As the deadline nears for making 2002 charitable contributions, there’s little surprise that Americans aren’t reaching for checkbooks quite so readily this time around.
Nearly half the country’s non-profit organizations have experienced a decline in contributions compared to last year, according to a survey by the GuideStar research firm. Twenty percent say donations have remained flat.
The long list of reasons for this includes a decline in stock valuations, a weak economy, lost jobs, a discombobulated world and a church sex abuse crisis. Overshadowing them all, however, is a general wariness about all organizations and concern over how our money is handled. This was initially prompted by the corporate debacles of Enron and WorldCom, but accelerated with publicized examples of charities flunking their accounting tests.
A number of regional United Way organizations, for example, recently got into hot water because some contributions received were counted more than once, inflating their totals and those of the entire system.
“Donors have become more suspicious and are giving less this year in part due to scandals and controversies,” said Suzanne Coffman of GuideStar in Williamsburg, Va. “Yet while there is a problem that non-profit accounting standards aren’t as uniform as people think, most charities are ethical and honest and I do not really believe there is widespread fraud.”
Many good causes are struggling because foundation grants and corporate gifts have dried up. Worthy organizations find themselves with less money at a time their services are most needed by the people they seek to serve. It doesn’t make sense to stop contributing to causes that make this world a better place just because the world may have been disappointing lately.
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Identify your own values, compare suitable charities, obtain full information, select those you wish to support and then budget an amount appropriate for your family. If you contribute cash, your total deductible contributions for the year can total up to 50 percent of your adjusted gross income.
You can check the legitimacy of 850,000 non-profit organizations on GuideStar’s Web site at www.guidestar.org. Groups either indicate their IRS registration or, in the case of those that are faith-based, give proof of status as tax-exempt organizations. Those with income above $25,000 file IRS Form 990, which reports income and expenditures. Again, faith-based non-profits are not required to do so.
“Instead of making a snap decision, sit down and think about what you’d like to give and how it fits into your budget,” advised Jeff Daniher, certified financial planner with Ritter Daniher Financial Advisory in Cincinnati. “We suggest people give more money to fewer charities because it does more for the charity and requires less overhead cost to process the gifts.”
Giving shouldn’t be spur-of-the-moment. Donors are duped this time of year into giving money to “sound-alike” organizations named to resemble well-known charities.
“Most individuals unfortunately base charitable giving decisions entirely on the appeal they receive and don’t bother to go to outside sources or ask for additional information,” cautioned Bennett Weiner, chief operating officer for the Better Business Bureau’s Wise Giving Alliance watchdog group in Arlington, Va. “Watch out for overly emotional appeals because emotion is sometimes used as a ruse to get you to give without investigating further.”
On its www.give.org Web site, the Wise Giving Alliance posts 500 detailed reports on national charities evaluated according to its 23 charity standards. You can also contact your local Better Business Bureau for information on regional charities.
The alliance believes total fundraising costs of a charity should not exceed 35 percent of total contributions raised.
Every charity should give you a general breakdown of where it spends money.
“Tax exempt” means the organization doesn’t have to pay taxes, while “tax deductible” means you can deduct on your federal tax return. Even if an organization is tax exempt, your contribution may not be tax deductible.
Save all canceled checks. For cash donations of $250 or more, also obtain a written receipt from the organization with its name, the date, place of contribution and amount given. If you send your check by mail, it’s good so long as you send it no later than Dec. 31.
“If you’re short on cash, one way to make a contribution and get the deduction this year is to charge it to your credit card,” said Martin Nissenbaum, national director of personal income tax planning for Ernst & Young in New York. “You’ll get a deduction in the current year even though you don’t pay your credit card bill until next year.”