Holiday cheer is likely to loosen the purse strings of charitable donors to the tune of $100 billion in the United States this Christmas season, according to organizations that monitor gift-giving.
The question for donors is how much of the money is used for its intended purpose.
Any reputable charity should spend at least 75 percent of its income on programs to benefit its cause, charity analysts say.
Most charities spend “10 percent or less on fundraising and 15 percent or less on administrative fees,” said Sandra Miniutti, vice president of Charity Navigator, a nonprofit organization that evaluates charities.
Donors have several options for ensuring charities meet their industry’s standards for responsible spending.
All nonprofit organizations with annual budgets of more than $100,000 are required to file Form 990 with the Internal Revenue Service. The form lists how a charity allocates its money, the salaries of its five highest-paid employees and any other important audit information.
Charities are required to provide their three most recent Form 990 filings to anyone who requests them, either in person or in writing.
In addition, “the Internet provides terrific resources for assisting with charitable contributions and deciding upon which charities are deserving of one’s contribution,” said Mike Sorrells, director of accounting firm BDO Seidman’s nonprofit practice.
Several Web sites track the financial performances of charities.
Charity Navigator is listed at www.charitynavigator.org.
The Better Business Bureau’s Wise Giving Alliance provides reports on charities that solicit nationally at www.give.org.
Information about more than 1.5 million nonprofit organizations that file Form 990s with the IRS is available at www.GuideStar.org.
Charityguide.org is a rating service from the American Institute for Philanthropy that lists the nation’s top-rated charities based on criteria of fiscal responsibility.
The Internal Revenue Service’s Web site, www.irs.gov, lists all charities with 501(3)(c) status, which is required before donors can claim tax deductions for their contributions.
If you’re donating by purchasing an item through a charity-retailer partnership, make sure to find out how much of your purchase is going to the charity.
Read advertisements and signs on the shelves carefully, said Stephen Adler, chief of Charity Brands Inc.
Phrases such as “100 percent of the proceeds go to charity” offer retailers loopholes, he said. “Proceeds” really means “profits,” which can be small after manufacturing costs, distribution costs and overhead. In some cases, it can be as low as 10 percent of the original sale price.
Many retailers cap the amount they are willing to donate, Mr. Adler said, so customers who purchase the product after the limit is reached never send any aid to the charity at all. Store employees should be able to say what the cap is and whether it has been reached.
Donations in general are likely to be up about 3 percent this year compared with 2005 largely because the nation’s economy is healthy, Charity Navigator officials said.
Mr. Adler said improper use of donated funds is widespread.
“That is the main reason to research the charity you are interested in supporting,” he said.
Donations are most often misdirected when they are collected after a disaster, such as Hurricane Katrina that devastated the Gulf Coast last year.
“When so much money was being donated for a disaster, it is possible that a charity could earmark the funds for other programs, even though a donor donated for a specific disaster,” Mr. Adler said.
This article is based in part on wire service reports.
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