Tis’ the season to be jolly. Tis’ also the season for charities to be seeking your dollars. However, there are a whole lot more charities out there that are asking you for money than to which you could reasonably donate. So how do you choose?
You should first investigate the charity to which you are intending to donate. Check on the Internal Revenue Service website to determine if the organization is a tax exempt charitable organization. Go to www.irs.gov/app/pub-78/ and enter the relevant information to see if your favorite charity is a real legal charity.
If the charity is a Michigan based corporation, check on the Michigan Department of Labor and Economic Growth website at HYPERLINK “http://www.dleg.state.mi.us/bcs_corp/sr_corp.asp” www.dleg.state.mi.us/bcs_corp/sr_corp.asp. You can review articles of incorporation, corporation information updates, annual reports and other documents that have been filed with the state.
One area to investigate is the finances of the organization. By going to HYPERLINK “http://www.guidestar.org” www.guidestar.org, you can view the charity’s Form 990 Return of Organization Exempt From Income Tax that was filed with the IRS.
Look at the percentage of their budget that is used for charitable purposes. There are some charities that take an excessive amount of the charitable dollar on administrative costs and fundraising and very little on their charitable purpose. There are other charities, like the United Way of St. Clair County, that spend only a minimal amount of their funds on administration and fundraising and then provide the remainder for their charitable programs.
One area to focus upon is the financial viability of the charity seeking your contribution. Especially in these difficult economic times, there are many charities out there whose long-term survival is bleak, at best.
For example, there is one relatively new local charity which represents that counselling to correct bad behaviors is at the core of its program. However, according to its promoters, it has no professionally trained social workers, counselors, psychologists or psychiatrists on its staff, nor does it have plans to contract with any. Because of this, the organization will only be effectively warehousing its clients.
Also this charity indicated it has no professionally trained person to run the business affairs of the organization, nor has it secured any form of permanent funding. It cannot seek government funds or court referrals because it requires its clients to attend church. It must rely solely upon private contributions.
Because this particular charity endeavors to address a need in our community, has a religious name and is faith based, it is popular with local area churches. As a result, this shaky organization is now sucking away charitable dollars from viable charitable organizations that have a successful past history of filling needs in our community.
Even after eliminating the non-productive charities, there are still a lot of charities which do a lot of good. There are more than you could possibly support. How do you narrow down which charities should get your hard earned dollars?
Since you have limited charitable dollars, one of the things that you could do is focus on your passions. For example, if you are an animal lover you may want to donate to your local humane society. If you are concerned about affordable health care, you may want to donate to your local free clinic or hospital. If you are a cancer survivor, you may want to support the cancer society.
Another method is first come, first served. Set your charitable contribution budget. As the solicitations come in, you contribute. When you reach your budget, you are done.
You could do what I do. I have a number of favorite charities to which I contribute every year. They are pretty much the same year in and year out. I then have a budget for all other charities. These vary depending upon a number of factors and what arises during the year. For example, when my daughter Elizabeth was in Chile earlier this year spearheading relief efforts for earthquake victims, I donated to that cause.
What about telephone fundraisers? Even if you are on a “do not call” list, you may receive telephone solicitations for charitable giving. Be careful of these telephone contribution requests for charities. Oftentimes these are professional fundraisers who receive a cut of every donation they collect.
Be especially wary of telephone solicitations if you do not know the charity. There are many scammers out there with fake charities or who are even posing as existing charities. These scammers are out to take your money or get your credit card numbers. To verify if a telephone solicitation is legitimate, you could request that the charity send you a solicitation request by mail to which you could respond. Or you could call the charity at their published number and then contribute.
The lesson to be learned here is that don’t donate to charities only because they have a charitable purpose. Make sure when you donate funds to charities, that they are good stewards of your contributions. You want to get the most charitable bang for your charitable buck.
By: Matthew M. Wallace, CPA, JD
Published edited December 5, 2010 in The Times Herald newspaper, Port Huron, Michigan as: Exercise caution when giving to charity