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The Give and the Take in Charitable Giving

by | Dec 3, 2015

Charitable giving, while good with intent, is not always received as expected. Let’s say you and I give to a seemingly worthwhile charity. You may be surprised at who really takes from the charity – frequently, it’s the fundraisers and executives. Oftentimes the fundraisers and executives are one in the same, since many founders will leave the charity to start a consulting and fundraising business to contract with the charity. This is really where it begins to get out of hand.

The Kids Wish Network gives only 2.5 percent of the funds it raises to the kid’s programs. It was ranked the #1 worst charity in the U.S. by the Center for Investigative Reporting and the Tampa Bay Times. Their rankings of the worst charities are based upon the amount of donations paid to professional “for profit” fundraisers. During the past decade, this charity raised over $141 million, but paid 82 percent of that money to fundraisers and 15 percent for administrative expenses. It’s been this way for over 16 years at Kids Wish Network!

The Cancer Fund of America is even worse. It raised almost $88 million and paid $75.4 million, or 86 percent, to fundraisers. Firefighters Charitable Foundation paid 81 percent of its donations to fundraisers, Breast Cancer Relief Foundation used only 2 percent of its receipts for programs, and the list goes on.

So, what are you and I to do when asked for a donation to what appears to be a worthy charity?

The answer is pretty simple. We need to do our own due diligence for information on the charity. I get the exact name of the organization, then type that name into Google and look at the hits. I also look at Guidestar.org and the Center for Investigative Reporting.

To be qualified as a charity, the IRS issues rules. Each year, the charity must file a tax return on form 990, which is a public document. Available at Guidestar.org, and somewhat difficult to read, the 990 gives a list of executive salaries and its administrative expenses.

To operate, most charities will have administrative expenses and naturally have to pay executive salaries—but these costs of operations must be reasonable. My personal guideline is 90 percent of the funds raised should go to the programs, although there may be exceptions. For example, I have to think twice about a program like Wounded Warriors where only 60 percent of the funds go to the programs – but by spending a lot of money on advertising, a lot of money is raised for a very good cause.

This year, make the most of your year-end charitable giving by ensuring that your funds will go to the deserving programs – not the fundraisers and administrators.

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