A user’s guide to charitable giving

“If it’s too good to be true, then it is too good to be true.” “Let your conscience be your guide.” “Don’t eat yellow snow.” Passed down from generation to generation, these simple lessons are essential. Just as we educate ourselves to protect against unwanted consequences of other decisions, with the right guidance and experience, we can educate ourselves to avoid disaster when it comes to charitable giving. 

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When responding to a charitable request or contemplating making a gift to a charitable organization, here are some brief guidelines that will help you make an informed decision.

1. Make your contribution to a bona fide charitable organization that issues receipts and whose filings are up to date.

More than 85,000 charitable organizations registered in Canada (with a charitable registration number) and 1.8 million in the U.S. (with 501(c)(3) status) are eligible to receive tax-deductible contributions. Charitable organizations should provide you with confirmation that the charity return has been filed and all filings are up to date. If you have other questions, ask them, to ensure that your gift is used as intended. You have every right to request the tax returns, the 990s or in Canada the T3010 returns of an organization, to satisfy yourself that there are no issues, no surprises. 

2. Governance = Responsibility = Accountability

Charitable organizations do not operate in a vacuum; governing volunteer bodies, frequently called a Board of Directors, oversee and approve organizational strategy, policy and operational activities. Responsible charities have accountability and operational rules in place to mitigate risk (i.e., fraud, unapproved purchases) and to ensure that the objectives of the charity are always being met. Directors have a fiduciary responsibility and are trustees, serving for the good of the community. If it is not immediately evident, never hesitate to ask who is on the Board and who — lay or professional — you can speak to about your gift.

3. Look for a charity that spends money on overhead/administration, including hiring and paying professional staff.

Successful charities rely on trained, paid professionals to oversee their operations including direct service, administration and fiscal management; staff partners with volunteer leadership to strategically plan and manage the affairs of the charity.  Overhead — staff, supplies and supports, accounting and record-keeping — including tax filings and communications with donors —is a necessary and acceptable expense of a charity. A recent article in The Chronicle of Philanthropy noted that, in some sectors, charities that wisely spent as much as 35% of their budget on overhead were more successful than those who “starved themselves.” Organizations that report the cost of overhead and fundraising costs, educate their contributors. As a contributor, you should satisfy yourself that the overhead/ administration costs are reasonable.

4. Communication = Transparency

When you respond to a charitable request with a large or small gift, you should expect to have regular and reasonable updates — positive or otherwise — on the status of the project or program. Any gift, large or small, is meaningful for a bona fide organization. If the organization has not initiated regular reporting, ask for updates. Reporting and the willingness to report is a valuable input as you assess your desire to make a future gift to the organization. Ask to see your gift at work — it’s your right as a contributor. 

5. Planning is a priority

Does the intended recipient have an annual budget? Are there timelines for achieving financial or programmatic goals? Who oversees and approves the plans? Who monitors and reports on progress, problems or day-to-day undertakings? Charitable organizations, to be successful, require planning. While it is not up to the contributor to determine the plans, they should be available, if asked. Remember, you are not just giving money blindly – you are making an investment in the welfare of the community.

By embracing guiding principles, contributors at all levels as well as recipient charitable organizations can partner in success, today and in the future.

Randy Spiegel runs R&D Philanthropy, a new venture that is designed to help philanthropists and donors at all levels to strategically consider, structure and execute contributions that will merge their passion and purpose so that their gift can have a meaningful and lasting impact. Learn more at www.rd-philanthropy.com