Giving Without Regrets

GuideStar_logo_H_RGB_216x107.gifMany donors don't ask for information from organizations to which they give. That can result in regrets and anger later on. Save the whales. Feed the hungry. Build a new museum. No matter the time of year, it seems like mailboxes overflow with fundraising appeals or phone calls pour in from solicitors. All can leave a potential donor dizzy with decision. In fact some are tempted to give first and ask questions later. But not all charities are created equal.

"The vast majority of donors don't ask for information from an organization to which they give. That can result in regret,"says Bennett M. Weiner, Vice President & Director Philanthropic Advisory Service for the Council of Better Business Bureaus (CBBB). "When you buy a product or service and it is less than satisfactory, you know it and can work to redress it. When you make a charitable gift in the dark, you may have unknowingly supported an organization that is not well run."

According to a survey by the Fidelity Investments Charitable Gift Fund, only two thirds of donors always or sometimes conduct research on a charity before making a donation. Worse, only one third said they follow up with the organization to see if their gift is being used effectively.

How to separate the treasure from the trash? Follow these recommendations:

1. Know your charity Charities have an obligation to provide detailed information to interested donors. As of June 8, 1999, Internal Revenue Service regulations provide the public with greater access to IRS Form 990. This is the financial form that most charitable organizations are required to file annually. The new rules require charities to provide copies on request to anyone who asks. Prospective donors are also entitled to the nonprofit's most recent tax returns at no charge beyond copying costs and postage. Guidestar a searchable database of more than 640,000 U.S. nonprofits, even posts Forms 990 for many private foundations and public charities.

An annual report can be one of the best ways to learn about a nonprofit. If a charity does not provide you with the information you request, you may want to think twice about making a donation.

2. Follow the money trail Now comes the hard part: making sense of those financial forms. An important finding should be how much of your donation goes for general administration and fundraising expenses and how much is left for the program services you want to support. The CBBB recommends that at least 50 percent of total income should be spent on programs and total fundraising costs should not exceed 35 percent of total contributions.

3. Retain your privacy Con artists are pros at getting unsuspecting folks to release all sorts of personal information over the telephone. Never give your credit card number, bank account numbers or any other personal information to an unknown charity solicitor. Only after confirming that the caller is a reputable organization and you are ready to make your donation should you give your gift by credit card or check (cash is another no-no) so you will have a record for tax purposes.

4. Look for substance Appeals should clearly identify the charity's programs. Be cautious of those that are long on need but short on specific actions. How many dollars are spent on medical research grants or the how many acres of land did it protect? Say a group's aim is fight a particular disease. Does the organization fund research to test treatments or find a cure, conduct public awareness campaigns or provide services to patients and their families? Do you support both the group's ends and its means?

5. Let your state help A nonprofit may have filed with the IRS, but that doesn't mean the agency condones or monitors non-profits. A Form 990 only proves compliance with federal tax issues. Currently, more than 40 states require that charities register if they are soliciting within that state. These agencies or departments usually fall under the authority of the State Attorney General's Office. For instance, in Pennsylvania nonprofits must register with the Bureau of Charitable Registrations.

6. Watch dogs bark loudest Several private organizations monitor charities to determine if they meet voluntary standards or guidelines beyond what the law requires. These groups such as the CBBB, National Charities Information Bureau or American Institute of Philanthropy publish detailed evaluations of national charities outlining which do and do not meet their respective group's standards for philanthropy.

Adapted from an article for Community Foundations of America, copyright 2002.

Carla E. Dearing

Posted at 12:19 PM, Dec 03, 2008 in Accountability | Intergenerational | Philanthropic Strategy | Tax Issues | Permalink | Comment