Costco Connection - November 2006

small
business

Charitable
choıces

How to make sure your donation is money well spent

INGRAM PUBLISHING

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, www.guidestar. 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 charity’s operations.

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, freelancer.

Connecting

■ 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 www.afpnet.org. ■ Guidestar serves as a clearinghouse of information on nonprofit organizations for potential donors. See www.guidestar.org.