Playing Santa to those in need
As cash registers ring and shopping bags sag, some choose not to give yet another pair of red-and-green socks or a peppermint-scented candle, instead sharing the gift of philanthropy by making a charitable donation in a loved one’s name.
Americans are generous givers, with charity donations hitting $306 billion in 2007, the first time the number broke $300 billion. Nonprofit health organizations took in $23 billion of that haul, according to the Giving USA Foundation, a Glenview, Ill.-based organization that tracks charitable giving. This year may be a bit leaner, says Patrick Rooney of the Center on Philanthropy at Indiana University in Indianapolis; during a recession giving typically falls by 1%, he says.
How do you decide where your dollars should go? There are nearly 1.8 million nonprofits collecting donations, according to the nonprofit Chicago-based American Institute of Philanthropy, which rates charities based on how they spend their money. The abundance of options can make choosing a charity harder than selecting a Christmas cookie from the office party platter.
Fortunately, several organizations rate charities to help donors select the best ones.
In 2007, charity gift cards entered the Internet scene, allowing the gift recipient to choose where the dollars go. (Last year, the nonprofit charity gift card distributor TisBest.org helped givers distribute $280,000 to more than 200 charities.)
Here are a few tips on how to pick the best charity stocking to stuff with your dollars and how to make the process a joy for friends and loved ones.
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Consider your recipient
Charity donations are best suited for people who have all the material possessions they require. If someone on your list really needs a new pair of pants, get them the pants, says TisBest founder Erik Marks. In addition, select a charity that your recipient will appreciate. When in doubt, Gamble says, a children’s health charity is always well-received.
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Consult health professionals for recommendations
If you have a particular condition in mind, ask hospitals, doctors and nurses what organizations they respect. “They would know who’s doing the important research,” says Daniel Borochoff, president of the American Institute of Philanthropy. But make sure to ask if your source is connected to the charity in any way -- you want the advice to be unbiased.
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Offer the gift of choice
If you’d prefer to let your recipient pick the charity, several websites will make that easy for you. TisBest and JustGive.org, both nonprofits, let the gift card recipient choose where the money goes. Bear in mind that a transaction fee goes to the gift card distributor, which can be as high as 15% at CharityGiftCertificates.org, another nonprofit. And note that if the card recipient never logs on to make a selection -- as happens 15% of the time in the industry, Marks says -- the distributor keeps the money, spending it as it sees fit.
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Do your homework
“Any bozo with no ethics can set up a charity and start soliciting really easily,” Borochoff says. Though most charities are legit, what they do with your donation varies widely. For example, Borochoff says, “research” could mean money for scientists to develop treatments -- or it could mean market research to discover how to collect more donor dollars. Similarly, “education” could refer to training doctors and nurses or it could mean that every solicitation for donations includes a reminder not to smoke. Ask what the charity has accomplished in the past, what programs you’ll be supporting and how your support will make a difference.
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Check a charity’s ratings
“You don’t have to go this alone,” Borochoff says. Several services have done the background check for you. The American Institute of Philanthropy (CharityWatch.org) and Charity Navigator (CharityNavigator.org) dole out letter grades and stars, respectively, based on how efficiently charities use your money. About one-fifth of the rated charities get an F, Borochoff says.
The Better Business Bureau (give.org) tracks whether charities meet 20 standards of accountability pertaining to transparency of operations, the members of a board of directors, regular assessment of effectiveness, money management, honesty in donation solicitation and protection of donors’ privacy.
In addition, nonprofit groups’ tax returns are available for download (with registration) at GuideStar.org, so you can see how much money they have and how they spend it -- even how much goes home in executives’ paychecks.
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Double-check the name
Some charities sound similar but earn different ratings. For example, Charity Navigator gives the Children’s Cancer Center four stars, the maximum rating, but the Children’s Cancer Research Fund merits only two stars.
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Crunch the numbers
An efficient charity will spend at least 60%, and ideally 75% or more, of your donation on the programs they support, with 40% or less going to solicit more donations.
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Make sure your privacy is protected
Charities should promise not to share your contact or credit card information, or at least offer the chance to opt out of such a program.
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Give directly to the charity
“A lot of business interests have invaded the nonprofit field,” Borochoff says. Solicitors that collect donations on a nonprofit’s behalf usually take a cut. In the case of telephone solicitations, for example, that cut averages two-thirds of your donation, he says. If you are giving through a third-party group, make sure it promptly passes the donation on to your charity choice -- otherwise, the money can languish in the middleman’s bank account.
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Invite kids to participate
Giving children a charity gift card along with this year’s Elmo incarnation and must-have video games can be a teaching opportunity, Marks says. “It’s an introduction to sharing, an introduction to philanthropy and an introduction to decision-making.”
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Keep the dollar amount to yourself
You wouldn’t tell someone how much the gift of a Christmas sweater cost, Gamble says -- nor should you share how much money you gave in their name. A simple note, telling your recipient about the donation, will suffice.
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Keep your receipts
The tax break goes to the giver, not the receiver. For donations of more than $250, the Internal Revenue Service requires a receipt for itemized deductions; for smaller donations, a canceled check, bank record or letter from the charity is fine.
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