When times are tough, Americans can always be counted on to give to people in need. Even in the midst of a challenging economy choked with uncertainty, Americans continue to donate their hard-earned money to the more than 1.5 million nonprofit organizations in the United States alone.
Sara Montgomery, Vice President and Philanthropic Specialist for Wells Fargo Private Bank, can testify to the generosity of our nation — she helps high-net-worth individuals and families pursue their philanthropic goals. Whether your passion is promoting medical research for groundbreaking cures, helping underprivileged students become the first college graduates in their families, or striving to lift women out of poverty with microloans, there is a charity that aligns with your values and your passions.
Selecting the charity you’d like to support is an important first step, but there is more work to be done, says Montgomery. Potential donors must perform due diligence to make certain that their dollars are doing the work they’re supposed to do. “Start thinking left brain and right brain,” Montgomery says. “You want to know that the organization is using the dollars in a way that closely aligns with your personal values.”
The Internet is a wonderful tool for researching and connecting with your charitable candidate. Montgomery recommends that you follow the charity, its CEO and board of directors on Facebook and Twitter — but beware of misleading or incomplete information. “The Internet can be a great resource, but not everything on the Internet is true,” she warns. “Information [taken] out of context can be very misleading.”
Also, don’t be afraid to ask tough questions. Nonprofits — especially larger, well-established institutions such as universities and hospitals — are dedicated to transparency. Their mission statements, tax returns and budgets are all available for you and your charitable giving advisors. The only wrong question may be the one you fail to ask.
With that in mind, Montgomery shared seven questions everyone should consider asking a charity before cutting that first — or next — check.
1) What is your charity’s mission statement?
Most organizations post a mission statement on their website. That said, a charity representative should be able to convey its mission without having to look it up. A donor should be able to understand the charity’s mission through an anecdotal story or a discussion with someone who has benefitted from the organization’s services.
If an organization does not have a mission statement, Montgomery calls this “red flag number one.” Also beware of mission drift, which happens when a charity slowly moves away from its original purpose. This can be a sign of poor leadership.
2) May I visit the charity and speak with the people in charge?
For a large charity, such as a university or a hospital, make an appointment with the Director of Alumni Relations or the Director of Community Relations and Development. For a smaller charity, you’ll most likely speak with the CEO or Executive Director.
“I want to walk through the door and get the sense that these folks are my kind of people. They get it, and I get what they are trying to accomplish,” says Montgomery.
3) May I speak with staff members?
Look for organizations that are willing to be transparent. That doesn’t mean that every employee’s desk is tidy when you visit or that no staff member has ever left the organization. Yes, staff turnover can be a potential red flag, Montgomery says, but remember to put it in context. Is it because of maternity leave or have there been six executive directors in two years? The former is a valid reason for departures; the latter might reveal legitimate frustration among workers.
Nonprofit leaders or donor liaisons should also be able to introduce you to the professionals leading its programs. If you’re interested in cancer research happening at a hospital or university, for example, ask to have lunch with a senior doctor or clinician who specializes in that work.
4) Are there other organizations doing good work in this area?
Find a charity or two that fits your desired objectives and then ask them whom else you should be visiting. Chances are that they collaborate with other charities doing similar work. Don’t be afraid to ask, “Who else should I be talking to about this?”
5) Can I have a copy of your organization’s annual report or tax returns?
A charity’s tax returns are public information; in fact, many nonprofits post them on their websites and on third-party sites like GuideStar. If they’re not publically available, ask for them. You can glean plenty of information from IRS Form 990, the tax return required to be filed by a public charity. You may even ask to review the tax return with the charity. For example, it may provide the context needed to understand the Executive Director’s salary and bonus. Remember: Transparency is vital.
6) What kinds of gifts can I give?
Although cash gifts never go out of style, people can and do donate all types of assets, such as stocks, real estate and even mineral interests. “It can get complicated, so make sure you work with a professional to help ensure the t’s are crossed and the i’s are dotted,” Montgomery says, “because donations are irrevocable gifts.”
7) How will you use my gift?
If you’re donating a significant amount ($1 million, for example), then you should expect to have substantial input as to how that gift is used. Ask for a quarterly telephone call or a semiannual report to discuss how your money is used. Schedule a site visit or two to check on any large-scale projects, such as a new hospital wing or a new sports-and-wellness center with your name on it. That is not unreasonable when you are giving away a lot of dollars, Montgomery says.
Phil Albinus is a freelance writer who lives in Ossining-on-Hudson in New York.
Photography by Corbis
Have you created your personal philanthropic gifting strategy? Read about "The Seven Philanthropic Guideposts for Individuals" available on the Wealth Management Insights Center.