It is more difficult to give money away intelligently than to earn it in the first place. – Andrew Carnegie
The next time you want to send a text message from your smartphone donating $2 to disaster relief, think again. Unfortunately, not all of that money will go to helping the victims. In 2011, Americans donated $200 billion to about 1 million charity organizations. When picking a charity to send your donation to, you have to do your homework. Here is a quick guide to some secrets that charities might not always be willing to share.
Some charities operate without any paid employees, and so they do not have to be registered as a charity. The limit they declare is usually below $50,000 annually. But all the other charities who claim to be registered should be checked out by consulting the list at the Internal Revenue Service (IRS). This is important because of the tax deductions available. It will also ensure that you will not give to those charities who are flying under the government’s radar. In the UK, the Charity Commission is the government’s regulator on charities.
Each charity will have enormous overhead costs regarding staffing, running costs, and fundraising. Inevitably, a part of your donation will go towards these costs. A good rule of thumb is that 60-75% of donations should go to the actual cause and 25-40% towards administrative expenses. But some charities cut back on expenses, which leads to more waste. Check to see if this information is available on the charity’s website before making a donation.
Some charities use companies who are for-profit fundraisers and they use telemarketing extensively. Because of the costs involved, it is unlikely that the charity will receive more than 10% of the amount you pledge.
Major charities have to be run as businesses. But disturbing news often comes to light about how much they are spending on salaries and bonuses. Sometimes, funds raised actually go to the charity’s pension funds, rather than to the poor, sick and needy. This information is rarely revealed. Charities defend paying high salaries to executives because they are in demanding roles, and clever fundraising policies have to be thought out and implemented. The site Charity Navigator believes that salaries around the $1 million mark are unacceptable.
These short mission trips to help build houses, schools and orphanages in third world countries seem to do more good for the volunteers, than the poor people. Think about these facts, before donating:
Organizers of short term mission trips should focus more on the permanent impact, and how locals can be more actively involved after the volunteers have left. Ask if they are approaching the mission in this way before deciding whether to donate or not.
When you think about Bob Geldof and Bono, who have supported enormously successful charities to fight world hunger and poverty, you can have nothing about admiration for them.
But some of these celebrity charities have made zero impact when auditors revealed that considerable funds were missing or unaccounted for. This was the case with Madonna. She was going to build a girls’ school in Malawi. Auditors revealed that almost $4 million went missing from the charity’s funds. Madonna is now contributing $11 million she has raised into Malawi-based organizations to help them build the schools that are needed.
Wyclef Jean, the hip hop icon, founded the Yéle Haiti Foundation after the disastrous earthquake in Haiti, which killed up to 300,000 people in 2010. He is now facing lawsuits about tax fraud and whether he gained financially from the charity he set up.
How many times have you been approached in the mall or on the street by a fast-talking and convincing fundraiser for a very worthy charity? This is a bit more sophisticated than the telephone calls you might receive at home. Here is what to look out for:
The whole concept of giving to charity should be based on a desire to help and not from being pressured in any way by a fast-talking fundraiser!
Before deciding on donating to any charity, check out the following information. All of this should be easily available on the charity’s website. Failing that, there should be information leaflets available. This is what you should check:
Charities are doing magnificent work. You just need to do some homework to make sure that they are managing their funds in the best possible way and that they are not using doubtful tactics. If you are unhappy about this, you can always volunteer to help local charities in your area.
Featured photo credit: Faces helped by charity: Water/Sacca via flickr.com
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