: U. S. NEWS & WORLD REPORT
by: Joellen Perry
December 8, 2003
W e are a nation of givers.
Last year, 2002, as the stock market lost nearly a quarter of its value, as millions of people lost their jobs, and as many others lost sleep worrying about terrorism and imminent war, Americans neverly the less gave a record $241 billion to charitable causes. While foundations and corporations contributed a good chuck of the philanthropic pie, the over-whelming majority of those billions-–more than 80%—was give by us ordinary, average Americans.
Tapping a vast national reservoir of goodwill, 2/3 of households, rich and poor, reached deep into their pockets last year and pulled out an average git of $2,499., according to estimates from Giving USA, a publication of the American Association of Fundraising Counsel Trust for Philanthropy. The bulk of the nation’s largess—35%—goes to religious institutions, followed by education, which nets 13% of our generosity, .These are figures to be proud of for sure. But, you’re about to be asked for more. The whole world is in a terrible shape in all areas and truly needs a lot of help, but, “when we give our hard-earned money we don’t want to see it wasted..says Tracy Thorleifson, a lawyer with the Federal Trade Commission. And what a rare treat: Charitable giving, whether of $1 or $1 million, gives each of us a chance to affect the greater good. U.S.News talked to philanthropic experts for advice on ensuring that your charitable investments are sound:
Identify a cause: It’s the most basic decision a donor can make. What do you care about? It maybe an issue that reflects passionately held beliefs or personal experience. “I know what it is to be hungry,” says Vanessa Lazar, 30, whose year-long brush with homelessness prompted her and her friends to start raising money for starving Ethiopians. “To think of someone going without food just does something to me.” Similarly, losing a family member to lymphoma may spur one to support cancer research, while a nature buff may want to help conserve wildlife.
After narrowing down a cause, investigate organizations working in that area. To aid your search, U.S. News has partnered with the philanthropic research service GuideStar to provide a searchable database of more than 800,000 public charities at www.usnews.com/charity. The process may seem daunting. Thousands of groups maybe working on your particular cause. A keyword search for “literacy,” for instance, results in over 2,700 organizations, from Books for a Better World, a Phoenix group that builds libraries in developing countries, to First Book, a Wash-ington, D.C., outfit that gives books to low-income children un the United States.
Pare that universe down with a series of questions; Do you want to give locally, nationally, or internationally? Will your generous gift support research or provide direct services? Are you more comfortable with a big organization or a small group of people on a shoestring budget? Bear in mind----there’s no right answer! You’re refining your own giving goals and desires. (The giving part is right—thereafter you decide.)
After losing her mother to cancer in 1986, Dacia Kruse, a manager at the Greater Omaha Chamber of Commerce, donated regularly to the American Cancer Society. But in 1998, the 31-year-old discovered a program called Harvest of Books. Now, each October, she buys books for local students. “I feel like my $50 is worth more to Harvest of Books than to the American Cancer Society,” says Kruse of the rush she gets from making a bigger splash in a smaller pool. “It’s not rational, but now I feel good after I’ve given.”
Nailing down your cause also makes it easier to turn down other pleas. “You can say no because you’ve already figured out how you’re going to support this cause that’s dear to your heart,” says the FTC’s Thorleifson. What’s more, proactive giving means you’re less likely to fall victim to overly emotional entreaties—a favorite ploy of fraudsters.
Choose the charity: You’ve selected a cause and rounded up the groups that appear to be working toward the same goal. Picking among. them can be very perplexing because, unlike businesses, nonprofit organizations can’t be judged by a single bottom line. Rather, a group’s impact rests on a complex brew of its goals, finances, and sphere of influence. Ultimately, too, the choice of where to give is personal. “Each of us comes at it with our own values, based on our own circum- stances, and with our own expectations,” says GuideStar President Robert Ottenhoff.
Still, one rule always applies :Verify, first, that the organization is certified a nonprofit by the Internal Revenue Service, crucial to obtaining a tax deduction for your donation (Page 56). Not all non-profits are 501(c)(3)’s. Gifts to lobbying groups like the Sierra Club, for example, are not deductible, while donations to the Sierra Club Foundation, the group’s non-advocacy arm, are. Confirming a group’s status also weeds out sound-a-likes, groups that glom onto popular names, hoping for mistaken donations.
Experts also suggest giving to groups you know. “There really is a logical reason “There really is a logical reason why people give to their alma maters,” says Christine Letts, associate director of Harvard’s Hauser Center for Nonprofit Organizations. Volunteering is another prime way to learn about the number of non-profits nationwide is now a staggering 1.6 million. That’s more than the entire population of Idaho and a 60 % increase in the past decade alone. But while the nonprofit count is up, state budgets—on which many charities, especially those serving the needy, rely for grants—are down.
Some experts predict state shortfalls will reach $80 billion next year, piling still more tasks on already stretched social-service organizations (Page 58). And though Americans gave a bit more last year than in 2001, the rate of giving remained where it’s been for years, at about 2 percent of the nation’s gross domestic product. “There’s more competition for the charitable dollar,” says Bennett Weiner, chief operating officer of the Better Business Bureau’s Wise Giving Alliance.
Urgent plea. And that means more “give now!” appeals in the mailbox and more fund-raising calls, as charities desperately try to distinguish them-selves from their do-good brethren. “We know you’re being bombarded by more groups than ever,” says William Swindell, associate executive director of development for Father Flanagan’s Girls and Boys Town in Boys Town, Neb. “We want to be on your short list.” To that end, his group is mounting a campaign to thank longtime donors— even folks who’ve given $100 annually for years can expect a call—and using lures like discounted tickets to black-tie galas to get the next generation hooked on giving.
Compounding charities’ scramble for donors is the looming promise of an economic turnaround. There will be a more intense solicitation during this holiday period,” says Eugene Tempel, executive director of the Center on Philanthropy at Indiana University. “An economic pickup enhances the prospect that donors might respond.” With more solicitations, of course, come greater chances of chicanery. It’s a singular conundrum—even as Americans’ generosity y has grown, our faith in non-profits has sunk. Widespread disappointment with the handling of September, 11th —related donations and a spate of recent scandals involving non-profits—from overpaid trustees to outright embezzlement—have hammered home the point that the money and trust we place in charities can easily be abused (Page 60). In August 2002, the Brookings Institution found that 16% of Americans had no confidence in charitable institutions, up from half that in July 2001. “There is no SEC for non-profits,” says Daniel Borochoff, president of the watchdog group American Institute of Philanthropy.
But for every rotten apple in the nonprofit barrel, there are many more that uphold high standards. The problem, especially with so many groups angling for assistance, is picking one. A BBB study found, in fact, that 70 % of donors have trouble determining a charity’s legitimacy. Add to that the vast array of giving options—Do
you want to give your money? Your time? Your car?—and the task can seem overwhelming.
It’s likely you already know which religious or educational institution will get your gift. Making other giving decisions can be tough, but the effort is worthwhile. “Donation is an investment in your community and your inner workings of an organization. Andrew Schechtman, a 86-year-old family practitioner in San Jose, Calif., volunteered in Liberia for a year with the international health group Doctors Without Borders, treating malnutrition, malaria, and war wounds. Now, safely back in the States, Schechtman donates money to the group. “I know from experience that they’re stingy,” he says, “so I know my money’s going to be well spent.”
Failing firsthand experience, donors can consult community foundations, which make grants to local nonproflts in more than 650 areas nationwide. “We can connect you with staff who have expertise in the area you’re exploring,” says Stuart Appelbaum, vice president of development for the Minneapolis Foundation. The Council on Foundations’ Web site (www.cof.org) lists community foundations that you can tap for assistance. Finally, quiz family and friends. A pal on the board of a women’s shelter, for instance, can give you the skinny.
Charity-rating services can also be helpful. The BBB, for example, assesses national groups on 20 different standards, from fund-raising efficiency to board governance. Every quarter, it produces a list (www.give.org) denoting whether groups have met its standards. AIP grades charities on similar measures, publishing the names of its top-ranked groups at (www.charitywatch.org) (A full report, which includes those graded C and below is available for $3.) Charity Navigator also rates over 2,500 groups at (www.charitynavigator.org)
But rating services cover only the largest or most-asked-about charities. And because standards differ, watchdogs may disagree. For example, Shriners Hospital for Children met the BBB’s criteria, but got an F from AlP for hoarding enough cash to fund over 13 years of programs (Alp’s limit is three years). “It’s the investment that produces the income to pay for our hospital budget so we don’t pass any costs onto our patients,” says Executive Vice President Lewis Molnar.
Standards on that most controversial of benchmarks—the percentage of a charity’s expenses spent on program services—also vary. The BBB says groups should spend at least 65 % of gifts on programs, while AlP and Charity Navigator say 75%.
The premium put on how much money goes toward program services is a sore point for many non-profits. “Donors often want 100 % of a gift to go directly to fund programs,” says Indiana’s Tempel. “But every organization has to pay utilities, rent, staff, and all the infrastructure pieces necessary to run a good organization.” And expenses vary widely among charities. According to Charity Navigator, museums spend, on average, 18 % of their expenses on pricey necessities such as high- profile collections and tony galleries.
Food banks, which funnel donated food to the needy, typically spend less than 2% on administration. “You need to compare food banks to food banks and museums to museums,” says Charity Navigator executive director Trent Stamp. “They operate fundamentally differently.”
Details, details. Donors can also run their own background checks by perusing a charity’s tax form. A third of the nation’s nonprofits take in more than $25,000, which means they must complete IRS Form 990. Trouble is, the data on the forms are not consistent. A 2002 General Accounting Office study, for example, found that 64 % of charities listed no fundraising expenses at all. Still, the 990s are chock full of details about a charity’s finances, listing helpful nuggets like the amount of individual contributions and top officers salaries. Some nonprofits spell out, say, how much they spent on bank fees or insurance. Legally, charities must disclose 990s to the public.
While finances are important, they’re just one way of judging a charity’s effectiveness. Equally critical is whether the group is setting—and achieving—clear, well-articulated goals. “‘We’re going to give people better housing’ “ is a noble aim, says GuideStar’s Ottenhoff. But a better target would be: “‘Next year, we’re going to rehabilitate 1,000 apartments and provide them to families with at least two children, at a cost of $5,000 per apartment.”’ Such specifics should be detailed in the group’s annual report, on its Web site, or in any requests for donations.
Donors may feel shy about being nosy, but the best answers can come from non-profit staffers themselves. “I called a local nonprofit last week and asked, ‘Why should I donate to this group?’ “ says the FTC’s Thorleifson. “The guy nearly fell out of his chair.” But his response was informed and passionate enough to persuade her to give. Another telling query: “What percentage of your board wrote a check to the organization?” says Renata Rafferty, author of Don’t Just Give It Away, who contends it should be no less than 80 %. . How much each member gave is inconsequential. The point is whether board members believe in the organization enough to put their own money into it and thus whether they are motivated to keep a close eye on the books. “What do they care,” asks Rafferty, “if someone ripped off a million dollars if it’s not their million dollars?”
Response to such inquiries varies. A U.S. News reporter called several groups, identified herself as a potential donor, and asked what percentage of board members donated. An executive assistant at America’s Second Harvest an answered cheerily: “All 17 members of the board contribute.” Staffers at Easter Seals and the Cystic Fibrosis Foundation were stymied but promised to call back with an answer—and did. (All board members of both groups give.)
What to give: So you’ve narrowed down the beneficiary of your largess. But in what form should your gift be? The majority of Americans—the nearly two thirds of givers who don’t claim tax deductions—simply make modest donations, a practice most non-profits appreciate. “Our mainstay since 1917 has been lots of small donors, not a few very large, wealthy donors,” says Father Flanagan’s Swindell.
Folks forking over substantial sums might consider a planned gift. Start a charitable gift annuity, for instance, and earn an income off your donation.. Return rates, calculated in part on actuarial tables, rise with age (a 55-year-old earns 5.5%, while those 90 years and over get 11.3 percent). Gloria Clinton, a 64-year-old property manager in Salinas, Calif., used the sale of a condominium in 1999 to fund a charitable remainder trust with the Rotary Foundation. She took a partial deduction for the $150,000 sale price and now receives an annual income of 6%. When she and her husband pass away, the remainder goes to Rotary. “I wanted to do something that would help others eventually,” says Clinton. “I don’t like the stock market. I like knowing I’ll get a guaranteed rate of return.”
If you’d rather spread the wealth, consider a donor-advised fund. Community foundations have been offering these vehicles for decades, but many finance firms got into the game in the 1990s. Donors to Fidelity’s Charitable Gift Fund, for example, make an irrevocable gift of at least $10,000 (Vanguard’s Charitable Endowment Fund minimum is $25,000). The giver gets an immediate tax deduction for the amount, then makes grants from the fund at leisure. Gibbs LaMotte sold a real estate consulting business in 1997 and put over $150,000 into a Vanguard charitable fund. Now the 62-year-old and his wife use the cache to make gifts each year to a number of nonprofits. “It’s like a parking space for the money while you figure out who to give it to.” Most fund programs let you pick from among several types of investment pools. Vanguard’s Total Equity pool, for instance, has returned 17.38% year to date. Money isn’t everything. Many cash-strapped groups seek used computers. A list of them can be found at (www.sharetechnology.org) For your privacy, be sure to erase the hard drive, and get a receipt from the group for tax purposes. Cellphones can also be recycled. Send your old mobile to CollectiveGood in Tucker, Ga., and designate a charity from the list at (www.collectivegood.com) Then, CollectiveGood will send half the phone’s resale price ($3 to $4) to the charity.
No mailer the item, you can deduct only its fair market value, or the amount it would fetch for sale. Determining the worth of low-value items is up to you. The Salvation Army posts a helpful guide at (www.salvationarmy.org) (sofas can fetch from $35 to $200; children’s sweaters, $2.50 to $8). Be honest about the item’s condition. Every year, the northeastern division of the Salvation Army spends $4 million disposing of broken and unusable refrigerators, computers, and fires. “If you wouldn’t give it to your best friend or your neighbor,” says Lt. Col. Timothy Raines, “then we probably can’t use it either.”
Cars are one of today’s most popular in-kind gifts. But their popularity has spawned shady operators. Many cars are processed through for-profit vendors, who sometimes give as little as 10% of the sale price to charity. But some charities do their own dealing. Last year, Volunteers of America received more than 75,000 vehicles (www.carshelpingpeople.org) “It’s much more cost-effective for us to do it ourselves,” says Jim Hartman, national director of the vehicle donation program, noting that his group receives 100% of each gift and will pick up vehicles nationwide.
Donating time: Many charities, especially struggling or smaller groups, couldn’t survive without volunteers. State budget cuts have forced the Vision homeless shelter in Luzerne County, Pa., to lay off several staffers. Without a roster of 3,000 volunteers to undertake tasks like supervising overnight shifts, the shelters—now housing 35 men—would close its doors. Many firms are making it easier for employees to offer their time. Timberland, an outdoor clothing company in Stratham, N.H., for instance, gives staffers 40 paid hours of volunteer time each year. Recent projects include building baseball parks in Valley, Ala., and painting schools in Baltimore. “It gives me great pride,” says Carolyn Casey, director of social enterprise. “And it motivates the heck out of me.” If your office doesn’t sponsor such a program, visit (www.volunteermatch.org) where more than 26,000 nonprofits post gigs, from long-term tutoring stints to one-day homebuilding sessions. In 1999, VolunteerMatch hooked up expert knitter and crocheter RuthVolk, 42, with Bundles of Love, an Apple Valley, Minn., group that provides handmade baby clothes to low-income parents. Now she’s on the board and devotes 100 hours a month to the group and its mission. Perhaps summing up the enduring appeal of American philanthropy, she says, “It’s addicting to know you’re needed.”
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