Charitable giving – just like with business and finances – planning goes a long way to improving results.
You don’t want to arbitrarily respond to requests sent in the mail or to phone calls seeking donations. Try to avoid the knee-jerk reactions.
Be pro-active – make a giving plan. What causes do you care about? What are you passionate about? What organizations have a mission that aligns with your passions?
When you find an organization that is working for a cause you support, evaluate them. Do you want to give your hard earned money to an organization with a leaky bucket?
Evaluating a charity may seem daunting. Fortunately there are organizations that can help you with this process.
Charity Navigator found at www.charitynavigator.org evaluates charities on a number of issues. You put in the charity name and it will pull up a report. However, for Charity Navigator to review a charity they need to have revenues of $1 Million or more.
What about a local charity? If they have receipts over $50,000, they have to file Form 990 with IRS. It is the non-profits reporting process… i.e. tax return. You can access a non-profit 990 Form from www.guidestar.org. They have records of 990 Forms filed by non-profits as it is a public record.
The 990 Form reports several factors: What program is the charity operating? How much money is spent on the program? How much money is spent on administration and how much on fund raising? A healthy organization will limit the fundraising costs and administration costs to 25% of revenues received. This leaves 75% towards the program costs.
You also want to look at the salary of the CEO or director. Is it comparable to other organizations its size?
Trying to determine if they are getting results from their programs is a little more challenging. Hopefully, they are sharing their programs and results on their website. Most charities are open to discussions with you. They need to be tracking their results and be able to share that with you.
With investing, you want to be diversified. The opposite is true in charitable donations. Giving small amounts to multiple charities will result in your mail box filling up with solicitations from other charities. Also, small amounts don’t really cover the fund raising cost and does little for the cause.
When you get the phone call from a charity soliciting money, ask for a website or have something mailed to you. Never give personal information over the phone.
You need to do your homework. There are too many ‘sound a like’ charities. Are you giving to who you think you are giving?
Once you have checked out the organization, mail the check directly to the organization or make a donation on-line. Many charities use fund raising companies to do their phone calling. These companies retain a percentage of your contribution. Giving directly cuts out the middle man. More money is going towards your cause.
Peggy L. Farnworth, CPA, CFP®, CSA
Ph: (208) 343-7777