How to make sure your
donation is money well spent
By Harvey Meyer
FOR MARCIA GANNON, choosing charities
is a simple exercise. The co-owner of Sunset
Salon in Faribault, Minnesota, donates gift certificates to almost every local charitable fund-raiser. Her business benefits from the enhanced
exposure, the actions are applauded by its 33
employees and Gannon savors the emotional
high of helping others.
“In a small town, there’s still a philosophy of ‘It’s better to give than receive,’” says
Gannon. “I’ve found that when you give, it
comes back tenfold.”
But for many small firms, pinpointing
charities—there are more than 1 million in the
United States alone—isn’t always that easy.
How do you know a charity uses donations
wisely? Should gifts stem from emotional
attachments or be tied to business objectives?
As National Philanthropy Day (November 14)
arrives, these are pertinent questions.
Because of government cutbacks, particularly to social services, charities need support more than ever, says Paulette Maehara,
president and CEO of the Alexandria, Virginia–based Association of Fundraising Professionals (AFP). But there’s another, more
selfish reason to donate: “You feel wonderful,”
says Maehara, a Costco member, “because
you’ve helped to make a difference.”
Andrea McManus, a Calgary, Alberta,
fund-raising consultant for nonprofits, gives
to a breast-cancer-prevention nonprofit because of strong emotional connections—she
and her mother have had breast cancer.
But McManus notes that many companies also contribute for pragmatic reasons.
“Donations raise businesses’ profile
and show employees you’re a good,
community-minded citizen,” says
McManus, a Costco member. Contributions to qualified organizations,
called 501(c)( 3) organizations, can
also be tax deductible.
Before selecting a charity, consider these giving guidelines.
Develop a giving plan. Whether
contributing cash, in-kind services or products, or volunteering, donors should consider
drafting a general outline of charitable enterprises they will support, whether homeless
shelters, environmental causes, health-related
organizations or other groups. A giving plan
tends to counterbalance impulsive, emotional
contributions and encourages careful consideration of a charity. A defined plan also makes
it easier to tell other soliciting nonprofits your
charitable dollars are already spoken for.
How much should you donate? No
rules here, but affordability obviously is a factor. Also, know that the more charities you
target, the more you tend to give. The IRS
allows tax deductions on charitable contributions of up to 5 percent of pretax income.
When should you give? Again, it’s an individual decision, but many nonprofits actively
seek funds during the last quarter of the year.
Seek written information. Fraudulent
organizations, sometimes sporting names suspiciously similar to established nonprofits,
may emerge, especially after major disasters.
Asking a charity for written information offers
a chance to step back and assess the organization. Look for a working phone number and
secure Web site, and an overview of the organization, its mission, programs and budget.
GuideStar, an organization that provides
comprehensive information on nonprofits,
has IRS Form 990 tax
returns for 1 million U.S.
charitable organizations on
its Web site,
org (registration required).
Form 990s are required for
most charities and list the
amount spent on fund-raising, revenues and ex-
penses; names of board members; even compensation for top officers.
Ask key questions. Don’t be bashful
about asking for Form 990s and if a charity
adheres to the AFP or other codes of ethics.
Also, query whether it subscribes to the
Donor Bill of Rights, a 10-point document
that states donors have the right to require a
nonprofit to describe, among other things,
how donated resources will be deployed.
Also, ask whether the charity is tax exempt or
a 501(c)( 3)—required for your contribution
to be tax deductible.
“The safest bet is to give to more mature,
larger organizations that tend to have lower
fund-raising costs,” says Maehara. But she
acknowledges that such a policy omits
smaller, more entrepreneurial nonprofits that
perhaps are making progress on challenging
concerns that your company may identify
with more strongly.
Volunteer. Aside from talking to people
familiar with the charity you’ve targeted, consider volunteering for it. That could mean
grunt work at a fund-raiser or serving on a
committee or board. In any case, volunteering
offers an up-close-and-personal view of the
In the end, guidelines are just that:
guidelines. Many small companies may feel
compelled to make spur-of-the-moment,
emotional donations—and that’s OK. But
more information about a charity will help
ensure that your giving counts.
“There are so many benefits to giving,
both for a charity and for a business,” says
McManus. “By not giving, you’re really missing out on a great opportunity.” C
Harvey Meyer is a St. Louis Park, Minnesota,
■ The Association of Fundraising Professionals Fundraising
Resource Center has more than 3,200 reference works and
periodicals on fund-raising, volunteering and philanthropy,
including charitable-giving guidelines. See
■ Guidestar serves as a clearinghouse of information on nonprofit organizations for potential donors. See