Selecting the Right Charity


Donating money to charity not only allows the giver to do a good deed but also rewards him or her with a tax deduction. These days, in the estate settlement process, more money is being given to charity than to family members. As a result, some experts predict that, in the next five years, philanthropy will reach $1 trillion annually.

While some clients already have a favorite charity, others may need help choosing an organization to receive donations during their lifetime or a bequest at death. Selecting a charity that will make good use of the money is important whether the client is donating $10 or $10,000. With 600,000 to 700,000 charities currently registered in the United States, the task can be a daunting one, so performing the proper due diligence is crucial. Here is some advice CPAs can give clients who are shopping for a charity.

  • Contact the proposed charity directly, and ask how much money the organization spends on fund-raising and administration and how much goes to the cause. Most people believe charities spend as much as 50% of their proceeds on fund-raising. In fact, successful organizations may spend much less. Donors should look for a charity that spends 40% or less on administration. Prospective donors should not be afraid to ask tough questions. The more information a charity provides, the less it has to hide.
  • If possible, visit the offices of the prospective charity and meet the people in charge. This helps donors better understand the organization’s mission as well as its real needs. Some charities need volunteer time more than they need money. A personal visit can help a prospective donor figure out whether a cash donation or a few hours of volunteer time a week better meets its needs.
  • Talk to others in the community to get their view of the charity. Some small charities may not be easy to reach or visit. Talking to people who have volunteered or donated money is the best way to find out if a charity is run efficiently and delivers on its mission.
  • Use the Internet and other sources to research the charity. Several Web sites allow visitors to research the financial statements of charitable organizations and can even match a prospective donor with his or her charitable inclinations. Helpful Web sites include

    www.irs.gov. All charities that collect more than $25,000 annually must file an annual information statement, form 990, with the government. Although the statement doesn’t break down fund-raising and operational costs, it does give a glimpse into the charity’s overall financial health.

    www.guidestar.org .This site includes a searchable database of more than 640,000 nonprofit organizations. It allows users to locate charities based on subject, state, zip code or other criteria. It also lists all charities that have filed a form 990 with the IRS.

    www.ncib.org . The National Charities Information Bureau rates 400 national charities and assesses how they work. While the NCIB charges a fee for these profiles, a client considering a large donation will find the cost worthwhile.

    www.nsfre.org . The National Society for Fund-Raising Executives is an organization that holds its members to a strict code of ethics, which requires the largest possible percentage of funds raised to go directly to the cause supported. There are over 400,000 NSFRE members; a charity that is a member is probably being run efficiently.

If the charity has its own Web site, potential donors should access it for more information on the organization and the causes it supports.

Source: Adapted from information provided by www.eCharity.com , a Web site that enables donors to make charitable contributions online at no cost.

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