Get The Most Bang For Your Charitable Buck

By Katie Adams | October 30, 2009 AAA
Get The Most Bang For Your Charitable Buck

The holiday season is upon us and nonprofit organizations are gearing up for their last quarter of giving. It's an important time for charities as they know millions of individuals will consider making charitable donations as a holiday gift, an end-of-year tax write-off or both. According to Charity Navigator, in 2008 year-end gifts accounted for nearly one-third (30%) of all member charities' annual contributions.

As you wade through numerous solicitations this holiday season, what strategy will you use to select a charity to support? Instead of giving in scatter-shot fashion, doling out a little bit to each organization that asks, start by thinking more like an investor when it comes to your charity dollars. Wise investors do their homework to know which offerings represent the best values for the money. It's no different when you're giving to a charity.

You want to find the group that is most efficiently using its financial resources to do the best work for the cause that's closest to your heart. Here are 11 tips to help you change your giving mindset and ensure that your financial gifts are doing the most good.

  1. Get Crystal Clear
    Take time to think, and talk with your spouse, partner or family, about your charitable priorities. Are there certain causes you want to support? Work to narrow down broad categories into specific groups. (Generosity may be its own reward, but some charitable giving also provides personal tax benefits. Check out Deducting Your Donations.)

    For example if global poverty is something you're passionate about, what sub-categories are of most interest to you? Orphaning? Microcredit? Fair trade? Next make up a list of organizations you know are working in those areas.

  2. Confirm Its Status
    Next, before you drop off your donation or mail off your check, check out the group you intend to support. You want to ensure that your chosen charity is a reputable, established organization that has earned its IRS-given 501(c)(3) status. There are more than 1.8 million 501(c)(3) nonprofits in the United States.

    Simply ask the charity for their EIN (employee identification number) , which represents their IRS 501(c)(3) approval, or use websites like Charitynavigator.org, Guidestar.org, GlobalGiving.com, Networkforgood.org or Give.org.

  3. Evaluate The Group's Efficiency
    Once you know a group is an established, IRS-approved nonprofit, use sites like Charity Navigator that carefully review charities' financial reports and evaluate their use of funds. You want to know that your chosen charity uses its donated funds efficiently. Specifically, you want to be sure that a nonprofit is using the majority of its funds for its organizational mission and not for overhead like salaries, building expenses and fundraising.

    Focus on giving to charities that spend preferably a minimum of 75% of its budget on direct mission-related expenses. (Learn how to trace where your tax dollars and charitable donations are going in Navigating Government And Nonprofit Financial Statements.)

  4. Look Over The Literature
    Take the time to read through the nonprofit's website. Call and request a print copy of their most recent annual report and other donor information. Check to see the type of financial information and programmatic results the charity voluntarily discloses.

    Does it provide a copy of its most recent Form 990 (IRS form documenting its finances)? Does the group have a clearly stated mission? Is it actively working to establish effective partnerships? What is its Board of Directors' make-up? Does it seem overstaffed for its current work? Get to know your nonprofit well before investing in it.

  5. Give Directly
    If a charity uses for-profit professional fundraisers (through telemarketing or in-person door-to-door campaigns), the majority of the money you give never makes it to the organization.

    For example, Charity Navigator reveals that the top five charities which overpaid their professional fundraisers spent, on average, 87% of all funds raised (or 87 cents of every dollar raised) for their fundraising sales force. That means that just $0.13 of every dollar those donors sent in went for direct program expenses. Send your money to the nonprofit directly instead and save them the money they would otherwise be spending on fundraising.

  6. Donate Funds, Not Goods
    While some charities specifically ask for in-kind donations (i.e. clothing, non-perishable food items, equipment, etc.) most nonprofit organizations need cash contributions to meet their organizational goals. Your financial support is going to most likely go much further than physical goods. Call and ask before you make a donation to know what the group most needs at the present time.

  7. Get Specific
    When you send in your financial contribution (by check or online), specify what you would like your donation to be used for. While some organizations will not accept "earmarked" funds, some will and by indicating your preference you can be assured that your money will be used for the purpose you intended.

  8. Look For Matching Funds
    Some employers will match all, or a portion, of someone's donation to a specific charity. Ask someone in your employer's Human Resources department if there is a list of charities it supports financially or if there is a matching gifts program you can use to multiply your gift.

  9. Give On A Sustained Basis
    Like any organization, nonprofits work from annual budgets. Your regular sustained giving helps the nonprofits' leadership to be able to more confidently plan at least one year out and have a more accurate picture of funding to leverage other commitments as well.

  10. Publicize Your Giving To Spur Others' Support
    You don't need to disclose how much you give to a nonprofit organization - simply let others know about your commitment. Use creative ways to raise awareness of your preferred charities' efforts and invite others' support.

    For example you could write about it in your family's holiday newsletter or on your personal blog, display badges on your social media pages (i.e. Facebook, MySpace), "tweet" about it on Twitter and invite others to "retweet" your message, etc.

  11. Ask
    If you're considering a large gift or providing long-term financial support to a specific organization, ask to meet with the leadership to discuss your interest and ask for their input on how your funds can most effectively be used. (You give to benefit others, but there can be perks for you too. Find out what they are in Gifting Your Retirement Assets To Charity.)

Take initiative with your giving this holiday season, and your generous donations will go that much farther. Following these simple guidelines will help more people celebrate this year and give you that satisfying feeling of helping others.

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