Make your charitable giving count
Nonprofits or charitable organizations play an important role in society. The private sector exists to make a profit and deliver goods and services for a fee. The public sector — government — will tax citizens in order to provide services to the public that are necessary but unprofitable for the private sector to provide.
Of course, there are limitations to what the public sector can or is willing to provide. Charitable organizations exist to fill this void and to bring services to many in society where funding does not exist, including religious organizations.
Contributions to charitable organizations fell during the “great recession” but have since recovered, setting new highs in the last several years. Since 2010 charitable giving increased at roughly twice the annual growth rate for the economy, 3.6 percent vs. 2 percent.
Who gives? Surveys show that many believe charitable giving is mostly done by large foundations and corporations. But not true. In 2015 individuals accounted for 71 percent of all giving according to the charity watchdog, Charity Navigator.
Which charities? Religious organizations received 33 percent of all giving in 2015. Education received 16 percent, human services 12 percent, foundation gifts 11 percent, health 8 percent, public-society 7 percent, arts & culture 5 percent, international affairs 4 percent, environment/animals 3 percent and gifts to individuals received 2 percent.
Five tips for informed giving
1. Be proactive when giving. Identify causes that you care about, be specific. Finding a cure for a disease is probably better funded at the national level but local charities can provide services to those in your community suffering from disease. Pull together a list of organizations that match your interests.
2. Research before giving. Make sure the nonprofit organization is a 501(c)(3) public charity. Examine the charity’s finances. How much of giving goes to the purpose of the organization? How much goes to overhead, to salaries, to rent or to marketing expenses? The more a charity is accountable and transparent the more likely it conducts itself in an ethical and responsible manner. Major watchdog groups like Charity Navigator, CharityWatch or BBB Give.org suggest no more than 25 percent of revenue/donations should be spent on managing the organization.
3. Discuss results and impact. Before making a contribution, talk to the charity about its mission, goals and accomplishments. Such conversations should give insight into how they operate and how effective they are in meeting their charitable goals.
4. Consider the way you give. Realize that donations are usually tax-deductible, so there is a tax benefit to your giving. For investors, consider giving appreciated stock instead of cash. You get to deduct the value of the stock and the nonprofit benefits on a tax-free basis from your generosity.
5. Follow your investment. Charity Navigator suggests following up with the charity six months after you’ve started contributing. Do they communicate clearly how they are accomplishing their mission? If not, reconsider your involvement.
Charitable organizations play a vital role in the U.S. and globally. But in order to maximize the effectiveness of your giving, a little due diligence is required. Jim Rhodes is a chartered financial analyst and executive director at American Money Management. His offices are at 300 S. Imperial Ave. #12, El Centro. For an appointment call 760-6046310.