See Where Your Charitable Donations End Up

Physician's Money Digest, October 2005, Volume 12, Issue 14

It is often said that one of the keysto satisfactory saving and investingis to have your money workfor you. In the case of charitabledonations, it's nice to be able tosay that your money is working for others—namely worthy causes or organizations.Sadly, only about 10% of Americansbelieve that charities do a "verygood" job of spending wisely, accordingto a survey conducted by the Center forPublic Service.

New York Times

The problem, according to a recentreport, is that charitiesoften receive a relatively small percentageof the monies raised. The reasoncan be traced to the fundraiser's cut.Small, nonprofit organizations, lackingthe necessary personnel, frequently utilizethe services of professional fundraisersto help raise cash through phonecampaigns. The fundraiser's fee, anagreed-upon percentage of the totalmonies raised, can often eat away alarge portion of those contributions.

Charity Scraps

Consider that in 2002, professionalfundraisers collected $184 million intelemarketing campaigns on behalf ofcharities registered in New York. Butaccording to the state attorney general'soffice, two thirds of that money—morethan $120 million—went to the fundraisers,a trend likely to continue.

The article points out that charitablegiving by Americans totaled $241 billionin 2003, up more than $6 billionfrom the year before. Of that $241 billion,individuals were responsible for$179 billion, or better than 74% of thetotal. Also, the practice of receiving acut of the monies raised is perfectlylegal. And efforts to impose tighterrestrictions on fundraisers have beenbeaten down by the US Supreme Court,citing that imposing fee limits onfundraisers would violate their FirstAmendment rights.

Where some fundraisers do step overthe line is in misleading prospectivedonors about where their money isgoing. According to the article, the CivicDevelopment Group of Edison, NJ, anational telemarketing company, collected$15 million for seven nonprofitorganizations in New York during2002. The organization retained all but$2 million of the donations, and hassince been sued in 12 states by theFederal Trade Commission. This legalbut highly unethical practice also hasnegative implications for the charitablesector. As consumers learn more aboutwhere their contributions are actuallygoing, nonprofits fear the public willstop giving. As a result, many charitieshave taken steps to restore confidence.

Contributor Beware

Wall Street Journal

According to a report, the Maryland Association ofNonprofit Organizations launched anationwide program for nonprofitgroups called the Standards for ExcellenceInstitute (www.standardsforexcellenceinstitute.org). Groups thatapply receive accreditation by meeting55 governance and operations standards.One of these standards indicatesthat fundraising proceeds generallyshould be at least 3 times as much asthe amount spent on fundraising drives.Thus far, the efforts appear to be working.According to the article, participantsin the Standards for ExcellenceInstitute say the program helped boosttheir coffers by reassuring donors.

There are things you can do to ensurethat your contributions are workingfor the charities you intended. As ageneral rule of thumb, the Wise GivingAlliance of the Better Business Bureau(www.give.org) suggests that you askwhat portions of your contributionsare going toward fundraising costs. Ifit's above 35%, you might want toclose your checkbook.

Times

The article also offers suggestions.Do not be swayed into giving onthe spot by emotional appeals or repeatedphone calls. If you're consideringgiving, find out how it will be spent.You should also ask for a financialstatement. In addition, do not pay bycredit card over the phone. Instead,mail your contribution by check afterlearning more about the charity.

For the latter, there are Web sites likeGuidestar.org, CharityNavigator.org,Give.org, and CharityWatch.org whichhave charity ratings and financial statements.In addition, the New York attorneygeneral's office offers an annual"Pennies for Charity" report listing professionalfundraisers who solicit byphone for nonprofit groups, includingthe percentages they receive (www.oag.state.ny.us/charities/charities.html).Also check with your state attorneygeneral's office for similar information(www.naag.org).