With so many folks in need this holiday season, you may be thinking of spending part (or all) of your holiday gift budget on charitable giving. In fact, more than 80 percent of the money raised by charities in the United States comes from individuals, according to the Wise Giving Alliance. But which charity is right for your gift? How do you choose? Put together a list of the causes you care about. Look around in the community, ask at your church or civic group, talk to family members. Think locally, nationally and globally.
A donation is a financial investment just like buying a car or an appliance, so it’s important to do your research.
It may seem obvious, but the first thing to do when considering a public organization for a donation is to make sure it is granted tax-exempt status under section 501(c) (3) of the Internal Revenue Code and that it files a Form 990, or financial disclosure. Many religious organizations, like the Salvation Army, are exempt from filing the Form 990. They’re legally allowed to do so, but that makes it harder for the giver to determine how money is being used.
Large national charities can be checked out at places such as the Better Business Bureau’s Wise Giving Alliance, www.give.org, www.guidestar.org, www.justgive.org or www.charity navigator.org. These sites validate a charity’s status and evaluate its financial health and how it distributes its funds.
The next thing to determine is how much money actually goes to those in need. It’s called the “program ratio.” It should be the biggest expense listed.
Charities have to spend money to raise funds and they must pay fair salaries to their employees. Every organization will have some administrative and fundraising costs, but those costs should come in at or near the bottom of the expenses.
Always donate with a check and write it to the charity itself, not an individual who may be soliciting.