It’s the Giving Season: How Much Difference Does Your Charitable Donation Make?

December 13, 2013
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It’s the time of year when you receive myriad charitable giving appeals. But, shouldn’t you ask how much of your gift actually goes to the services that the charity represents? It is understandable that a percentage of any donation that you give will be charged against fundraising costs as well as the charity’s administrative salaries and expenses. After all, any business organization has operational costs, such as employee salaries, rent, supplies, and equipment. However, the actual percentage of your contribution that is actually devoted to the charity’s mission can vary greatly. For example, the American Red Cross uses nine cents of every dollar donated for administrative and fundraising expenses while the Salvation Army, a staple outside retail stores during the holiday season, applies 82 cents of every dollar received to providing its charitable services. It may surprise you that the American Red Cross and the Salvation Army are among the best when it comes to putting your money to work. CharityWatch, a nonprofit charity watchdog, recommends donating only to those organizations that, at a minimum, apply 60 percent or more of charitable donation to program services.  It is distressing to learn that many so-called “charities” fall well below this recommended benchmark. As with any investment, it is a good idea to research a charitable opportunity before opening your wallet. CharityWatch provides a list of top-rated charities, which spend 75 percent or more of their budgets on programs, spend 25 percent or less to raise public support, do not hold excessive assets in reserve and receive “open-book” recognition for disclosing basic financial information and documents. In addition to verifying where your money goes, other tips for making the most of your donation dollars include requesting detailed information about the charity’s endeavors via an annual report, keeping written records of your donations, and staying vigilant for scams that capitalize on recent disasters, such as the typhoon in the Philippines or recent tornado outbreak in the Midwest. While you give your money to “do good,” you owe it to yourself and the intended beneficiaries that your money achieves its intended benefit. If you have any questions about evaluating a charitable giving opportunity or would like to discuss the legal issues involved, please contact me, Gary Young, or the Scarinci Hollenbeck attorney with whom you work.