It is easy to understand the generosity involved with donating to charity. However, there are some aspects of charities that are misunderstood. Truly understanding these misapprehensions can help donors give responsibly.

Charity Navigator's Web site, www.charitynavigator.org, dispels some charity myths:

• Charity executives are overpaid—Most charity leaders earn a salary commensurate to their talent, experience and education. The average nonprofit chief executive officer (CEO) has a salary of $141,947; therefore, an average 3.4 percent of a charity's spending goes toward CEO pay. Charities can be just as complex as for-profit firms and must offer competitive salaries.
  Donors should take into account that not all of a CEO's pay is considered overhead. Additionally, a charity's size and performance should be considered; a CEO making less than $50,000 at an organization with a small budget or that spends a small percentage on programs may actually be more "overpaid" than a CEO earning more than $200,000 at a large, efficient organization.
• After a natural disaster, charities need old clothes—It is generous for communities to organize clothing drives after natural disasters occur, but most charities have no use for clothing donations. Because it takes time to sort the items and dispose of unwearable clothing, charities prefer cash donations they can use to purchase supplies. Additionally, the local economy benefits if disaster victims receive cash or vouchers to purchase clothing from local merchants instead of receiving donated clothing.
• You can judge a local charity based on a national name—Although some large national charities—such as the American Red Cross—have local affiliates but operate as a unified organization, other charities—such as Habitat for Humanity—operate as local chapters independent from the national organization. A local chapter in one location could be much more efficient than a local chapter in another location.
• Excellent charities spend 100 percent of their budgets on program services—To operate effectively, all charities must allocate at least a portion of their resources toward generating new funds and supporting the infrastructure that makes their activities possible. Critically examine charities that claim to spend 100 percent of donations on programs. Efficient allocation of funds is most important.
• A good way to support charity is to participate in a special event or buy a special product—Although charities can receive revenue from a charity gala or golf tournament—and some events raise money more efficiently than others—the best way to support a charity is with a direct contribution. Results from Charity Navigator's special events study shows that on average, charities spend $1.33 to raise $1 in special events contributions compared with an average overall fundraising rate of 13 cents to raise $1.

Purchasing a product that donates a portion of proceeds to charity also can be helpful, but straight donations are more efficient. Be aware of the fine print and find out what portion of the proceeds go to the charity.

This Web exclusive information is a supplement to Roofing to the rescue.