It’s that time of year: you probably received endless messages in the last days of December urging you to “Save a Life now!” or “Chip in $5!” or letting you know this is your “Last Chance to Give.”
Looking beyond the Internet hype, here are five things about making charitable donations that you might not have considered.
1. Charities are not necessarily set up to help the needy.
To be considered a charity by the IRS, a nonprofit organization need only operate “in the public interest,” which is defined very broadly to include many services not necessarily aimed at the poor and does not preclude such organizations from operating on a fee-for-service basis. In fact, many organizations designated by the IRS as “charitable” do not operate in a manner consistent with the traditional, more limited, view of charities.
American charities consist of 1.1 million organizations with $1.5 trillion in annual revenue, and cover all kinds of areas, including hospitals, entertainment, higher education, scientific research and social services.
2. Finding the right charity for you takes some work.
If you are serious about donating to a charity that meets your criteria, you’ll need to put in some work. There are some organizations, such as Guidestar, GiveWell, or GreatNonprofits, which can give you basic information on a group’s effectiveness, but that’s just a start. Once you’ve decided what type of cause you want to give to, look at the organization’s background, get all the information you can about the group’s finances, and check that an independent board has oversight of the organization . You’ll also want to examine the mission of the group, and look for proof that they are fulfilling that mission.
And keep a clear head when checking out organizations. Hint: there are more than 60,000 charities that use the word “veteran” in their name.
3. Lower overhead costs doesn’t necessarily make for a better charity.
As explained in The Washington Post:
The notion that charities should put as much money as possible into services and as little as possible into overhead expenses is widely accepted. Overhead ratios, which measure the relationship between a charity’s income and expenses, are one factor in popular rating systems such as Charity Navigator and the Better Business Bureau’s Wise Giving Alliance. Charity Navigator, for example, suggests that administrative spending greater than 30 percent is unreasonable, and it rewards its highest ranking to organizations that put less than 15 percent of their resources toward such costs.
Low overhead has become a point of pride — and marketing — for charities such as the Brother’s Brother Foundation, a Pittsburgh-based relief organization whose Web site boasts that “less than 1% of the value of donations [is] used for overhead.”
But charities need to spend on research, training and financial systems, all classified as “overhead,” to be effective. Those that shortchange these investments — and many do — are less likely to achieve their goals.
4. Staying local might be the best way to give to charity.
On the other hand, if you stay local, you can watch to see exactly where your money is going. Why not check out your local area’s charities, ask your friends and family what good charities they may know about and what they do, and visit one or two to see for yourself. Giving locally is a great way to begin — as you can see over the next few months how they’re doing and learn if you want to become more involved or continue to contribute.
Another thought is to volunteer so that you can see how the organization operates firsthand, give something of yourself in the process, and find out if it’s worth supporting or not.
5. Scammers always appear to profit from tragic situations.
You probably know this already, but it’s always good to be on your guard. Most recently, in the wake of the massacre in Newtown, plenty of scam artists have moved in to take advantage of this dreadful tragedy.
According to federal authorities, a woman from New York City has allegedly been posing as the aunt of Noah Pozner, one of the children murdered at Sandy Hook Elementary School. The woman, Nouel Alba, has been arrested and has appeared in a Hartford, CT, court, where federal prosecutors said that just hours after the massacre, she used her Facebook and PayPal accounts to seek donations for what she called a “funeral fund.”
Be on the alert and give wisely in 2013. Happy New Year!
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