Making charity count
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August 25, 1999: 6:20 a.m. ET
Donations go further when you give to groups that spend responsibly
By Staff Writer Nicole Jacoby
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NEW YORK (CNNfn) - The overwhelming tragedy resulting from the earthquake in Turkey last week has left many Americans wanting to do their part.
But before you loosen your purse strings, make sure the money you're sending is really headed where it can do the most good.
Tragedies of this magnitude "bring out the very best in most people ... but they also bring out the very worst in a few," said Dan Langan, spokesman for the National Charities Information Bureau, a watchdog group.
Some charities have been known to spend more on executive salaries than on their programs. And other groups have been known to take advantage of extreme situations to perpetrate fraud.
That shouldn't keep well-intentioned donors from dipping into their bank accounts, however, as the vast majority of charities are well-intentioned and well-run.
"There will always be those that take advantage of Americans' generosity," said Bennett Weiner, vice president of Council of Better Business Bureau's Philanthropic Advisory Service. "But potential contributors should not use those concerns as an excuse not to give."
Donors can, however, take some simple precautions.
Money where their mouth is
Whether your altruism is prompted by a large-scale tragedy or just old-fashioned goodwill, you should always carefully evaluate the organizations that will benefit from your hard-earned cash.
You want to be sure the money being donated is actually going to the purposes promoted by the charity, as many non-profits spend a substantial portion of their donations on fund-raising, salaries and other administrative expenses.
"The urgency and overwhelming need of the earthquake victims is all the more reason for donors to check out the organization to make sure their gift is being used wisely and effectively," said Weiner.
A good relief appeal should define what special need or service the group is filling or providing, says Weiner. Even a newly-created organization should be open about why it was created, what niche it hopes to fill and how it plans on spending contributions.
"If they don't have a plan, it may be a sign of good intentions, but bad management. It may not be evidence of fraud, but it may indicate whether the donation will be used effectively," said Weiner.
Charity watchdog groups, such as the National Charities Information Bureau and the Council of Better Business Bureaus, can tell you more about the spending habits of individual organizations. Generally-speaking, their guidelines demand that at least 50 or 60 percent of donations received by a charity goes directly to the cause being promoted, though 70 percent is ideal, says Langan.
(For a list of NCIB-approved charities working in Turkey, click here.)
Some smaller charities may not be evaluated by these watchdog groups, but you can still do your own homework. Charitable organizations are required by law to provide anyone who asks a copy of their most recent Form 990. This form -- filed annually with the Internal Revenue Service -- includes information about their budget and plans.
A charity has the right to charge a "reasonable" copying fee if this document is requested, so don't be surprised if the group asks for a few dollars in exchange.
Charities with gross income less than $25,000 are not required to file a Form 990, but you can check with your local Better Business Bureau to see if any complaints have been filed against the organization.
The organization's annual report may also yield clues about how the budget is being allocated and what programs are in place.
"You have to be able to see right through them and be happy," said Langan.
Giving with open eyes
You will also want to make sure the organization is legitimate.
"Most charities are honest and are spending money with full accountability, but you won't know who they are unless you bother finding out more about them," Weiner said.
Find out the exact name of the organization before sending a contribution. Some fraudulent organizations may use a name that sounds very similar to a legitimate group.
High-pressure calls and mail solicitations with strong emotional content but little substance should be viewed as suspect, as should charities that refuse to send written materials until you donate or because it is "too costly." An organization that refuses to be up front likely has something to hide.
Callers or door-to-door volunteers that insist on cash donations also may not have the best intentions. Err on the side of caution by writing a check payable to the full name of the charity so that it can be canceled in the event of fraud. And never give a credit card number to an organization unless you are confident of its intentions or have dealt with the group in the past as you might be set up for identity fraud.
Minding the IRS
While most people donate to charities for altruistic reasons, many may also have one eye on their tax returns.
To get the most out of your tax situation, make all your donations count. Donations to overseas organizations cannot be deducted, for instance, so make sure the charity you contribute to is based in the United States.
Good record-keeping is the best way to ensure you qualify for all the deductions coming your way.
For donations under $250, a canceled check or similar receipt generally will be all the documentation you will need. But for single donations larger than that, you will need written acknowledgment from the charity.
Donating property -- such as clothes to the Salvation Army or books to a nursing home -- is a bit more complex, since it may be difficult to determine the value of the contribution. In most cases, the fair market value of the property can be written off, but sometimes additional substantiation may be necessary. Because the laws governing property donations are elaborate, you may want to consult with a tax adviser before making a major property donation.
If your donation is part of a pledge drive, bear in mind that contributions are deductible for the year in which they are paid, not pledged.
Candy, magazines, cards or theater tickets purchased to benefit a charity have fewer tax benefits than you might think. Only the portion of the item that exceeds the item's fair market value can be written off. The organization sponsoring the sale should be able to tell you what that is.
Finally -- and it may go without saying -- you should remember that donations to individuals, such as pan handlers, or coins tossed in a collection container in a retail establishment are not tax deductible.
And -- like candy and card sales -- they are rarely best deal for charities.
"It's the middle man who walks away with most of the money," said Langan.
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