Hearts & Minds - Information for ChangeSM
Wise Giving to
when making a donation
President, American Institute of Philanthropy
Tax-exempt organizations are the fastest growing sector
in the U.S. economy. About 30,000 new charities are created each year. There are now 1.2
million nonprofit organizations and the competition for funds has become intense.
face inflation, government budget cuts and a growing demand for services, they ask you for
more donations. Increasing numbers of charities use high-tech fund-raising techniques.
Mailboxes overflow with fund-raising appeals. All of this can leave you confused about
which charities are most deserving of your contributions.
charities are honest and accountable to their donors. Unfortunately, a few are not.
American Institute of Philanthropy suggests the following pointers to help you give more
1. Know Your Charity
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 financial reports.
If a charity
does not provide the information you request, you may want to think twice about
giving to it. Honest charities encourage your interest and respond to your questions.
With a little effort, your money can go much further.
2. Find Out Where
Your Money Goes
Ask how much of your donation goes
for general administration and fund-raising expenses and how much is left for the program
services you want to support. AIP's Charity Rating Guide recommends that in most
cases 60% or more of your charitable donation should go to program services. Less than 40%
should be spent on general administration and fund-raising costs. Keep in mind that newer
groups and those working on less popular issues may find it necessary to spend a
greater percentage on fund-raising and administrative costs than well-established, popular
charities that identify as "public education" large portions of their direct
mail and telemarketing expenses. This often disguises high fund-raising costs.
difficult to find out the real percentage of donor dollars spent on program services
due to charities' inconsistent quality of self-reporting. You can ask the
charity's representative for specific information, such as how many individuals were served
annually or what the major program accomplishments were during the past year.
Not Respond to
Do not let yourself be pressured into
contributing on the spot. If you are not familiar with a charity, request additional
information in writing. Inspect it carefully and write a check if you decide to donate.
You have a right to say no. No legitimate organization will pressure you to give
It's a good idea to keep
track of your donations
4. Keep Records of
Do not give cash. Also, do not give
your credit card number to a telephone solicitor you do not know. Give your gift by check
or money order so you will have a record for tax purposes.
requires that you obtain a receipt from the charity
(a canceled check will no longer suffice) for all tax-deductible contributions of $250 or
donate more than $75 to a cause and receive something in return, like a dinner, the
charity must subtract its value from the total amount of your gift. Only the remainder is
tax deductible. If you donate less than $75, it's your responsibility to separate the
independent appraiser if you plan to give appreciable property worth more than $5,000. The
IRS does not accept appraisals by the charity or the giver for property worth more than
Not Be Misled
by a Charity's Familiar Name
Some questionable charities use an
impressive name that closely resembles the name of a respected, legitimate organization.
Ask for information in writing. Check out the charity with AIP or other watchdogs or check
with your state charity registration office before making a contribution.
Making donations may benefit
you as well as others
Remember that "Tax Exempt" Does Not Always Mean "Tax-Deductible"
Not all charities soliciting for
"good causes" are eligible to receive tax-deductible contributions. "Tax
exempt" means the organization does not have to pay taxes. "Tax deductible"
means you can deduct contributions to the charity on your federal tax return if you
itemize your taxes. Contact the IRS or the public library and refer to the IRS listing of
organizations to which contributions are tax-deductible.
Do Not Be Enticed
by Emotional Appeals
Beware of the pathetic "sob
story." The hard-luck appeal is a favorite of some organizations. Question phone
solicitors or direct mail appeals that 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
Registration in and of itself is not
a stamp of government approval or endorsement of the charity. It does not
necessarily prove that the charity spends donations honestly and
efficiently. However, most legitimate charities are registered.
non-church charities with more than $25,000 per year in income must file a 990 financial
form annually with the IRS. You can make a written request to the IRS for a charity's IRS
Form 990, but expect to wait two months or more to receive the information.
states require charities to register annually. You may receive the form 990 more quickly
if you request it from a state office.
law, charities are required to make copies of their 990 for the past three years available
to individuals via mail upon request. You can also go directly to the charity's office and
request to view the Form 990 or to have a copy of it made.
Gifts are not always a good
thing and you shouldn't trust everyone who offers them
9. Beware of
Charities Offering Gifts
Some charities include free greeting
cards, address stickers, calendars, key rings or other "gifts" in their direct
mail solicitations. They send these items to increase donations, but this can mean higher
fund-raising costs. You are not bound to make a contribution to keep a "gift."
It is against the law for a charity to demand payment for any unordered merchandise.
10. Consider Giving
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.
DANIEL BOROCHOFF is founder and
president of the American Institute of Philanthropy, one of the nation's foremost
charity watchdogs. He served as a member of the Hearts & Minds governing
board from 1996 - 2010, providing invaluable advice on our financial and
To receive a sample of AIP's Charity Rating Guide
and Watchdog Report, send $3 to:
American Institute of Philanthropy
3450 North Lake Shore Drive
P.O. Box 578460
Chicago, Illinois 60657
E-mail: [email protected]
has timely articles on charities and helpful advice to aid in giving decisions. A $40
tax-deductible contribution to AIP includes receipt of three Guides and supports
its work to
promote more effective giving.
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