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Charitable giving: Make the most impact
Give where it's most needed by checking the financial health of the charity.
December 22, 2004: 1:11 PM EST
By Penelope Wang, MONEY Magazine

NEW YORK (MONEY Magazine) - Although you wouldn't necessarily know it by the urgent tone of many fund-raising appeals, not all charities are in dire straits. The Salvation Army, for example, announced in January that Joan Kroc, widow of the founder of McDonald's, had bequeathed a whopping $1.5 billion to the nonprofit, or more than it raised from all private contributors last year.

National Public Radio received $200 million from Kroc, more than twice the group's operating budget. Meanwhile, Harvard University recently reported that its endowment had grown to $22.6 billion, about twice as large as runner-up Yale's.

One way to gauge the relative neediness of a nonprofit is to compare its net assets -- its assets minus liabilities -- with its annual expenses. You can find these figures in its annual report or online.

Says Daniel Borochoff, president of the American Institute of Philanthropy, which runs, "If you see that a charity has enough assets to cover several years of expenses and has no immediate plans to spend it on, say, a new building or program, chances are, it doesn't need your money as urgently as other organizations."

Also consider directing some of your giving to smaller organizations and less popular causes that don't have the money for big fund-raising appeals. They include groups that provide humanitarian relief to poor and war-torn nations, and human-services groups that operate food banks, job training programs and similar initiatives for the needy here at home. (For more on where the giving goes, see the chart.)

You may also get a better feel for the impact of your contribution if you direct at least some of your giving to organizations within your own community.

Where our giving goes
Last year Americans donated $241 billion to charity. Nearly half of that money went to schools and religious groups, while causes such as the environment and international relief received far less.
Type of nonprofitContributions
International affairs2.2%
Public/society benefit5.0%
Arts, culture and humanities5.4%
Human services7.8%
Unallocated giving10.0%
Source:Giving USA Foundation.

That's the approach used by Allen and Shira Purkiss, who made giving locally a priority when they moved to Ridgefield, Conn. last year. Among their new charities: the Ridgefield library, which their two daughters often visit, concerts in the park and a residence for mentally handicapped young adults.

Notes Allen, 43, an investment adviser, "When we give to our town, we really get to see where the money is going and how it's being used."

The more control you can exercise over your donation, the more satisfying your giving is likely to feel too.

For example, Kelly Chapman, 37, a singer and executive recruiter in Cleveland Heights, Ohio, recently started a scholarship fund at a community foundation to honor her mother, who suffers from mental illness yet still managed to hold down a job and raise her children.

Working with the Cleveland Foundation, a local nonprofit that supports area charities, Chapman set up a scholarship for college students with mental illness, funded by a $10,000 donation that was invested in a mutual fund. Chapman and her mother awarded the first $750 grant in September. "My goal is to grow this fund to $100,000," says Chapman.

Next: Leverage your giving »  Top of page

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