

Guidestar also suggests waiting a few weeks or months, or giving an unrestricted (unearmarked) gift to an organization with disaster-relief experience.

Thanks Good Intentions for the helpful quiz!

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