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How to Make Charitable Donations That Serve a Purpose

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Why give? It’s an important question. In the wake of the recession, people need more compelling reasons to part with their hard-earned income. 

“There are numerous and diverse benefits of giving,” says Marisa Wigglesworth of The Franklin Institute. “Many organizations offer tangible benefits, such as special access to tickets or programmatic opportunities. Also, philanthropic gifts generate a tax benefit.”

Jim Travers of Community Concerts of New Castle echoes these statements. “We are all subject to life’s ups and downs, and those of us in good periods should feel an obligation to help others who are not so fortunate,” he says. “A benefit of giving is enjoying the opportunity to share what we can when tragedies occur, and we discover others’ unmet pressing needs.”

Rebecca Wilson of the Old Swedes Foundation had this to say about giving: “People give to Old Swedes Historic Site for one of several reasons: their family connection, their cultural heritage or their recognition of the importance of preserving the church and burial grounds for future generations so that we can learn how people lived and their influence on us today.”

“If you live in Delaware, you benefit from the services of nonprofits every day, whether you realize it or not.” says Christopher Grundner of the Delaware Alliance for Nonprofit Advancement. “Generally speaking, when the word ‘nonprofit’ is mentioned, the first groups that come to mind are disaster relief organizations, health-related foundations, and food banks. 

Nonprofits also benefit the Delaware community outside of the services they provide. A recent study indicated that in 2010, nonprofits generated $5.3 billion in revenues and provided more than 60,000 jobs in Delaware—or about to 14 percent of all jobs in the state, says Grunder. The reported payroll for those Delaware jobs that year was more than $2.6 billion. 

“In this sense, nonprofits are no different than for-profits,” says Grunder. “Nonprofit employers pay wage taxes, Social Security and Medicare, and their employees pay personal income tax.”

Individual giving in Delaware is below the national average despite income being above the national average. Grunder feels that if everyone in Delaware steps up to the plate, we can collectively help move the needle on individual giving. 

 

Christy Pennington of Delaware Guidance Services takes a philanthropic view. “As a member of a society,” she says, “I feel very strongly that it is our responsibility to help those less fortunate then us. At some time or another in our lives, we have received or know someone who has received services from a nonprofit organization. The services provided are critical to the foundation of our society.”

It is basic human nature to want to help others, and the reward comes back two-fold. Giving to an organization also provides an opportunity for involvement and engagement within our communities, adds Pennington. “As a donor, you should be kept informed of the activities and opportunities provided by the organizations you have supported. Volunteer opportunities, educational opportunities and on-going communication are direct benefits to supporting an organization. Yhere are also tax advantages, leadership opportunities and social interaction that are direct benefits to giving.”

Why Give?

There are several reasons for giving, but where does the donated money  go?

According to Giving USA: The Annual Report on Philanthropy, in 2012, American households, estates, corporations and foundations donated $316.2 billion to 1.1 million charitable organizations, and an additional 222,000 American religious organizations.  Of that, about 32 peercent went to religious organizations, the industry consistently garnering the largest percentage of philanthropic dollars. Other industries receiving a relatively large portion of philanthropic funding in the U.S. are education (13 percent), human services (13 percent), foundations (10 percent) and health (9percent).

“The money we donate should go to those who need it,” Travers adds, “with smaller percentages to overhead, executives, marketing and far-too-frequent fund drives.”

Grundner says that the use of financial donations varies. “My advice is for donors to do some research and ask the organization.” he says. “Thankfully, technology has made the research task easier than ever before. Curious donors can do research right on an organization’s website, which usually provides enough information to give the reader a sense of where it gets its money, and how it spends it. 

 

Solicitations are often made for capital, program or organizational budgets. In some cases, there are opportunities to select a particular program or initiative. Gifts given to a general budget are typically unrestricted gifts used for ongoing operational expenses. Educating donors about programs and services is critical to helping them determine how he or she should designate their gift. 

Technology

Thanks to the digital age, donors are now exposed to a wealth of information about where their donations are going. It’s up to them to make sure their gifts are being used properly.

“Donors are becoming increasingly savvy about where they invest their philanthropic dollars and we all want to see our donations generating impact.” Wigglesworth says. “We often hear about donors who don’t want their donations to go to overhead. It is important to remember, however, that some administrative costs are necessary to generate impact. 

“I would encourage all donors to be aware that overhead includes human resource functions to make sure talented program staff are on the job.” says Wigglesworth. That includes finance, to make sure bills are paid and the organization is well run from a fiscal perspective. It includes things like rent and cleaning, to make sure the organization has a clean, safe location to do its good work.  

Many of us tend to be more reactive with our giving, responding to requests from friends, neighbors and co-workers about causes that matter to them. Making donations based on impulse—or your positive feelings for the person doing the asking—isn’t wrong, but consdier your true motivations.

 

Answering some simple questions help to you to clarify those motivations and set a forward-course. Consider the following:

What issues do you care about most? 

Have you or your family been personally affected by a specific health issues, or broader issues like racism? 

Are there specific problems in your community that you would like to help address, such as education or the environment? 

Do you prefer to address persistent needs, like hunger or homelessness? 

How about issues that arise unexpectedly, like humanitarian crises and natural disasters? 

Do you want to make an impact locally, nationally, or globally?

Many heads of households benefit from setting their giving strategies as a unit. Communication and coordination certainly helps to increase overall impact and helps to minimize the potential for conflict when the giving budget is tight.”

Size doesn’t matter, experts say. Many people think they don’t have enough money to make a difference. The truth is that making smaller but regular donations can be very beneficial to nonprofit organizations and is something that has become very popular with the younger generation. Also, legacy giving—naming nonprofits as beneficiaries in your will or your life insurance policy—is a great way to ensure that the organizations you care about are sustainable into the future.”

Pennington says that she has one overriding principle when giving: “My general rule is that I do not give to any organizations who allocates more than 20 percent of my gift to cover overhead, 80 percent of my gift must have direct impact on the population served.” she says. “Define your own individual parameters and then stick to them.”

 

More Tips on Giving

 “It is a great and exciting time for philanthropy in the United States,” Wigglesworth says. “We are in the early years of what is expected to be a period of significant wealth transfer from one generation to the next.  A 2003 analysis confirmed an earlier study projecting these funds to total $41 trillion. The baby boomers, who now or who will soon control this wealth, are much more likely than those in older or younger generations to say they want to give their money to charity rather than leave an inheritance. Charitable organizations have a wonderful opportunity to engage these donors and prospects, and to help them see how they can use philanthropy to share their values.

“Understanding who is behind the cause and examining their track records for success is really important,” says Grundner. The board of directors is responsible for everything from the organization’s financial accountability to preserving its mission and the executive director or CEO is responsible for executing the organization’s strategy, managing the staff and operations, and is often heavily engaged in fundraising. Taking the time to get to know these folks prior to making a donation is completely fair, adds Grunder.

Taking the time to plan out your charitable giving is important, says Pennington. Prioritize and evaluate each opportunity. Don’t be guilted into it or emotionally manipulated to give. Most giving is driven by emotion. Trust your instincts and know where your individual passions lie.

Most important, remember that every time we give, we are teaching the next generation the importance of giving and ensuring the future of stronger communities. 

» For more from the December issue, click here. 

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