Do your clients feel guilt about benefiting financially from giving to charity? They shouldn’t, of course. “There’s nothing illegal, immoral, unethical, or unpatriotic about making money from charitable activity,” says CPE Link speaker, Stuart P. Sobel, EA who teaches about how to build wealth through wise charitable giving. There is one good way to get over the guilty feeling. Put hard earned money where it will do the most good.
But with new crises every day and the proliferation of non-profit organizations all competing for donor dollars, that’s easier said than done. There are 1.6 million non-profit organizations in the U.S.—a whopping 68 percent increase over 10 years ago. What’s a taxpayer to do? Two things, says Sobel. First, have a tax plan for giving. Then, check out a charity before giving it a check.
One measure of a good charity is how much revenue goes to programs as opposed to administration and fund raising. Another, perhaps more important one, is how effectively is the money used.
According to 2010 donor survey by Russ Reid, a consultant to non-profits, as reported in Forbes.com, “only one-third of donors actually talked to an organization's staff before making a gift, and only one-quarter visited the organization in person or reviewed its annual report.”
Here are some resources that help donors check out charities before writing the checks.
- The Better Business Bureau Wise Giving Alliance reports on charities.
- Charity Navigator has an unbiased, objective, numbers-based rating system to assess the financial health of over 5,000 of America's best-known charities.
- Philanthropedia, acquired by GuideStar, rates verified, financially responsible charities according to how much great work they're doing.
- GiveWell focuses on how well programs actually work – i.e., their effects on the people they serve.
- American Institute of Philanthropy (AIP) publishes a rating guide three times a year.
How do you research charities?