When it comes to charitable giving — and this IS the season for charitable giving — we often let our hearts rule our heads.  As a result, it's not unusual to give and then second-guess yourself. 

We wonder: Did our donation end up where it's most needed? Will the charity use the money wisely? 

As my colleague Penelope Wang reports in the December issue of Money magazine, a recent survey from the Brookings Institution confirms those doubts.  Nearly one-third of respondents expressed little or no confidence in charitable groups.  And only 11 percent said they believe charities do a very good job of spending their money wisely. 

It's no surprise.  In recent years, several high-profile scandals have rocked the charitable world.  Most recently, the American Red Cross was criticized for its plans (later dropped) to use some 9/11 funds for other purposes.  The Nature Conservancy was criticized for failing to disclose loans to its executives.  And high salaries awarded to heads of some nonprofits have also drawn fire.

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And yet, in good times and in bad, Americans want to give.  Two-thirds of us give money to charity every year, reports Wang, just slightly more than those who make non-monetary donations.  One in four Americans volunteer.  Last year charitable donations rose nearly 3 percent to $241 billion, which represents 2.2 percent of disposable personal income, according to Giving USA, a philanthropy research organization.

Here are some steps you can take to to make sure your hard-earned money does its very best work:

1. Find your motivation
Most people giving to charity respond to the fact that they were asked.  Giving only to charities that ask for your money may be the easy way to choose from the roughly 1 million charities in the US, but it's not the most satisfying way to give or the best way to ensure your money goes where its needed. 

Instead, ask yourself or talk to your family about which issues are most important to you.  Do you feel strongly about famine relief or cancer research? Do you prefer to donate within your community or send your money to a national or international group that will disperse it where it's needed?

Often, a personal connection can be the most powerful motivator.  (That's been my experience.  I give small amounts to a number of groups, but a larger amount to only one — the hospital where my son had heart surgery as a small child.)

2. Check out the charity
Once you've identified your causes, finding the charities that best match your giving goals is easiest to do online. You can search for charities by cause at Web sites such as www.Guidestar.org and www.Networkforgood.org.  If you prefer to give close to home, you can get information about local charities from community foundations, which are nonprofit organizations that support area causes.  You can find one near you at www.communityfoundations.net. 

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Once you have your names, you want to make sure as much of the money as possible is going to the actual cause and not, say, telemarketing.  (In a 2003 survey of charity telemarketing campaigns, New York State attorney general Eliot Spitzer found that on average less than a third of money went to the groups, the rest was siphoned off to telemarketing and campaign costs. 

You can look at the financials for 300,000 charities at www.guidestar.org.  You want to see that at least 60 percent of the money goes to the actual cause, though many top charities do better — giving 80 percent or more to the program. 

If you don't want to do the looking yourself, thesse Web sites — www.charitywatch.org, www.give.org and www.charitynavigator.org — rate charities on how well they use the money they raise. (Note: New charities may not meet these numbers for a couple of years while start-up costs get in the way.)

3. Consider the impact
You wouldn't know it from their appeals, but not all charities are in dire straits. 

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One way to gauge the relative neediness of nonprofits is to compare their net assets (assets minus liabilities) with annual expenses.  You can find these numbers in the annual report or online. If a charity has several years’ worth of expenses banked and no immediate plans to spend it on a new program, chances are it doesn't need your money as much as other organizations. 

You may also want to consider directing some of your giving to smaller organizations and less popular causes that don't have the money for big fund-raising appeals.  These include groups that operate food banks and job-training programs.

4. Leverage your giving
Giving $100 to a worthy cause is good; turning that hundred bucks into $150 or $200 without contributing more from your own pocket is even better. 

One of the easiest ways to leverage a gift is to get your employer to match it — as 8,600 companies do.  Check with your human-resources department to see if your workplace offers this benefit. 

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Another way to get a bigger bang for your buck is to invest in a donor-advised fund, an increasingly popular way of giving.  With a donor-advised fund, you contribute a set amount of money to a fund that invests in stocks and bonds, like a mutual fund.  You get an up-front tax deduction for the amount you invest in the year you make your contribution, and then, at your direction, a portion of that money will be donated to your charities. Meanwhile, the rest can continue to grow, presumably giving you a larger total amount to contribute to charities over time.

5. Keep up with the tax rules
For instance, the rules about giving old cars to charities are changing on January 1.  The new regulations state that you can only write off what the vehicle fetches at auction, which is usually at or below wholesale price.  Before, for cars worth less than $5,000 you could use fair-market value.  Auction price is often half of fair-market value, so if you're giving a car away, you want to do it before the end of the year. 

To find a good charity to give your car to, go to www.auto-donation.com.  They've deleted the middlemen, so the greatest amount of money goes to the charity.  They work with 10 to 20 of the top national charities.

Overall, always check out the charity when you are donating a car.  And always sign the title of the car over to the charity — if you leave it blank or sign it over to the middleman you could be liable if that car causes any damage after it leaves your driveway. 

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright ©2004. For more information, go to her Web site, www.JeanChatzky.com.

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