As more philanthropic organizations are established, donors may find themselves struggling to choose the right place to give. That’s especially true as it becomes easier to create nonprofits or support causes within minutes through websites like GoFundMe, making it difficult to determine what is legitimate.
Before donating, individuals should research the validity of an organization, according to Stephanie McCormick, president and CEO of Make a Wish Ohio, Kentucky & Indiana, which is headquartered in Columbus; Deanna Stewart, president of the Mount Carmel Foundation in Columbus; and Diane M. Strachan, director of individual giving and planned giving at the Cleveland Museum of Art in Cleveland.
“Giving is a joyful experience and if the act of giving is not a positive one, it may impede one’s desire for future giving and what a shame that would be,” Strachan stated. “Donors give to make a difference. If money is not directed to effective, efficient and well-run organizations, a donor’s desired impact may be compromised.”
McCormick added, “It’s always incredibly important to do your homework. These are people’s hard-earned dollars and donors give from the heart. They want a good return on investment. Research is a good way to see if that investment has been good or not.”
Without research, Stewart said a few unfortunate things can happen if the organization turns out to be less than legit.
“The bulk, or none, of the money they donate could never get to the intended cause,” she said. “The donor may also not be able to claim a tax deduction for the gift.”
The professionals said legitimate organizations should be more than willing to provide information about taxes, spending, audits, board members and organizational salaries to any interested parties. Many times, this information is readily available on their websites, given without being asked.
“A legitimate organization is one that is very front-facing and transparent,” McCormick explained. “When you look at their website, all of those things are publicly visible. Is a live person answering the phone? And if you’re leaving a message, does someone get back to you within a reasonable amount of time? A legit organization is a visible one.”
Stewart added legitimate organizations should be able to share annual documents, like their 990s, which summarizes all of their accounting and financial statements of the charity, she said. It shows revenue, expenses, program expenses and impact.
But there are also some red flags to be aware of when determining if an organization does everything by the book.
Strachan suggested potential donors confirm an organization’s EIN or federal tax identification number.
“If a charity doesn’t have one, don’t give,” she stated. “Google the organization. Check if it has a ‘.org’ web address or a ‘.com’ address. Most nonprofits are ‘.org.’ You can also run the name through Charity Navigator for more information.”
McCormick circled back to information that should be easily available, adding, “If a website doesn’t have a section for financial transparency, it’s worrisome. A simple lack of information is another thing. A website can be very pretty and look nice, but if they don’t have a physical street address, that can be a big red flag.”
Clear and available information goes a long way in making the donor feel comfortable in their choice to give, Stewart stated.
“The foundation publishes an annual report highlighting the financials and impact of the 150-plus programs we fund,” she said. “We are governed by a foundation board of directors and their information is on the website and highlighted in the annual report. We work closely with donors to help them understand the impact of the program being funded, before and after making a gift.”
McCormick mirrored the sentiment, explaining donor stewardship is an important part of making individuals feel comfortable giving money.
“This includes regular communication and is not always about asking for money,” she noted. “You want donors to trust you. Another touch point for donors is keeping our records accurate by sending out quarterly statements. Donors tend to be deeply appreciative in knowing what they’ve given.”
Strachan said the Cleveland Museum of Art does something similar in their yearly “Summary of Giving” given to every donor in January.
“This ongoing communication with donors is important in helping donors feel comfortable that their philanthropic dollars are being put to good use and stewarded in the manner in which they intended,” she said.