Getting The Most Out of Your Giving

The staff and I recently volunteered at Heart to Heart International creating care packages for Haiti. We thoroughly enjoyed helping out and were quite impressed with the passion and efficiency of this charitable organization. Based upon how they are structured, approximately 96% or more of all money donated goes directly to helping those intended via programs and services. This means that they are able to keep their overhead/administrative costs (i.e., rent, salaries, etc.) to around 4% or less, which is quite an achievement.

IAG Staff Volunteer

However, a client of mine, Tom, had a very different experience with another organization. He received a phone call soliciting donations for cancer research. Since he makes it a practice to vet any charity before donating, he asked that materials be sent to him. He wanted to review the charity's administrative costs as a percentage of their total budget. This information is readily available and lets him know how efficient the organization is with his donation...remember it is for charity. In this particular case, the lady replied that she was a phone solicitor of a firm separate of the charitable organization. Upon further questioning by Tom, she reluctantly revealed that only 15% of all funds raised/donated actually go to the cancer research (i.e. 15 cents out of every dollar). When Tom noted that he found it to be unreasonably high, she said, "well I need to be paid." He even went on to tell the lady that he could donate directly to the cancer research organization, which would result on the vast majority of the funds being used for their intended purpose vs. 15 cents on the dollar. Well, that ended that conversation. All I can say is, "Way to go Tom!"  

As we enter the season of giving, this caused me to realize that many of us give to charitable organizations, for a variety reasons, but we may not truly know if they are good stewards of the money. As a result, the following are some things to take into account prior to making a donation. 

  • Stick to charities that have a track record for relief work, such as the Doctors Without Borders, the Salvation Army, etc. “Given the nature of disasters, it’s just too much for a new group to jump in and tackle the relief efforts effectively,” says Sandra Mini­utti, of Charity Navigator, which vets charities.

  • The high-profile nature of some disasters makes them prime opportunities for con artists. For example, it is estimated that up to 60% of the 4,000 charity web sites that cropped up in the wake of Hurricane Katrina could have been phony. Be especially alert for sound-alike names, newly formed sites and forwarded e-mails claiming to be from disaster victims. 

  • So what charities should be avoided? The worst would be those that use telemarketing to raise funds, because these for-profit telemarketing companies often charge the charity 20 to 90 cents of each dollar raised, according to the Charity Navigator website, just like Tom encountered previously. Charitable causes that people get emotional about, which leads them to not think through their donation decision should be avoided as well.

If you feel strongly about where your donation should go, you can earmark the money and ask the charity what happens once the specific need is met. Alternatively, consider making an unrestricted gift and let the professionals prioritize the projects that need funding.  If you want to see how well the charity is allocating its money, you can check its IRS Form 990 filings, which most nonprofits are required to make public. GuideStar has a searchable database of those documents.

  • Before you research how an organization coordinates its efforts and uses the money it’s given, make sure it is a 501(c)(3) organization qualified to receive tax-deductible donations. Next, look into how the charity is run. Expect it to devote at least 75% of its budget to programs, with the remainder going to administrative costs and fund-raising. One public resource for investigating charities is the Foundation Center, which allows access to organizations’ IRS records. There are also several organizations that will do the background checking for you, among them the Better Business Bureau and Charity Navigator. GiveWell has evaluated fewer charities, but it provides an extensive analysis of each one. The Better Business Bureau’s, and the American Institute of Philanthropy’s have already crunched the numbers on hundreds of charities and rated them accordingly.

Also, donating to international charities can get tricky (and you won’t reap any tax benefits), so stick to U.S.-based charities with an international scope.

  • Remember to document your donations! To deduct your donation, you must itemize your deductions. Then confirm that you are giving to a qualified organization. (You can search for the charity on Once you make the donation, keep a record. For contributions of $250 or more, you’ll need written acknowledgment from the charity. You must actually pay your pledge before the end of the year for the donation to count in that tax year; checks and charges to a credit card count even if they don’t clear until after December 31.

  • Another note in favor of informed charitable giving: When you focus donations on a single or a few favorite charities, you’re less likely to get unsolicited appeals from other charities in the mail. “Small donations, such as $25, barely cover the costs the charity incurred in soliciting the gift. To recoup those costs, many charities will simply sell the donor's name to another charity doing similar work,” advises the Charity Navigator website.

Deciding on what charitable organization to support can be daunting. As such, jot down the three things that are most important to you besides your family. It might be education, your faith or the environment. Involve your spouse or even the whole family in this discussion, and talk about the impact you want to make. Bottom line, you have to find what hits your heart and hits you at home.

Which Nations Are The Most Generous? reported earlier this week that the results of the annual World Giving Index are out. This year, the United States and Myanmar tied for the top spot as the most generous countries in the world. They shared a 64% generosity rating, followed by Canada, Ireland, New Zealand and Australia. The U.S. is the only country to rank in the Top 10 for all three kinds of giving measured by U.K.-based charity CAF-America for the World Giving Index: Helping a stranger (No. 1), volunteering time (joint No. 5 with Tajikistan) and donating money (No. 9). Myanmar ranked No. 1 for money, No. 2 for volunteering time, but only No. 63 for helping a stranger.

World Giving Index Chart

The World Giving Index is primarily based on data from research firm Gallup’s “World View World Poll,” an ongoing research project carried out in more than 140 countries in 2013; it encompasses interviews with over 130,000 people. The measurement for donating money is not tied to the wealth of a country or the actual dollar amount given, but based on the number of people who give money. 

Charitable giving rose 6% to 64%, meaning 16.9 million more Americans gave last year than in previous years, which may be an indication that we’ve weathered the recession and weathered it well. 


Since Thanksgiving is a week away...

"An optimist is a person who starts a new diet on Thanksgiving Day."
          Irv Kupcinet

"Coexistence… what the farmer does with the turkey – until Thanksgiving."
          Mike Connolly

Quotes selected by the IAG staff

"There is no exercise better for the heart than reaching down and lifting people up."
           John Holmes

 "We make a living by what we get, but we make a life by what we give."
           Winston Churchill

Tony Moeller, CPA 

The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.

If you enjoy the commentary and believe others may benefit or find it of interest, please feel free to forward it on. Also, interested individuals can contact us, and we will be happy to add them to our mailing list. 

Sign up to receive our Commentary

First Name:
Last Name:
Security Code:
Back to top