Wise Giving Tips

Evaluating a charity, and deciding whether or not you want to give, can be a challenging task. Many potential donors focus on how much the charity spends on its mission, administration, fundraising, and other matters. While these are important questions, they can miss the larger point about giving and how you can best “make a difference.” The following items can be helpful as you begin to consider your philanthropic efforts.

There is no single source that lists and grades all charities

There are hundreds of thousands of charitable organizations across North America, and the number has nearly tripled in the past 20 years. Some organizations (such as a Better Business Bureau) may have information on certain local charities, but their data will represent a small fraction of all the charities in a community.

Develop a giving plan

Many donors now consult financial professionals to monitor their earnings and investments. Yet, when it comes to voluntarily giving away money, donors still tend to give quickly and often on a whim.

Instead of giving in this manner, develop a giving plan of how much, when and to whom you want give. It can be as detailed or as general as you want, but should include an outline of what kinds of organizations you will support (only health-related organizations? Environmental causes? Literacy groups?), approximately how much you can give, and when you will give.

Deciding when to give is also important. More than a third of all charitable giving occurs in the last three months of the year. Donors should be sure to allocate some money to give during that period. But giving during the rest of the year is critical too, as some charities often struggle for funds in spring and summer.

Use the Donor Bill of Rights

This document was created by a group of philanthropic and fundraising-related organizations dedicated to the advancement of ethical and effective fundraising. Know your rights, and challenge the charities you support to uphold them. If they don’t, tell them you expect them to do so, or you’ll consider giving elsewhere.

Take your time

Always resist the urge to give right away. Legitimate charities don’t need money at the exact second a solicitation is made. The more an organization uses high-pressure tactics, the more donors should resist making a gift. Ideally, donors should always ask for written information (especially during a telephone solicitation) about the charity before they give. The request will give donors more time to find out about the charity and resist the temptation to give on a whim.

Ask for the right information

What kinds of materials should donors ask for? First, the material should contain an overview of the organization, its mission and its programs. Financial data can also helpful; donors should look at a charity’s cost of fundraising, its overall budget, and whether or not it is running a deficit. Ideally, donors should look for signs of consistent and improved management over several years.

Ideally, fundraising costs (which can be quite high for new organizations) should decrease over time. AFP has not created fundraising cost standards for charities because many variables are involved, and each campaign will be unique. For information on the variables that can impact a charity's fundraising campaign, visit factors affecting fundraising costs.

Donors can also ask about how the fundraisers and solicitors for a charity are paid. Some organizations use percentage-based compensation, where the fundraiser and/or solicitor receive a cut of each gift they obtain. Percentage-based compensation often leads to high fundraising costs, which cut down on the money the charity can spend on programs. Many professional associations, including AFP, believe percentage-based compensation is unethical and prohibit their members from accepting it.

In the United States, charities must disclose their Form 990 to anyone who requests it. The Form 990 is the financial reporting document that most, but not all, charities are required to complete and file with the IRS. Donors can request a charity’s three most recent Forms 990. Those documents should provide an accurate picture of the organization. The Form 990 can be difficult to understand. GuideStar (www.guidestar.org) has a good section on its website about understanding the IRS Form 990.

In Canada, when an organization successfully applies for charitable status, it receives a registration number. Donors can ask for this number, and then use the website of the Canada Revenue Agency (CRA) to determine if the charity is legitimate and is registered. The CRA website is http://www.craarc.gc.ca. When you’re there, on the left-hand side, click on “Charities.” You’ll be sent to a page that has information on which charities are registered and how you can contact your local tax services office to verify if an organization is legitimate.

Volunteer for an organization

One of the best ways donors can evaluate and feel confident about a charity is to volunteer for an organization. Talking with staff members, other volunteers, and the people the charity serves will give the donor a personal view of the charity’s mission and operations. If the donor’s impressions are positive, then he or she can feel good about giving to that organization. And of course, if the experience was gratifying, then the donor should consider volunteering on a consistent basis!

Ultimately, giving is a personal decision

Despite fundraising costs, management, and the best-laid plans, charitable giving, at its heart, is a personal decision that donors must make on their own. If the donor truly believes in the organization’s mission, then he or she should give to that nonprofit. The guidelines that have been presented here are simply that — guidelines. The real decision lies in each donor's heart.