by Moe Zilla

Created on: May 10, 2009   Last Updated: May 22, 2009

There's something beautiful about people caring about the other people around them, and stories about nonprofits describe an impulse that's truly special. But if well-meaning contributors are being exploited by crooked charities, it's an important civic duty to probe and investigate. At the same time, remember that nonprofits exist solely on the donations of others. This makes them especially sensitive to negative stories, since they could be damaged or even destroyed by an implication of wrong-doing. As with all journalism, insist on a comment from the organization before publishing. And then trust, but verify.

Nonprofits are subject to different laws than any other organization, so covering a nonprofit is very different than other journalism. First check their statements against tax filings. (All nonprofits in the U.S. are required to file yearly records of their finances and contributions - either a form 990-N, 990-EZ or 990.) Nonprofits must also list every officer, direcor and trustee, as well as their five highest-compensated employees. Basically, they're accountable for showing how contributor money is being spent, so this first step is crucial, but do some fact-checking of your own to verify that the money was actually distributed!

Any incoming money is supposed to be furthering the nonprofit's mission - but there's a catch. Employees are allowed to receive a salary to fund their ongoing work. Usually the salary is competitive for the position, and nonprofits are sensitive to charges that they're overspending contributors' money on themselves. Still, it's worth trying to determine how much money is being spent on salaries - and to calculate its percentage of their total annual income. Nonprofits are required to list these salaries on their tax records, and salaries have been discovered that were exorbitantly high. The charities were simply hoping that no one noticed!

It's a double-edged sword, because a large portion of the money charities raise is spent on trying to raise even more money. But one Washington newspaper actually discovered a charity where only 8% of the money actually reached its intended benefactors. According to the Seattle Post-Intelligencer, "Most of the dollars were eaten up by high professional fundraising fees, consulting and management fees, travel expenses and payments to the husband-and-wife team who run the organization." Its two co-founders extracted $155,000 just for their salary each year - or nearly ten cents out of

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