Charitable giving, both on a personal and corporate level, are important parts of our social responsibility and ways to improve our communities, both local and global.
This time of year, businesses and individuals are looking for ways to make impacts…and finish the year’s tax planning. Giving to non-profit organizations can provide a tax break, but to maximize your impact and stewardship there are some tools that can be used to make sure your hard-earned dollars are really helping.
Doing effective research is the starting point for any charitable giving. There are a number of websites established as guides to non-profit organizations. A few popular websites are:
Key leader compensation – Is the CEO of the charity paid a large salary? There has been much debate over the years about what is a reasonable salary for the CEO of a charity. Should the CEO’s of a charity make a similar salary to CEO’s of for-profit companies that earn a similar annual revenue? Some would argue to attract good talent the compensation needs to be on the same level, but many people are uneasy with the CEO of a charity making $500,000+ per year. The compensation of key leaders is usually available on the websites listed above.
Board compensation – Similar to compensation for the CEO and other key members, is the board compensated? Because this is an area that some charities exploit to enrich a select group of founders, charity watch organizations pay close attention to whether the board is compensated and to what level.
Fundraising and overhead percentages – When evaluating a charity, the first thing most people look at are what percentage of funds go towards fundraising, and what percentage is overall overhead. If a Charity spends most of its money raising funds and paying their own office staff, then you probably want to avoid them. Anytime you give your hard-earned money to a charity you want to make sure that at least $0.80 or $0.90 cents on every dollar are going towards the intended beneficiaries, not $0.50 or worse.
Besides these factors, spend a little time navigating the charity watch website and see what else they have to say and what complaints, if any, have been lodged against the charity.
Another concept to consider is, does the charity provide relief or development services? There is nothing inherently wrong with providing one service over the other, but problems arise when they provide relief when really, they should be providing development. Take for example a charity that provides meals for the poor. That can be a worthy cause that provides a much-needed service, but a charity that provides job training for those in need or entrepreneurial loans to less privileged may be a better way to donate. Going back to the age old teach a man to fish adage.
Charitable contributions, although a good cause, are not always effective. Before donating, take a good look at your core values and do your own research to find the charity that best aligns with your personal or corporate convictions. Sticking to this simple principal will ensure a shared sense of fulfillment for both you and your favorite charity.