Giving: Where Does Your Money Go?

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Ever since I started writing the “Giving” category, people have asked me “How do I know where my money goes?” or “How do I know if this is a legitimate organization?

For example, say you want to give $100 toward cancer research. You may be under the impression (or have high hopes) that your donation will go directly to labs and scientists searching for a cure. Perhaps, but then again maybe the administrative, publicity or marketing costs of the organization are so great that little, if any, of your donation actually lands in the hands of the intended recipient.

Unfortunately, not all charitable causes are created equally with regard to how the money donated will be spent. It really is wise (time and money well spent) to research the organizations you are interested in donating to.

Here are what the HOTY and I look for when we make contributions:

  • Finances: From a purely financial standpoint, your money should yield the highest return possible. Some contributors only donate to organizations with 10% or less operating expenses. Also, if you have only a small amount to donate, look for a charity that has a very small operating budget, where $100 will make a significant difference.
  • Intentions: Make sure that the organization is up-front about the cause that they support. For example, they may say they support lung cancer research when they are funded by tobacco companies. GULP. Yes, it does happen.

The Silver Lining is that there are Charity Watchdog Organizations that validate and rate the functionality of charitable organizations. They allow donors to search for a particular charitable organization’s ratings on their websites.  Ratings include: the charity’s income, business expenses, amount of money it takes to acquire donations, how much money is spent on the cause, and the length of time the charity could exist without acquiring more donations.

Although each of the agencies uses a different methodology for rating charities, they all utilize the charity’s financial documents, particularly the charity’s tax return Form 990, as their information source. There are three main charity watchdog agencies:

Generally speaking, donations made to a “501(c)(3) organization” are tax deductible. While many organizations, including private foundations and public charities, fit into this classification, this is not true of all of them. To assure that your donation is tax-deductible, check with:

Supporting a charity that you believe in can help make the world a better place is an incredible Silver Lining!  Please develop a habit of checking out charities and making educated decisions about donating.

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