1. Our favorite charity is the fundraiser we hired.

Fundraising expenses are an inescapable fact of life for charities, and many have turned to fulltime professional fundraisers for help. That could mean less of your money reaches the cause you re trying to support. In California, for example, commercial fundraisers raised $355.8 million in 2008. Charities received just $156.4 million of that sum, an average of about 44%, according to recent findings by the state s Department of Justice. Back in 2004, 36.5% of funds raised by professionals went to charities. Today, there are similar imbalances throughout the country.

How is it possible that such a small percentage of contributions goes to the charitable organization? The problem starts with the agreements between the fundraisers and the charities. Take the National Veterans Foundation s agreement with New York-based fundraiser Quadriga Art. To increase its direct-mail donor base file, the NVF, which addresses crisis management for U.S. veterans and their families, agreed to pay Quadriga Art 99% of all revenues that it helps the foundation raise over a five-year period. For the year ending June 30, 2009, Quadriga Art raised $3.96 million for the NVF. As per the contract, Quadriga Art kept all but $53,550. Mark Schulhof, chief executive officer at Quadriga Art, says NVF s net profit should increase each year, assuming that it brings in more donations from direct mail. The NVF didn t return a request for comment.

To make sure the bulk of your donation goes to a charity and not a fundraiser, look for organizations that keep their fundraisers cut below 35%, says Daniel Borochoff, president of the American Institute of Philanthropy. Call the AIP and request a free copy of a charity-rating guide or become a member on its web site for $40 a year.

2. Pinpointing our fundraising costs isn t easy.

To find out what percent of a charity s income is spent on fundraising, you could ask the charity itself. But that doesn t mean you ll get a straight answer.

Instead, ask the charity for its audit statement, which most state attorney generals require each year along with the charity s tax returns. Charities must make this statement available on their web site or upon request, says Frank Jakosz, co-chair of the American Institute of Certified Public Accountants' Not-for-Profit Organizations Expert Panel. The statement will show if the charity met three standards set by the AICPA: whether the charity s financial statements are free of errors during the audit; whether the charity fairly and accurately determines its estimates; and the auditor s conclusion about whether the charity s records are clean. If a charity meets these standards, you can have some assurance that they re not putting fundraising-type costs into program expenses, says Jakosz.

3. Our watchdogs may have some blind spots.

Charity-watchdog groups can be helpful when you re trying to evaluate where your donations are really going. However, they can t see everything. For instance, only half of local Better Business Bureaus report on their local charities, meaning that plenty of charities soliciting funds in your neighborhood could be unaccounted for. Bennett Weiner, chief operating officer at the BBB Wise Giving Alliance, says local BBBs produce more than 8,000 reports on charities in their area. The Alliance evaluates the finances of more than 1,200 national groups.

Charity Navigator, which evaluates 5,500 charities, including local ones, also performs full evaluations, but it tends to base much of its data on Form 990, which all charities must file with the IRS. Form 990 lays out an organization s financial activity over the past year, specifying revenue sources and various operational expenses, among other things. But these forms are not foolproof sources, says Borochoff. One problem is that not everything gets reported. Plus, what is reported sometimes is inaccurate -- in part because the forms were recently revised and nonprofits are still growing accustomed to them, Borochoff says.

4. You may not be giving money to the group you think.

To get a better sense of a charity s effectiveness, check out the ratings it gets from the AIP. For example, the institute rates the American Breast Cancer Foundation an F, in part because it spends 67% of its earnings on solicitations with an educational message. The A+ -rated Breast Cancer Research Foundation devotes nearly 90% of its funds to research.

The foundation is taking steps to improve our rating, says Cathy Wilhite, executive director of the American Breast Cancer Foundation, which provides diagnostic testing to the uninsured and under-insured. We re providing necessary services to the best of our ability, and we honor our fiduciary responsibility to our donors to the highest degree.

Also, startup organizations may try to profit from the popularity of an already-established charity, Borochoff says. Your best bet for getting your money where you want it to go is to scrutinize a potential charity carefully.

5. Your spare change might be going to thieves.

Whether they re candy honor boxes, wishing wells or plain tin cans, the ubiquitous countertop collection boxes at so many checkouts are often not what they appear to be. In many cases, the charities aren t getting all the money people drop into the container; rather, they re renting out their name to for-profit vendors for a flat fee or a small percentage of the intake in exchange for posting the charity s logo.

The advertised charity may get only 1% or 2% of the take, says Elizabeth Grant, vice president of the National Association of State Charity Officials, and sometimes they get nothing at all. In December 2009, Michigan s attorney general announced the arrest of a Lansing-area man who placed charitable donation collection boxes at nearly 90 local businesses claiming the money would help find missing children. From February through June 2009, he collected between $1,500 and $2,000 a month in donations from customers at these stores only to use that money to pay for his personal expenses. The case is scheduled to go trial this October.

If you decide to contribute to a collection box, see if it belongs to a for-profit business. Many state laws require disclosures on boxes if a for-profit company is involved in collecting donations. The company may also need to register with the state as a professional fundraiser.

6. Our board members could be too busy.

Just as in big business, a charity s board of directors is one of the keys to successful management. However, some charities boards serve more as rubber-stamp assemblies than active oversight committees.

The most important regulation of charities is often self-regulation," says Frederick Lane, a Cape Cod-based management consultant to nonprofits and a faculty fellow at the Center for Nonprofit Strategy and Management at Baruch College in New York. "We have to rely on the board of directors of any nonprofit group for this kind of accountability."

Boards aren t always up to the task. Nonprofit consultant BoardSource, in its 2007 Nonprofit Governance Index (its most recent), reported that nonprofit boards "do not understand their role very well, based on evaluations by chief executives and board members.

The underlying issue is the demand on members time, says Linda Crompton, president of BoardSource. People are busier, she says. It s becoming increasingly difficult for boards to get the kind of commitment that is needed to do a good job.

Historically, most nonprofits have been undermanaged, but that is starting to change, Lane says. Nonprofits are increasingly creating "dashboards," a limited number of measures of their efficiency and effectiveness, he says. "Right now, these are mostly for internal use and sharing with their boards."

7. We re making money off your name and address.

When you give your name and address to a charity, it may end up in the hands of other nonprofits that will contact you for a donation. A nonprofit will most likely exchange donor lists with other nonprofits, says Bob Tigner, general counsel to the Association of Direct Response Fundraising Counsel. Alternatively, a nonprofit may also rent out a donor list to another nonprofit and charge a one-time use fee, he says.

It is less common for a nonprofit to sell its lists to a for-profit operation, such as a fashion catalog company. Those businesses don t necessarily have a great deal of success using nonprofit lists, says Greg Fox, chief strategy officer at nonprofit group Merkle and former president of CFF Direct, a direct mailer for the Cystic Fibrosis Foundation.

How to stem the tide? The best way is to ask the nonprofit to not give out your name, says Tigner. That s almost always honored. It s a matter of good business sense, he says. You honor the reasonable requests of your supporters. Another option is to visit the Direct Marketing Association s web site and register to be removed from mailing lists.

8. If we call you, you might not want to answer.

When you answer the phone and it s someone making a solicitation for a charitable group, don t agree to give money right away unless it s an organization you know. At minimum, ask the caller to send you some written material first. If the group is a scam, you probably won t hear from it again.

Typically, the reputable nonprofits won t do cold calls, says Tigner. Instead, they will contact you by mail. For a nonprofit, a single phone call may be less expensive than a direct mail letter, but overall, direct mail can net the charity more money than a phone campaign, depending on the arrangements with a telemarketing firm, Weiner says.

9. We re sitting on a lot of cash.

Some charities are actively taking in funds but not spending them, in part because they ve hoarded so much of their previous fundraising cash that they can t use the new money. Currently, roughly 25 out of more than 500 charities tracked by the AIP have cash reserves that could keep them running at current operational levels for more than three years without any other revenue coming in.

The Shriners Hospitals for Children, for instance, has a funds balance of $6.9 billion, according to the AIP. That means the group could dip into its savings and distribute just as much money as it does now for nearly seven years without raising another cent, says Borochoff. Shriners didn t respond to a request for comment.

10. Before you write that check, call your accountant.

In many cases, taxpayers can claim write-offs for contributions of cash and some tangible items to charitable organizations, but not every contribution qualifies.

To begin with, not all nonprofits are qualified charities for tax purposes. The IRS Publication 78 has a list of qualified organizations. And in order to qualify for a deduction, you ll need proper documentation, which will vary based on the size and type of contribution. In some cases, you ll also need to fill out separate IRS forms come tax season.

For cash contributions of less than $250, you ll need a written receipt from the organization or a canceled check or bank statement proving your deduction. For contributions of $250 or more, a written acknowledgment from the charity is required when you file your tax return. Non-cash contributions can be trickier, especially when they re worth more than $5,000; in that case, you ll have to get a written appraisal proving the value of the item, says Buz Livingston, a fee-only certified financial planner in Santa Rosa Beach, Fla. Have the assessment done by an experienced independent appraiser whose fee is not based on the value he or she gives to the item, he says.