By Natan Sedaka
Thinking of making a donation to your local federation or other charity? Before you send any money, think about how you can be the best steward of your funds. If you adopt the best practices of smart foundations, you can go to sleep at night knowing you’ve met all your responsibilities as a donor.
Let’s say you want to donate $100. Don’t just write a check! You’ll want to know exactly what the charity will do with your money. So first, send the charity a Request for a Proposal to alert them to your priorities and to find out how they plan to use your funds.
Assuming you like what they propose, notify them that you’ve accepted their proposal by sending a Grant Letter, specifying certain conditions. Remember, you want accountability and impact! So you need to control how the funds are used. A popular method is to include conditions like these:
- Require that the charity send you a report every 90 days on how they’re using your money, on a form that you create. Don’t let them use a standard form! Every smart donor devises their own.
- You want the money to be used strictly to provide needed services. So you need to specify that none of the money may be used for secondary expenses like rent, utilities, HR, IT, travel, executive salaries, staff expenses, etc. That’s how to ensure real impact!
- Monitor compliance by paying in stages. Explain in the grant letter that you’ll be making quarterly payments, rather than giving the entire $100 up front. After all, if they get all the money at once, they have no incentive to follow your wishes.
- Withhold 10% of the total until you receive their final quarterly report. That means you’ll pay $22.50 at the beginning of each quarter, and the final $10.00 based on satisfactory completion of the terms in your Grant Letter.
In addition, don’t be afraid to question them before you send a payment if you don’t like what you see in a quarterly report. Remember, it’s your money they’re spending!
After a year has passed, the charity may ask you to “renew” your donation. If they do, tell them that they need to send you a proposal every year. Remind them that you’re not going to send them money unless they can show a steady pattern of growth demonstrating scalability. If they’re not growing every year, move on to another charity that is.
Some of these ideas may sound strange to you. But they’re based on industry practices. And smart foundations can’t be wrong!