Tomorrow, Nov. 29, is what’s known as Giving Tuesday or, more accurately #GivingTuesday. It’s the annual kick off for the charity season that, the founders say, is “a day when the world comes together to give.” Last year, Giving Tuesday raised $116.7 million online from 700,000 donors in 71 countries.
With Giving Tuesday in mind, I just spoke to Nick Tedesco, West Coast lead of J.P. Morgan Private Bank’s Philanthropy Centre, for his advice on how to help ensure your charitable contributions do the most good.
Highlights from our conversation:
Next Avenue: How do you advise people to choose charities wisely?
Nick Tedesco: Choosing a nonprofit can be intimidating; there are more than 1.5 million nonprofits, so selecting one can be daunting to say the least.
First, you need to understand your motivation for giving. What do you want to see as a result of your giving? Once you’re able to do that, you can identify the organization.
You can do research online by going to sites of charity rating organizations. [A few that Next Avenue suggests: Charity Navigator, the Better Business Bureau’s Give.org, Philanthropedia, GiveWell.org and GivingWhatWeCan.org.] I also often have individuals engage with nonprofits in their local community. Once you connect with one or two organizations, that opens up a network of additional ones.
How can donors help ensure they will be making an impact?
The first step is identifying the right organization, one that’s creditable and one you believe in. Then, identify what success is for you and for the organization. Assess what you would like out of your giving; that’s something most people do not do prior to making a gift.
Also, set realistic expectations. Is your gift proportional to the outcome you expect? You may not be able to solve the education crisis, but maybe you’ll be able to contribute to a meaningful outcome.
Think about providing more than financial support. One of the best ways to ensure an organization will meet success is to provide them with what they need holistically. Think about what your skill sets are and how you can use them to help beyond the checkbook.
And stay involved. Ask for updates, especially if you’ll be making a substantial gift. Then it’s well within your right and expectation.
What do you look for to see that nonprofits are spending money well?
The best way to make meaningful gifts is to get to know the organizations. Understand who they serve and what they want to accomplish. Then look at their financials. Are they financially sound? Are their programs sustainable? Is the administrative overhead reasonable?
How can someone tell if programs are sustainable?
Look at the cost of the nonprofit’s programs this year and next and what it will look like to execute on what they’re proposing and maintaining it over coming years. Are they bringing in enough money through fundraising to sustain costs?
You could look at the nonprofit’s 990 Form [the tax return the Internal Revenue Service requires] to see how much is coming in versus how much is going out. You want to be sure the nonprofit is bringing in enough money to meet or exceed its needs each year.
And what do you mean by “reasonable” when it comes to administrative overhead?
Reasonable would be spending around 20 percent on overhead. You want to be wary of one exceeding that for administrative costs. But although looking at administrative costs is important, it’s just one piece of the broader puzzle.
Should donors tell charities exactly what they want their contributions to be used for?
We stress the importance of unrestricted funding to let nonprofits accomplish their objectives as they deem appropriate. And part of that is administrative costs. If they need to keep the lights on or bring in a new printer or pay additional staff to meet their outcomes, we as donors owe it to them to support their infrastructure and the continued development of it.
What if you want to earmark your donation for a particular program?
If you feel passionate about a specific program, I would encourage you to talk to the nonprofit and express your interest. Have an open conversation about restricted versus unrestricted funding and the efficacy of earmarking dollars. You want to be hypermindful of tying the hands of nonprofits.
And what’s your view of donor-advised funds, where you create a charitable account through a financial services firm, get an immediate tax deduction and allot grants of your money to a charity in the future?
I think donor-advised funds are a great vehicle. They provide a bit of ease to administer your giving and ensure that due diligence is done prior to your gift being made. A donor-advised fund is a powerful tool to direct future giving.
How should people analyze new or younger charities compared to ones that have been around for years?
For established charities, you’re going to look at their results. Has the organization met its success goals? You can review its annual report to assess program outcomes and its ability to grow programs.
For newer organizations, you’re going to be betting on leadership. Does the organization have a strong, reputable CEO and an engaged board? Is the bold vision commensurate with the anticipated resources it will bring in? When you look at a newer organization, you are taking on a bit more risk. But the opportunity for reward is great as well.
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