This is the time of year when people make charitable gifts to non-profits to fill the needs of the organizations and to receive tax deductions for their donations. How do we go about choosing where we donate our money?
First, narrow down your search. What is your passion? Is it world hunger or clean water for people in third world countries? Or is it helping local children have a safe place to go after school and good nutritious meals on the weekends and when school is out? Once you decide on your focus, look at charities that fall into that category.
As you consider charities, make sure you understand their mission. Look at their website. If their mission is to eradicate world hunger, do they have programs and data to support some real-world specifics that demonstrate they are accomplishing their goals? Are they touching peoples’ lives or just collecting donations? How are the non-profit’s initiatives run? What benchmarks have been achieved by those programs in the past? How many people are served by the initiatives? How does a potential client qualify to receive a service? If that information is not available on their website, contact the group’s Executive Director to obtain it.
If you want your donation to be tax-deductible, make sure the non-profit has been granted a 501(c)3 designation. An organization must apply for this designation, and it is officially granted by the Internal Revenue Service. All donations made to 501(c)3 organizations are used for charitable purposes, your gifts to them are tax-deductible, they are required to make financial information public, and strict rules govern how much they can spend to lobby the government. Remember, a group’s .org website does not necessarily mean they are a 501(c)3. To verify their non-profit status, visit Guidestar.org and enter the name of the organization to see if it’s in their database. If it is not a verified 501(c)3 and you are seeking a tax deduction for your donation, move on.
There are other important questions to ask as well. How long have they been in business? Is their Annual Report on their website? If not, can you get a copy of it? The website CharityNavigator.org can provide an analysis of a non-profit’s financials. A key figure to look for is the organization’s “spending ratio.” Ideally, you’ll want to see a ratio of at least 75/25. That means they are spending 75% of their donations on programs and 25% or less on overhead and operations. Keep this ratio in mind and investigate the group closely.
You should also consider the organization’s Board of Directors. Are they strong members of the business community who can give advice and help generate donations? Are they a diverse group of people? An assortment of backgrounds and professions can be helpful to the organization.
Another way to find out if a non-profit is meeting their objectives and serving their clients well is by reviewing third party assessments. Many organizations measure their effectiveness at meeting their goals by having these done. You can request a copy from the organization’s office. Doing your research will help you maximize the impact of your donations.
