Want to know if that charity helping Haiti, or some other cause important to you or your company, is worth supporting?

Here is a very simple formula that removes all the guesswork.

First, obtain a copy of the charity’s most recent IRS Form 990.  These are freely available through Guidestar.com.

Add Line 14 (management expenses) to Line 15 (fundraising expenses).  Now, take that sum as a percentage of the charity’s total revenue as reported in Line 12.  So the formula is: Line 14 + Line 15 divided by Line 12 x 100.

This gives you the organization’s combined management and fundraising expenses as a percent of revenue.

If that number is higher than 30 percent, i.e., if a non-profit is spending more than 30 percent of its revenue on management and fundraising expenses (as opposed to services), that’s a problem.

Some might argue that the threshold should be a bit higher, say, 35 percent, but stick with 30 – unless the non-profit has some compelling reasons why it is higher.

The 30 percent test is used by grants’ administrators at many major corporations to evaluate requests for charitable support. These programs are often – or should be – closely tied to a company’s community and public relations efforts.

In the wake of a tragedy like the earthquake in Haiti, companies are likely hearing about and receiving solicitations from a number of organizations promoting their work in the disaster relief effort.

Give, by all means.  But give wisely.