Focus on Finance

Americans are generous people, donating billions of dollars to charity each year. This is especially true during the holiday season. In fact, more than 80 percent of the charitable funds raised in this country come from individuals. And the truth is, charities need our help now more than ever. Faced with rising costs, the loss of government funding, and increased demand for services, money-starved charities are left to ask for more individual contributions to cover the gap. So how can a giver respond?

As a donor, you probably receive more requests for help than you can support. Here are some tips to help you evaluate your charitable giving.

• Do your homework. As a potential donor, you have a right to know what kinds of programs a charity operates; how much of your contribution is spent on these programs; and how much is spent on fund-raising, executive salaries, and other administrative expenses. The quickest way to gather this data is to request a copy of a charity's annual report, budget, audited financial statements, tax returns, and a list of board members. Charities are accustomed to providing this information every day, so don't hesitate to ask for it.
  
• Ask questions. Don't be deceived by a name that sounds impressive or resembles the name of another well-known charity. Also, be wary of organizations that focus solely on emotional appeals yet tell you little about themselves or fail to tell you what they're doing to address needs.
  
• Find out if your contribution is tax-deductible. Some organizations may claim they're tax-exempt, which means they don't have to pay taxes. If you wish to deduct your contributions on your federal income tax return, your donations must be made to nonprofit organizations the Internal Revenue Service considers charitable, educational, religious, scientific, or literary; those that prevent cruelty to animals; or those that foster amateur sports. In most cases, these groups have received 501(c)(3) status from the IRS. If you're unsure about an organization's tax status, ask for a copy of its Letter of Determination or contact your local IRS office.
  
• Plan your giving. Few of us are able to donate to every group that asks. Begin each year by developing a charitable contribution budget, then keep track of fund-raising activities and designate recipients for the year. By being proactive, you maintain control of your giving rather than simply reacting to the many requests you get. If your contributions are substantial, you may also want to consider making gifts by establishing your own charitable trust. Depending on the kind you create, you could arrange to have your interest income paid to a designated charity.
  
• Volunteer. There's little that can match the satisfaction of contributing financially to a worthwhile cause-except perhaps contributing your time. By volunteering for a charitable organization, you'll be able to learn more about their programs and services firsthand, develop relationships with the staff and other volunteers, and provide valuable skills and support for their cause. TPW