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Tips for Giving Wisely
With over 2 million nonprofit organizations in the
US, competition for donations has become intense. As charities face
budget cuts and increasing public demand for their services, they
turn to you for more donations. Many charities stuff your mailbox
with fundraising appeals, hire high pressure telephone solicitors,
and use aggressive tactics to get your money. All of this can leave
you feeling overwhelmed and confused about which charities are most
deserving of your contributions. CharityWatch suggests the following
pointers to help avoid the bad actors and give more effectively.
1. KNOW YOUR CHARITY
Charities have an obligation to provide detailed information to
interested donors. Never give to a charity you know nothing about.
Request written literature and a copy of the charity’s latest
annual report. This should include a list of the board of directors,
a mission statement and the most recent available audited financial
statements with accompanying notes.
If a charity does not provide you with the information
you request, you may want to think twice about giving to it. Honest
charities typically encourage your interest and respond to your
questions.
2. FIND OUT WHERE YOUR DOLLARS
GO
Ask 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 CharityWatch Charity
Rating Guide recommends that in most cases 60% or more of your
charitable donation should go to program services. In our view,
60% or greater is reasonable for most charities. The remaining percentage,
ideally less than 40%, is spent on fundraising and general administration.
Note: A 60% program percentage typically indicates a “satisfactory”
or “C range” rating. Most highly efficient charities are
able to spend 75% or more on programs. Keep in mind that newer groups
and those that are working on less popular issues may find it necessary
to spend a greater percentage on fundraising and administrative
costs than well-established, popular groups.
Attempt to seek more information about charities
that identify as “public education” large portions of
their direct mail and telemarketing expenses. This may be done in
some cases to disguise high fundraising costs.
It is difficult to find out the real percentage of
donor dollars spent on program services due to the inconsistent
quality of charitable self-reporting. But you can ask the charity’s
representative for specific information, such as how many individuals
were served annually or what were the major program accomplishments
during the past year.
3. DO NOT RESPOND TO PRESSURE
Do not let yourself be pressured into contributing on the spot.
If you are not familiar with a charity, request additional information
in writing and inspect it carefully. You have a right to say no.
No legitimate organization will pressure you to give immediately.
4. KEEP RECORDS OF YOUR DONATIONS
Do not give cash. Also, do not give your credit card number to a
telephone solicitor or website that you do not know. Be sure to
obtain a receipt or printed copy of your donation so you will have
a record for tax purposes. Read more tips for giving
online.
For tax purposes, you will need to keep a record of
all your contributions of any amount. For contributions under $250,
records may be in the form of a bank record, cancelled check, or
written communication from the charity. The written communication
may be in the form of receipt or letter that must contain the charity's
name and the amount and date of the contribution.
For all tax-deductible contributions of $250 or more,
the IRS requires that you obtain a receipt from the charity (a cancelled
check will not suffice).
5. REMEMBER: “TAX EXEMPT”
DOES NOT ALWAYS MEAN “TAX DEDUCTIBLE”
Not all charities soliciting for “good causes” are eligible
to receive tax-deductible contributions. Many well known groups
engage in lobbying or political activity which precludes them from
receiving tax-deductible donations. “Tax exempt” means
the organization does not have to pay taxes. “Tax deductible”
means the donor can deduct contributions to the charity on his or
her federal income tax return. Request the charity’s tax exempt
letter. If the charity does not have a tax exempt letter indicating
its status with the IRS, you cannot legitimately claim your contribution
as a tax deduction.
6. DO NOT BE MISLED BY A
CHARITY’S FAMILIAR NAME
Some questionable charities use an impressive name which closely
resembles the name of a respected, legitimate organization. Ask
for information in writing. Check out the charity with CharityWatch
or your state charity registration office before making a contribution.
7. DO NOT BE ENTICED BY EMOTIONAL
APPEALS
Beware the pathetic “sob story.” The hard-luck appeal
is a favorite of some organizations. Question phone solicitors or
direct mail appeals which tell you nothing of the charity or offer
vague explanations for spending your charitable dollars.
8. ASK IF THE CHARITY IS
REGISTERED BY FEDERAL, STATE AND/OR LOCAL AUTHORITIES
Nearly all non-church charities with more than $25,000 per year
in income must file financial information annually with the IRS.
Currently 39 states and the District of Columbia require that charities
register annually. Bear in mind that registration in and of itself
is not a stamp of government approval or endorsement of the charity.
Charities with annual incomes of under $25,000 are
also required to file very limited information annually with the
IRS.
9. BEWARE OF CHARITIES OFFERING
GIFTS
Direct mail solicitations are often accompanied by greeting cards,
address stickers, calendars, key rings or other “gifts.”
Charities do this because it can increase donations. But do not
feel that you have to make a contribution to keep these “gifts.”
It is against the law for a charity to demand payment for any unordered
merchandise. Beware that these enclosed items can mean higher fundraising
costs for the organization.
10. CONSIDER GIVING GENEROUSLY
Once you are satisfied that the charity is worthwhile, give generously
if you can. There are many good charities that need your help to
operate valuable programs and provide needed services. When you
give wisely, you will be giving more effectively.
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