Giving Wisely: A Brief Guide
for Prospective Donors
by David Renz
During the holiday season, most of us are inundated with requests from all kinds of charities, and most of us are moved to respond. Most of us also have learned to give carefully, recognizing that not all nonprofits are equally worthy of our hard-earned dollars. When we make a major gift, we want to feel confident that our contributions will be used well and for the purposes that we intend. But how do we really know? What should we think about as we consider where to give? Wise donors will consider four key elements of agency accountability, while wise charities will share this information with donors.
Mission and Results
What are the agency’s mission, vision and long-term goals? How well is it accomplishing them? How does the agency know it is making the difference you care about? The effective agency has systems to assess performance and impact.
Leadership
Who is leading and governing the agency? Are they attending to the right matters? Every nonprofit has a board of directors and, in larger agencies, a chief executive. The effective nonprofit’s board is strong and independent, meeting regularly (at least quarterly) to provide leadership and oversight. The board links the agency to the community, guides the strategic plan and monitors and evaluates agency performance. An “independent” board is comprised of people dedicated to the interests of the agency; neither its members nor their relatives are on the agency payroll, nor have any other personal financial interest with the agency. The reputable charity will list its board members and their affiliations.
Finances
What is the financial health and performance of the agency? You should have a basic understanding of the agency’s financial condition, with current, accurate financial information. Most donors look for charities that are efficient, are good stewards, and are sustainable.
Relevant financial information includes primary sources of money (how much comes from gifts, fees or government sources), how it spends this money (a report on last year and a budget for this year),
and overall financial status. The effective agency engages an external auditor to conduct an independent review of the financial statements and affirm that they are accurate and that agency systems comply with accounting rules and policies. Most agencies provide audited financial statements in annual reports. All nonprofits with annual budgets of more than $25,000 (except churches) must file an annual “Form 990” with the IRS and provide a copy to anyone who requests it. Other sources also provide such information on larger agencies, including the online service GuideStar (www.guidestar.org) or the Greater Kansas City Community Foundation’s DonorEdge® program (www.gkccf.org).
Financial reports also help you know the share of agency funds spent on fund raising and management versus program delivery. It is not true that the best agencies spend almost nothing on management and fundraising—effective agencies always in-vest in these areas to ensure long-term
success. But there is an essential tradeoff, and you should know the share of resources that goes for each type of expense and why.
The Use of Your Money and Name
How will your money be used? You have a right to know and, if you wish to restrict its use, you have a right to do so. Unless solicited as part of a campaign for special purposes (e.g., a building fund, a scholarship program), your funds usually are used to support general agency operations and programs. If you donate for a specific purpose, an agency is ethically and legally obligated to ensure the money is used only for that purpose. You also have a right to expect privacy, if you request it.
Philanthropy is among the most time-honored of traditions in all cultures, and wise giving is the lifeblood of every community. I hope these thoughts offer useful counsel as you consider where to give most wisely.
David Renz is director of the Midwest Center for Nonprofit Leadership at the University of Missouri–Kansas City. He can be reached by phone at 816.235.2342 or by email at RenzD@umkc.edu.