Give, but wisely, in time of giving: Experts recommend research before donating to a charity

“There are many worthy causes, and you can’t support all of them"

Published: December 8 2013 | 3:30 am - Updated: 29 March 2014 | 12:35 am in
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In the heart of the holiday season, and with the end of the tax year around the corner, this month is prime time for giving.

The question is, give to whom?

"I set a budget for giving every year," said David Bywater, president of Tru Art Color Graphics and board chairman of Goodwill of the Heartland.

Bywater donates money to a variety of charities ranging from larger groups such as Goodwill, United Way and Johnson County Community Foundation to more specific groups such as the Iowa City Public Library, Englert Theater and the Hoover Presidential Library.

"I emphasize local organizations in particular. I think there are a lot of worthy causes, but by doing local giving I can check up on that charity and make sure the money is being used for the mission," he said.

"I think for many organizations, the last quarter of they year, and particularly the last month of the year, are peak times for fundraising," said Lois Buntz, chief executive of United Way of East Central Iowa. "Many charities get 40 percent of the money in the last few weeks of the year."

Last year, giving in America increased to $316 billion, according to Giving USA, and as much as 42 percent of online giving occurs between November and December, according to a survey by Convio, a fundraising software company.

Blackbaud, a software company for not-for-profits, reported that Giving Tuesday contributions last Tuesday were up 90 percent across its 3,800 clients compared to 2012.

Giving Tuesday is a campaign to establish “a national day of giving to kick off the giving season” following Black Friday and Cyber Monday, according to a website for the effort, which began in 2012. It includes United Nations Foundation as a supporter.

In Linn County, there are 672 registered public charities with a combined revenue of $1.16 billion, and 434 registered in Johnson County with a combined $727 million in revenue, according to the National Center of Charitable Statistics.

Those are big numbers, and they suggest people could be getting more generous.

Also on the rise are reasons for Americans to be cautious as to how they donate their hard-earned money. Caution can mean recognizing the well-run versus poorly run charities by exploring efficiency, how much goes to administrative costs compared with its stated mission or how much is spent on fundraising.

"People in it for the money tend to target the emotional causes that will get you to give without thinking it through," said Daniel Borochoff, president and founder of Chicago-based Charity Watch.

He said many phone solicitation charities will slip in messages such as "don't forget to buckle up," instructions on folding the American flag or a cancer-screening reminder. These phone calls then can be considered educational and therefore a mission-related expense.

But donors giving to a police organization, disabled veterans group or cancer funds generally want their donation to go to help the victim or cause, Borochoff noted.

Cents on the dollar

Judith Johnson of Stacyville became the face of an investigation by the Center for Investigative Reporting and Tampa Bay Times into charity fundraising.

The disabled 72-year-old cut at least 25 checks to solicitors calling on behalf of groups with compelling causes — disabled veterans, firefighters, cancer patients — to find in many cases only cents on the dollar reached those in need, according to the report.

What’s more, her giving led to increasing calls from solicitors, the report said. A call to Johnson’s home now has a message telling solicitors to stay away and requests her number be put on their “do not call” list.

Strategies recommended by watchdog groups include ask questions, donate locally and don't get pressured to give now.

The same is true for businesses.

“When somebody solicits Paulson Electric for money, we don’t generally reply over the phone. We ask to see them face to face,” said company president Ron Olson, who said Paulson Electric chose to give to United Way of East Central Iowa after a careful review.

United Way raises money and distributes it through applications for grants to at least 40 vetted, local agencies.

“There are many worthy causes, and you can’t support all of them," he pointed out.

While ratings often exist for larger national not-for-profits, many local charities are too small to make those lists. Still, a number of strategies exist make good choices, and many resources are available for those interested in inspecting specific charities.

Richard Koontz, director of the Larned A. Waterman Iowa Nonprofit Resource Center at University of Iowa, said people should ask questions. What are the charity's goals? Does it have a mission statement? How will the group use your money? Ask to see a copy of the organization’s most recent audit, he said.

Another resource is Form 990, a public financial disclosure most tax-exempt organizations are required to fill out. Some organizations will post their Form 990 and audit on their website.

The 990s also are available through websites such as Guidestar.org and the National Center for Charitable Statistics. Using the 990, you can get a snapshot of local charities on your own.

A Gazette analysis of United Way of East Central Iowa's 990, found that agency operates with approximately 12 percent of its expenses going to administrative costs and 6 percent for fundraising. For every 6 cents spent on fundraising, $1 comes in the form of contributions, gifts or grants.

Based on Charity Navigator's metrics, these are strong numbers.

Charity Navigator, a not-for-profit that touts itself as the largest and most used evaluator of not-for-profits in the nation, has a five-tier grading scale for charities. Under its general category, for a charity to be considered at least mediocre, it would spend no more than 25 percent on administrative costs and no more than 20 percent on fundraising. Also, the agency should spend no more than 35 cents for each $1 contributed.

The scale can shift based on the type of charity. For example, an organization focused on disabled youth or running a museum is expected to have more administrative costs than a volunteer soup kitchen or a community foundation.

Most charities aren't aiming for "mediocre," though, and the lower the number, the higher the rating on the Charity Navigator scale.

Here's a sample of other local charities analyzed by The Gazette:

  • Goodwill of the Heartland spends 10 percent of its budget on administrative costs, less than 1 percent on fundraising and raises $1 for every 1 cent spent.
  • Girl Scouts of Eastern Iowa and Western Illinois spends 12 percent of its budget on administrative costs, 6 percent on fundraising and raises $1 for every 42 cents spent.

 

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