philanthropy

Giving to Charity is Great. But How Do You Pick One?

Chris Birk — Tue, 14 Dec 2010 14:00:09 +0000

Although the declining economy has left many pinching pennies, thousands of Americans will still make charitable donations between now and year’s end.

The holiday season often provides grateful organizations with half of their annual donations. Most consumers give time or money to organizations that mesh with their personal passions or life experience. But it’s also important for consumers to make sure their hard-earned dollars are getting to those who need the help. Despicable as it is, charity scams run high this time of year as unscrupulous actors aim to take advantage of goodwill and holiday cheer.

Here are a couple avenues potential givers should explore when considering a charitable donation:

Find the Right Fit

Think about what’s important to you and where you want your donation to do good. There are charities big and small doing important work in all corners of the country, from community-based groups to national organizations. Maybe it’s whales. Or puppies. Or the working poor. No matter your outlet, make time to evaluate your desires and the corresponding missions and values of potential organizations.

Check the Credentials

You can launch a website in 10 minutes, so just because a charity has one doesn’t mean it’s legitimate. There are watchdog groups that monitor the fiscal health and overall financial impact of nonprofit groups. Two of the biggest hubs are GuideStar and Charity Navigator. Use these sites to start your search or run prospective organizations through their search engines. Viable, legitimate charities should be willing to frankly discuss their missions, their programs, and their finances. You can also search for charities through the Internal Revenue Service.

Most organizations will dedicate about two-thirds of their funds directly to their unique cause, although that number can vary a bit depending on the group’s focus. Anything that looks out of line with that general guidepost should perhaps raise some red flags. You have every right to inquire about how donations are funneled and how much of your contribution will go to pay salaries.

It’s also important to note that a nonprofit group isn’t necessarily a charity, which means your monetary donation might not be tax deductible. Be sure to ask.

Prioritize Privacy

Be careful when it comes to using your credit card for donations. Make sure you’re using an organization’s protected website or just mail a check. Whatever the route, don’t just fork over cash. Be extremely wary of folks who go door-to-door.

Look for an Open Book

Charities are usually eager to share their stories with potential benefactors and volunteers. Well-run organizations will actively demonstrate their achievements and goals through a variety of outlets including:

A clear mission statement
Frequent updates regarding day-to-day activities through blogs, social networking sites, and other communication channels
Updates from a board of directors
An annual report detailing achievements, future plans, and other key information

Not every organization will have this suite of information. A neighborhood soup kitchen probably doesn’t have the resources to crank out round-the-clock Twitter updates.

Consider Giving Something Other Than Money

Writing a check isn’t the only way to contribute.

Many organizations also appreciate the volunteering of time, as well as things like food, clothing, meeting space, and other in-kind donations. You might also be able to volunteer your expertise — writers and designers can help pull together a newsletter, for example. Ask the organization what they need most to support their outreach programs and day-to-day operations.

This article is from Chris Birk of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Private foundations for ordinary folks

Philip Brewer — Tue, 28 Aug 2007 12:04:48 +0000

There are a lot of advantages to having a private foundation to use as the vehicle for your charitable giving. Sadly, the tax laws make setting up a private foundation impractical unless you're wealthy. Fortunately, there's an alternative that's very nearly as good: a community foundation.

Advantages of a private foundation

The main advantages of a private foundation are:

You can separate the step of donating the money from the step of granting the money to some particular organization that you want to support. In particular, you can donate the money when you have it (and, perhaps, when there's a tax advantage to making the donation), without having to decide exactly what organization will eventually get the money.
You can create an endowment, making a gift where the capital sum of the gift is invested and the income is made available to the local service organizations or philanthropic projects that you want to support. Your single gift goes on supporting your charitable objectives into the future.

You can get both of those advantages from a community foundation, without having to go through any of the paperwork or expense of creating a foundation. Community foundations were created for exactly this purpose. There's a community foundation for most cities and many towns, and the service area of community foundations usually includes the smaller towns and villages nearby.

Using a community foundation

The most flexible option is to create a "donor advised fund." You donate money to the community foundation, which creates a fund for your philanthropic interests. From time to time you send a letter to the fund telling them to make a grant to some local organization. It's called "donor advised" for a reason: technically the foundation owns the money (that's why you get a charitable deduction when you donate the money). But in practice, the whole point of the community foundation is to carry out the wishes of the donors. As long as your request is legal--that is, it supports an actual charity--the foundation will pretty much do what you ask.

Beyond just doing what you ask, the community foundation also provides a certain amount of extra value in the form of research, suggestions, contacts with local charitable organizations, and knowledge of local needs. Although this will vary a lot from foundation to foundation, it can be a big help in making your gift as effective as possible, and in saving you time and effort.

Simpler than the donor advised funds are "field of interest" funds, where you simply specify a particular area that you want to support (medical research, youth programs, historical preservation, human services, etc.) and the foundation will use your money to make grants in support of activities in that area.

You can also specify a specific organization to receive the income from your donation. Here again, the community foundation provides some additional value. If the organization that you specified disappears (which may very well happen eventually--since they're only spending the income and are preserving the capital, there's every possibility that your fund will exist in perpetuity), the community foundation will pick one or more replacement organizations, doing their best to make sure that the money continues to support your charitable intent.

Local organizations would, of course, be pleased to receive the whole gift. However, most local organizations would find some excuse to go ahead and spend the money right away, rather than spending just the income. My father and I talked to the senior center in the town where his parents had lived, indicating that we wanted to make a gift to support projects in memory of his parents. They were enthusiastic, describing a similar gift that had been made a few years earlier, where the income went to fund an annual bus trip to a major league ball game. They admitted, though, that after making the trip for a few years, one year they had a budget deficit just about the size of the principal that funded the baseball trip. The spent the principle, and the annual trips ended. If the money is in the hands of a foundation, that sort of result can be avoided.

A community foundation is particularly attractive if you have a lump of money that you want to donate that is not representative of your future giving. For example, a friend of mine earns a modest sum every year from some software that she wrote years ago. She doesn't need the money to live on, so she donates it to charity each year. One year, though, the software did very well, and she ended up with several thousand dollars. That put her in something of a quandary. If she gave the whole sum to one organization in one year, she would suddenly become a major donor and could expect to be wooed to make future large donations--which were not in the cards, because the software could not be expected to produce such outsized returns in future years. On top of that, she had tended to rotate her donations among a few similar organizations, and now she was face with either changing a rotating practice that had worked well (perhaps by splitting the money), or else giving an outsized donation to just one of the organizations that she supported and not the others.

I suggested that a community foundation donor advised fund could solve all those problems. She could donate that year's large sum, and future sums of whatever size. The fund could make donations to each of the groups she supported, in exactly the same rotation she'd been following.

Finding your community foundation

It's pretty easy to find your community foundation: Just google "community foundation" plus the name of your town or the nearest city. There is also a tool for finding your local foundation at communityfoundations.net and at the Council on Foundations. (They seem to both point to the same tool, which seems to be down just now as I write this, but that I assume will be working again shortly.) Besides providing the locator tool, their websites are also excellent resources for anyone interested in charitable giving.

A nationwide alternative

There is one circumstance where a community foundation isn't the best choice: if most of the groups you want to support are not local. (Community foundations, by their very nature, prefer to support local groups.) In that case, one option to consider would be the Fidelity Charitable Gift Fund, or one of several similar funds available from other mutual fund companies. These funds work more or less exactly like the donor advised funds in a community foundation, although there's some concern that they're not properly policing the directions that come from the donors.

There are a lot of worthy causes--local, regional, national, international--and a lot of organizations that will take your money and do good work. A community foundation is a tool that you can use to manage your charitable giving, especially in cases where you're in a position to make a larger-than-usual gift in one particular year, and especially where you want to support local charitable activities.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Ask the readers: What charities do you give to?

Troy Hadley — Thu, 12 Apr 2007 19:41:04 +0000

My last post on giving made me think a bit about... well, giving. My train of thought, fortunately, is easy to track.

I give a good deal of money to charity every year, enough so that the monetary amount actually affects my tax returns (in a good way). I was just thinking about all of the places that I give to, and since some people started posting other charities in the last blog post, I thought I'd just out and out ask: who do you give to?

Because I'm really dig critters, be they fuzzy or bald, small or huge, I give to the following organizations on a regular basis:

Rolling Dog Ranch and Sanctuary is a great place and fantastic organization where disabled animals go to live out their days, or even find new homes! Warning! If you like animals, or have a functioning heart, do not visit this site until you are somewhere in which you can wipe away tears. Not that I'm the crying type, no sir. I'm pounding my chest in an aggressive manner as we speak. No, I'm worried about you sissy types who cry easily... especially if you read the story about Spirit ...the ... wonderdog (breaks down sobbing).

The Elephant Sanctuary is well-known, and damn, if elephants just aren't as cool as can be.

The Humane Society of the United States is activist enough for me to feel like they're really DOING something, but without being obnoxious, like PETA. I recently signed their plegde to boycott Canadian seafood until Canada stops clubbing baby seals like it's some kind of freaking hobby.

People

When I feel like helping humans, I give to Kiva.org, Operation Smile, and Doctors Without Borders (Medicins Sans Frontieres).

Who do YOU give to?

(Picture by Jo Philips)

This article is from Troy Hadley of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: