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YOUR MONEY-How to answer those year-end charity appeals

Source: Reuters - Mon, 9 Dec 2013 11:00 AM
Author: Reuters
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By Mitch Lipka

Dec 9 (Reuters) - As the year nears its close, charities are making their final appeals - hoping to raise as much as they can during the traditional season of giving. But how do you decide if a charity is going to be a good steward of your money, or if your cash will go to the cause you would like it to?

Individuals, who account for 75 percent of giving, donated $277.2 billion to charities in 2012 and are on track to boost that by nearly 12 percent this year to $285.7 billion, according to Rob Mitchell, CEO of the Dallas-based charity-focused economic forecasting firm Atlas of Giving.

Unfortunately, the vast majority of donors do not do any research before giving, says Bennett Weiner, chief operating officer of the Better Business Bureau's Wise Giving Alliance. A study by Hope Consulting in San Francisco found that only one-third of donors did research before making a donation and that was mainly to validate a charity rather than find one.

"Most people don't look for any information," Weiner says. "That is really a significant limitation."

You can find a repository of information about charities at the main evaluators, including GuideStar USA Inc (guidestar.org), Charity Navigator (charitynavigator.org) and the Wise Giving Alliance (bbb.org/us/charity/), operated by the Better Business Bureau.

But you can dive a bit deeper on your own, too. Here are some research tips.

Simple steps

If you're considering giving to a specific charity, take a look at its website. "How transparent is it?" asks Weiner.

You should be able to find a link to the group's tax return on the site, called a Form 990(charities' tax returns are available to the public) as well as its yearly audit report and annual report. Very small groups - those that raise less than $50,000 a year - do not have to file a detailed tax return.)

Having an annual report is important, he says, though it doesn't have to have a fancy design. It should include a summary of the group's finances, a list of board members, the organization's mission and its accomplishments.

Earlier this year GuideStar, Charity Navigator and the Wise Giving Alliance issued a joint statement denouncing the longstanding notion that a charity could be evaluated by how much it spends on overheads. Spending a lion's share of revenue on fundraising is still a red flag, Weiner says, but having a low ratio isn't necessarily a green light.

It boils down to figuring out if the group spends its money in a way you want to get behind. "People should use common sense," says Ken Nopar, a Chicago-based philanthropic adviser. "How many people is the organization helping? What impact is it having? Sometimes people focus too much on the costs within the organization."

Look for when the information on the website has been updated, he says. Does it say what the group did in 2010 or what they are doing in 2013 or plan to do in 2014? If the financial information isn't current, Nopar says, it could be indication of an accountability problem.

Check the background of members on the board of charities to see if they have relevant expertise and be leery of any board that includes multiple family members of the person running the group, say both Nopar and Weiner - That can significantly impair oversight.

Distinguish between bona-fide registered nonprofits that will qualify your donation as tax deductible, and those groups that do political lobbying. They may support a cause you like, and you may want to contribute to the political effort, but your gift won't be tax deductible.

TEARS DON'T HELP

An emotional pitch from a charity, while potentially effective, shouldn't be taken at face value. Indeed, it could be distracting, Weiner says, from what isn't there: the important information.

"Watch out for overly emotional appeals that bring tears to your eyes but don't provide any details," he says. "Watch out for vague program descriptions. You should not have to be Sherlock Holmes to figure out what a charity does. If they say they're helping the homeless, what sort of help are they providing and where? What are they doing and where is it happening? It should be right there."

You could do more, too. Nopar says ideally you should get to know a charity. Visit their offices and volunteer if you can. Get a feel for what the group does and who works there. If you're planning to make a more significant contribution, arrange to meet with the organization's leadership and board members.

NO SOLICITATIONS

Ideally, donors will seek out charities they would like to support and not simply respond to solicitations, say donors.

But solicitations will come. Unless they're from a group you already support, don't rush to say yes. Many pitches come from organizations with names that sound like other organizations you might be more familiar with. If you're truly interested in what you've heard, ask the solicitor to mail you some information, Nopar suggests. If you're not, then move on, he says -- there's no sense in providing your mailing information to a group you don't want to hear from.

These pitches can also come with red flags. "If any appeal is asking you to make a decision right now and not tomorrow that should be a red flag," Weiner says. "Whatever the case is, excessive pressure is a rouse to get you give without looking any further."

Also, when you give through a phone solicitation, a significant percentage of the money raised will often go to the soliciting company. They typically keep a portion (sometimes more than 90 percent)of what they collect. Giving directly to the charity - and skipping the phone solicitor - would ensure all the money is going where you want it to. (Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance Editing by Linda Stern and Andrew Hay)

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