(FORTUNE Magazine) – ROSS PEROT is giving away his $2.5-billion fortune. He says it is all going to charity, ''the best and highest use.'' Over the past two decades he has parted with more than $100 million, and in the process has learned that while good causes are easy to find, good management is not. With customary pith, Perot tells how to judge charities: ''The whole trick is to figure out which deliver results, which have leadership, and which are using the money for the people who need it, as opposed to chewing it up in overhead, making it disappear in enormous amounts, wasted.'' That is a workable rule for anyone trying to identify charities worthy of support, at a time when the need for private generosity is increasing. Cuts in federal and state funding have left large -- and increasingly visible -- gaps in the social welfare net that private agencies are struggling to mend. Perot's sister, Bette, who has charge of his foundation, reports, ''We are under siege here in Dallas with requests for help,'' particularly, she adds, for food and shelter needed by the homeless and poor. Charities dealing in health and social service causes -- some 135,000 in all -- are sending out mail and telephone solicitations as never before. In an extreme example, a Virginia businessman had his dinner interrupted seven times by phone calls asking for donations. The appeals will increase. The Independent Sector, a Washington-based coalition of corporations, foundations, and charities, is calling for a doubling in the next five years of the $87 billion a year that fund-raising drives now bring. Not all the charities mounting drives are well known or national. Typical of many local charities is Pegasus (see picture below), a 12-year-old program in Darien, Connecticut, that helps disabled children and adults regain balance and coordination through horseback riding. Most of Pegasus's 150 ''clients'' have brain damage, usually from birth injuries, accidents, cerebral palsy, or stroke. The innovative program, run mainly by volunteers, raises $90,000 a year to provide free riding lessons at eight stables in Connecticut and New York. WHICH CHARITIES are well managed and deserve your money? The best benchmark -- useful but not infallible, because of the differences in needs served and services offered -- is the percentage of revenue an organization spends on ''program,'' or the good works for which it was established (see table). There is no magic figure for spending on program vs. overhead and fund raising. And the Supreme Court has ruled that states may not establish fund- raising benchmarks. In 1984 the Court struck down a Maryland law that made it a criminal offense for a charity to spend more than 25% of gross income on fund raising. The Court declared that high solicitation costs are not necessarily an indication of wrongdoing. Two watchdogs that do set ethical and procedural guidelines and review charities for compliance differ on what percentage of program spending is enough. The Council of Better Business Bureaus likes to see at least 50% of income spent on program; the National Charities Information Bureau, 60%. In return for a self-addressed, stamped envelope, both organizations will send prospective donors reports assessing various charities. Write to the Philanthropic Advisory Service of the Council of Better Business Bureaus, 1515 Wilson Boulevard, Arlington, Virginia 22209, or the National Charities Information Bureau, 19 Union Square West, New York, New York 10003. Movie star-philanthropist Paul Newman sets a more stringent standard in giving away the profit made by his food companies, Newman's Own (popcorn, spaghetti sauce, and lemonade) and Salad King (salad dressing). In four years he has donated $11 million to 300 charities. He and partner A. E. Hotchner, a writer best known for his 1966 book, Papa Hemingway: A Personal Memoir, look for organizations that spend at least 85% of revenues on their programs. Says Hotchner: ''If the whole point of your business is to give away money, we don't think you should gobble it up first.'' Many of the 15 largest social welfare and health charities listed in our table come within reach of that stringent standard, but only four equal or exceed it. One that does is the Salvation Army. An unabashedly evangelical church, whose officers wear red labels symbolizing the blood of Christ on their blue suits, the Salvation Army aims to restore the self-respect of those who cannot help themselves. Says author Peter Drucker, a consultant to several charities as well as business managements: ''The Army probably does a better job with the poor than anyone else. Its achievement is to convert outcasts into citizens.'' Board member George McCullough, a former Exxon vice president, marvels, ''For helping the down and out, there is no one like the Salvation Army people. They stay with it.''

And frugally. Of each dollar the Salvation Army receives, 86 cents goes to the needy. One reason for this heavenly record: The Army's troops work for next to nothing. Married Salvation Army officers with 45 years of service, for instance, get only about $12,500 a year per couple in salary. Each couple also receives a grant, which varies with location, of about $9,000 a year to pay federal, state, and self-employment taxes. In addition they get living ! quarters and, when necessary, the use of a car. In the Army's staff quarters, upholstered furniture must last ten years, and wooden furniture 15 years, before being replaced. The Army refuses to consolidate the finances of its five regional operations, citing the cost of hiring the necessary auditors. Low-cost labor also helps Project Hope exceed the 85% standard in delivering health care to the developing world. The famous hospital ship is gone, unable to keep up with the demand for Project Hope's services. Its volunteer doctors now work on dry land, training local physicians and nurses. The doctors donate a year or two of their time and receive a nominal wage. They live in quarters provided by the host countries. PROJECT HOPE spends nothing out of its annual revenues of $37 million on professional fund raisers, outside public relations firms, or paid advertising. Says founder William Walsh, a cardiologist: ''Those are the things that eat your money up. We are unhappy if our spending on programs falls below 85% of revenues. After all, people send us money to help the less fortunate, not to help ourselves.'' But Walsh also gets unhappy when his organization spends much more than 85% on programs. He finds that running too tight a ship makes it harder for Project Hope workers in the field to do their jobs. A certain number of people at headquarters are needed to raise money, organize programs, and be available to help out in emergencies. Says he: ''We have been as high as 92% in program, but that's too high. Our people at home nearly had nervous breakdowns backing up the field.'' At 95%, CARE outclasses all other big charities in program spending, but for special reasons. It is not a typical charity. The U.S. government donates surplus food and pays some shipping charges, which accounts for 86% of CARE's revenues. Public donations are used to move the supplies inland in poor countries to fight famines, droughts, and other disasters. CARE also digs wells and latrines, builds roads, schools, and small factories, and plants trees to control soil erosion. It excels at all these jobs. Says executive director Philip Johnston: ''We strive to have the local government pick up as many of our expenses as possible -- for instance, the rent on our offices.'' Such cajolery cut CARE's costs by $26 million last year, a sum equal to 58% of the $45 million it raised from public donations. Most charities devoted to health causes do not make the 85% grade, but that does not necessarily mean they are badly managed. By spending more on fund raising, they argue, they increase the pot of money available to support their programs. Few pay medical bills or provide medications. ''Frankly, that would be a bottomless pit of costs,'' says G. Robert Gadberry, executive vice president of the American Cancer Society. Muscular Dystrophy, however, does pay some medical bills and buys certain medical equipment, such as wheelchairs. The health charities devote large amounts of money to educating the public. The American Heart Association makes no apologies for laying out $73 million last year on its campaign to tell the public and doctors about heart disease, compared with just $55 million for research. Executive Vice President Dudley Hafner credits the informational campaign against hypertension with helping to lower the death rate from cardiovascular disease. The American Cancer Society, the sixth-largest charitable organization, solicits funds to find cures for cancer, while crusading passionately and effectively against smoking. Last year it spent $44 million on fund raising, $75 million on education, and $81 million on salaries for its staff, while allotting only $77 million to research grants. The society plans to move from New York City to Atlanta to cut overhead; Gadberry says some of the savings will go to medical research. NOW AND AGAIN a clear-cut case of bad management and fraud makes news. In 1978 the board of CARE appointed an executive director and later discovered that he had pocketed $106,000 of the agency's money. The man returned the money and served ten months in jail. The incident had a useful outcome -- under Johnston the agency is now one of the best managed. Formerly a CARE official based in Europe, Johnston hired five new professional managers to back him up. They installed an internal auditor and raised salaries, linking them to job performance -- something that was then rare among charities. They also put a professional agency in charge of opening donation-bearing envelopes. High spending on fund raising and overhead justifies a close look at what's going on, but sometimes the spending seems proper. That appears to have been the case with Farm Aid, which was organized in 1985 by country singer Willie Nelson, a farm boy himself, in an emotional response to the economic plight of family farmers in the Midwest and South. Nelson produced three concerts to raise money to help debt-burdened farmers stay on the land. Such singers as $ John Denver and Neil Young donated their services, but the concerts were expensive to stage, inspiring criticism in the press. Nevertheless, Farm Aid claims that 62% of the $11.4 million raised by the first two concerts has reached farmers. Proceeds from the third concert, held in Lincoln, Nebraska, in September, are still being tallied. Variety quotes Nelson as complaining: ''The media are always talking about where the money goes. The money is the smallest part of what we're doing. Farm Aid gives farmers hope.'' Father Flanagan's Boys' Home, the formal name for Boys Town, immortalized in a 1938 Spencer Tracy movie, is a charity that in 1986 spent comparatively little of its resources. In addition to caring for 648 orphaned or otherwise disadvantaged boys and girls at the ''home campus'' near Omaha, Boys Town operates two small campuses in Florida (at Orlando and Tallahassee), a high school in Omaha's inner city, a diagnostic research hospital, and a technical- assistance service for nonaffiliated children's homes. The organization had revenues of some $92 million in 1986, a walloping $64 million of it from a $360-million endowment fund -- probably one of the largest of any charitable organization. (Notes the Boys Town annual report: ''The Lord has blessed us with an excellent year in the stock market.'') Boys Town spent only 35% of its income last year, while continuing to conduct fund-raising drives. The reason is that the Lord cannot be counted on to bless investments year in and year out, and so part of Boys Town's 1986 returns were used to build up the endowment fund for hard times. With its portfolio still prospering this year, the organization is skipping its 1987 drive and plans further expansion of its homes. Boys Town spends $26,000 a year on each child living on the Omaha campus. Father Val J. Peter, Boys Town executive director, says many of the kids there are ''severely emotionally disturbed'' and require costly care. He adds: ''We're the Mayo Clinic of child care. I believe children are to be prized, not priced.'' Charities are just now beginning to evaluate themselves. Notes United Way Vice President Russy Sumariwalla: ''Charities do not like to be evaluated by anyone. This is a very touchy issue.'' Now professional managers are bringing basic business techniques -- such as long-range and strategic planning, salary reviews, and market research -- to many charities. As they straighten out finances and hack at overhead, they spring more money for program. At decentralized charities such as the American Red Cross, March of Dimes, the American Cancer Society, Planned Parenthood, and the American Lung Association, managers can't easily swing an ax at overhead. The national organizations have no control over costs in their local branches, which are run by independent boards. Since branches also raise funds for the entire organization, executives at headquarters are loath to rein them in -- and probably couldn't if they wanted to. Some workers belong to unions, which have a big say in personnel policies. American Red Cross President Richard Schubert, former vice chairman of Bethlehem Steel, has cut 225 jobs from headquarters but is running into a turf problem trying to cut costs in branches: ''It is very frustrating to me that we are not as efficient out there as we should be.'' March of Dimes board chairman Richard Hallinan, a former general counsel of Combustion Engineering, notes: ''You can't move like you can in a corporation. There you can put out a memo to all international and domestic divisions and say, 'Tomorrow we do this.' In an outfit like this, you can't tell a chairman of a local board to do something. They don't work for me. They're not on my payroll. You have to use subtle persuasion. It's a little slower.'' Some charities have found that self-evaluation can pay off. Multiple Sclerosis ($43 million in annual revenues, 70% to programs) went through a shake-up in 1982. The board brought in a professional manager and gave the organization's founder and salaried head, Sylvie Lawry, the unpaid position of ''founder-director.'' One of the first things the new manager did was revamp the organization's financial systems. Says board chairman Clifford Goldsmith, former vice chairman of Philip Morris: ''Before, they didn't quite know what was coming in, what could come in, and how to classify it. Now we are in great shape.'' The board boldly asked medical experts to assess whether its research money was well spent. The verdict was favorable, and Multiple Sclerosis is now spending more on research. BOYS CLUBS, which sponsors educational programs and other activities for disadvantaged boys and girls, is another charity that evaluated itself recently. It hired a pollster to ask its alumni if its programs had helped them. Told by 96% of the living alumni from the 1920s on that the organization had made a difference in their lives, Boys Clubs decided to expand. Most charities are run by well-meaning people, but not every executive director is a competent manager. The trend toward self-evaluation and professional management can only help charities do better the jobs they were organized to do. Ross Perot may start finding it easier to give away his money.

CHART: NOT AVAILABLE CREDIT:NO CREDIT CAPTION:How the Money Comes and Goes The 15 largest charities are ranked by 1986 revenues. Some get sizable income from sources other than donations. Red Cross, for example, earns over half its revenues by selling blood; Unicef sells greeting cards. Government payments are for services, except in the case of CARE, which distributes surplus food. Some percentages do not add up to 100% because of surpluses or deficits. All figures were supplied by the charities. DESCRIPTION: Chart of revenues, spending, income sources and paid staff of several charities.