‘Tis the season of giving, and this year you want to put a nonprofit on your list. Even though you’re probably running around like a crazy person getting everything ready, you know you’ve got it good and you want to help others. That’s natural and frankly, awesome.
“When you think about Thanksgiving and the religious holidays in particular, they tend to make us feel like it’s our responsibility to give back,” said Art Taylor, president and CEO of the Better Business Bureau Wise Giving Alliance.
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But with high overhead costs and executive salaries, it’s hard to know whether you’re giving to the cause or another lease on a sports car for the organization’s CEO. To choose the right nonprofit, you have to do your homework.
“I think you need research to find a charity that is accomplishing the purpose that you want it to have,” said Sarah Rebosa of law firm Cullen and Dykman who advises clients on charitable giving and long-term financial planning. “I also think it’s important on the financial side because there’s a lot of scams, every charity has different overheads and different intents.”
Decide What You Want to Accomplish
Pick a cause that’s meaningful to you and look for organizations that support it. Perhaps you want to help people with cancer. Some might fund research efforts while others might run meals-on-wheels and transportation services.
“Review their mission statement and make sure it matches what you want to do,” said Jean Shafiroff, a philanthropist who is actively involved with nonprofits like the Southampton Hospital and New York Women’s Foundation and is writing a book on philanthropy set to be published in January by Hatherleigh Press.
The website or an appeal letter is a good place to start. You’ll also need to decide whether you want to give to a large nonprofit like the American Red Cross or a smaller local one.
“A local charity can give a different level of reward to the donor, perhaps they can see what their money is going towards if they choose a local charity,” Rebosa said. “[With] a bigger charity, you may not see the direct effect although your money may be used for very charitable causes. When you’re comparing on that front, it’s more about what the donor is looking to accomplish.”
Read Up and Ask Around
Once you’ve honed in on an organization you’re interested in contributing to, the homework really starts.
“When in doubt, ask different people and read articles about the charity. If the New York Times wrote them up, see what the New York Times had to say,” Shafiroff said.
The organization’s website is a good place to start. Shafiroff also recommends asking other people in the community for insight.
Visit and Meet the Players
Paying a visit to the organization and meeting board members, volunteers and employees can provide valuable insight on how it’s run and people there are treated. Make the most of your time by asking the right questions.
“If I was going to meet with a board member the first thing I’d ask is, ‘Do you give them money and why?’” Taylor said. “The second thing I’d want to know is how long they’ve been involved in the organization and why they feel the mission is so important.”
Taylor would also want to know why the board member thinks the organization is succeeding and what they would like to do better.
“If there’s nothing they could be doing better, why do they need my money?” he said.
While there, get a copy of the organization’s Form 990, which is a copy of its IRS filing and can help you get information like director and officer salaries, income and spending. You may even want to request one before you meet with anyone so you can ask questions about any concerns you have about spending.
“I think it’s fair to ask percentage wise where the charity’s money gets spent because you want to know what’s going towards charitable activities and you want to know what’s going towards overhead,” Rebosa said. “If the charity is hesitant on disclosing information to you, that’s a red flag.”
If you need help reading a financial statement, speak to a lawyer or accountant.
A Word About Financials
Taylor has noticed that there’s a cultural belief that nonprofits should have very little overhead and that if you ask people how much they should be spending on overhead most would say 5-10 percent.
“The big problem with it is, believe it or not, charities need to spend money on overhead,” he said. “It gets to the point where you really can’t operate if you don’t have certain things in place.”
Accountants, office space and training are all expenses that can add up for an organization, so Taylor thinks 35 cents out of every dollar is a better general benchmark. Keep in mind some may have lower overheads than others, especially if they are more volunteer-based or don’t require training.
Of course, if an organization is throwing a lavish $1,000-per-ticket benefit with an expensive florist and notable band and you find nothing is getting donated, that’s certainly cause to not want to get involved.
“I wouldn’t want to go to an event where the majority of my money is being used to pay for the event and then the purpose doesn’t get much of the money,” Shafiroff said.
When it comes down to it, it’s about what makes you feel comfortable, but Shafiroff, Rebosa and Taylor all advise you to look at the big picture and not simply fixate on overhead.
If you want to have more control over where your money goes, many larger charities and foundations, such as colleges and hospitals, allow you to choose whether or not you want it to go into an unrestricted or restricted fund. An unrestricted donation will go to a general fund and the organization will use it as it wishes. A restricted fund can go towards a very specific focus of your choosing, such as to the oncology unit of the hospital or a scholarship at your alma mater.
“It gives the donor control over how their money is being used and gives them a direct connection to where their money is going if they chose a restricted fund,” Rebosa said.
Beware of Scams
With this being a time of year people tend to give back, you may find yourself sorting through multiple solicitations, some of them unannounced.
“There’s a lot out there about telemarketing on the fundraising side,” Rebosa said. “I think people feel pressure to give money from unsolicited phone calls. Sometimes, not all [the time], these are part of a scam.”
If you are on the receiving end of a call, Rebosa advises not to commit right away. Politely ask if they can send something in writing in the mail along with financial statements.
“That way the donor has the time to review it rather than give personal or financial information over the phone,” she said.
Make sure to read any appeals you receive in the mail carefully, too.
“The letter could be pressuring you to give a gift, like a call to action claiming that if you don’t give right away somehow the world is going to come to an end,” Taylor said. “[It] might say that you somehow owe this to a particular charity at this time [and] appear to be an invoice as opposed to a solicitation.”
Taylor says to look for specifics, like what the charity will do once they get your money, before giving the solicitation a second thought.
If you want to help others but are wary about giving money, consider giving your time instead.
“I think volunteering is good on many levels,” Rebosa said. “It gets you into the organization to get a better sense of what goes on behind the scenes and it’s good for the community.”
5 Resources For Giving
- IRS: The Exempt Organization Select Check allows users to check information about an exempt organization’s federal tax status and filings, including deductibility of their contributions and whether it has had its tax-exempt status revoked for failing to file Form 990 series returns or notices as required for three straight years.
- New York Attorney General: The Attorney General Charities Bureau site contains financial reports of charities active in New York and tips for prospective donors.
- BBB Wise Giving Alliance: Evaluates charitable organizations based on ethical governance, responsible fundraising and transparency of financial operations. It also publishes a magazine listing of charities and whether they meet its standards.
- GuideStar: Has IRS information, including Form 990 images from millions of tax-exempt organizations.
- CharityNavigator: Rates charities on a star scale by using Form 990s to see how much of a charity’s money goes toward income and what percentage goes to overhead. Four stars is considered the highest mark.