How prudent donors can follow their dollars
Accountability means treating a gift as an investment to ensure a quality return.
With an eye on their dwindling investment-account balances, Americans are making end-of-year charitable donations expecting greater accountability, philanthropy watchdogs say.Skip to next paragraph
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“People want to do something meaningful,” says Bob Ottenhoff, president and CEO of GuideStar, a nonprofit dedicated to helping donors make prudent gifts. “The mindset changed from, ‘Here’s a donation because you are a nice person doing nice things,’ to ‘I’m a person making an investment in your organization and expect results.’ ”
Yet despite this desire for accountability, Mr. Ottenhoff and others say, too few donors do any legwork to safeguard their donations. Many simply respond to charitable solicitations, rather than seek out charities to support, which can leave them vulnerable to scams or result in funding fiscally irresponsible nonprofits.
But with a little donation acumen, donors can vastly increase the likelihood that the gifts they make will reach the individuals they intend to benefit this holiday season.
In 2007, Americans donated $300 billion to charity; $200 billion was from individuals, Ottenhoff says.
Ensuring donated money goes to the right place begins with donors, says Daniel Borochoff, president and founder of the American Institute of Philanthropy, a charity watchdog group.
“These are one-way transactions and a lot of people don’t put in the effort…. If people would think a little bit, so much more could be accomplished,” he says.
Ottenhoff says donors must first “resist an urgent telephone [solicitation] or the mailing you get with sad looking pictures, or increasingly, e-mail.”
Instead, they should ponder causes, and whether they wish to donate internationally, nationally, or locally, and to new or established organizations.
“Then, begin to look for organizations that fit your criteria,” he says. “If your interest is food banks in Boston, narrow it down to a few and make comparisons: How are they doing? Are they meeting their goals?”
A donor should also search for consistency across a charity’s platforms, says Bennett Weiner, chief operating officer of the Wise Giving Alliance of the Better Business Bureau, which evaluates some 1,200 national charities.
“The audit and the 990 [tax form] should clearly match the activities described on the [charity’s] website and in appeals. Any discrepancy alerts us that we should get additional information,” he says.
Sometimes, a charity’s financial information can be onerous. Confusing issues range from a charity giving money to another group and then claiming credit for services the other is providing, Mr. Borochoff says, to funds appearing or disappearing due to account transfers.
“The majority of organizations on our website are able to provide 70 percent of operating expenses to program services,” says Mike Smith, Charity Navigator’s chief operating officer. Administrative and fundraising expenses round out much of the remaining 30 percent. “Organizations where the number is upside down – 70 percent to fundraising and 30 percent to program – that’s an organization that’s not going to be using your money wisely,” he says.
Any trustworthy charity will welcome questions about its mission, structure, and finances, says Genevieve Piturro, executive director of the Pajama Program, a New York-based organization that donates new pajamas and books to more than 513,000 children in foster care across the US.
“We have the 990 tax form on our website,” Ms. Piturro says. “We think it belongs there and people will use it.”
Dos and Don’ts for charitable giving
DO research nonprofits by using watchdog websites such as the Wise Giving Alliance (bbb.org/charity), American Institute of Philanthropy (charitywatch.org), Charity Navigator (charitynavigator.org), and GuideStar (guidestar.org).
DO understand that online donations are likely to incur processing fees. Charges of 3 to 5 percent are not uncommon, and a reputable agency will ask donors if they wish to have the charge deducted from the donation or added on to the gift.
DON’T open a link in an e-mail appeal. Go directly to an organization’s website to donate.
DON’T believe charities that say 100 percent of donations go toward services. Expenses don’t disappear and must be paid for by some source.
DON’T assume that a nonprofit’s salaries are all covered under “administrative costs.” Program costs can also include salaries.
Sources: Wise Giving, Charity Navigator, Guide Star, AIP