Claudia Newcorn: Be smart when it comes to making charitable donations

’Tis the season for charitable giving. Many local, regional and national organizations are issuing volumes of fundraising solicitations by mail, phone and digital. But as you open up your wallet to help the less fortunate, are you really doing any good with your money?

Ten years ago, I was involved with a nonprofit charity that raised money to help fire departments purchase thermal imaging cameras. Once established, we started to receive numerous calls from professional fundraising companies (aka telephone solicitors) offering to assist us with reaching out to potential donors.

Intrigued, we reviewed the contracts – and were shocked at the numbers. For every dollar raised, the companies would take anywhere from 85 to 95 cents for administrative costs. The explanation was that they would be calling millions of households. If we looked at the math, they said, that would translate to hundreds of thousands of dollars for us.

We declined. Our charter was to donate 98 percent of our donations to the cause, and we did just that for several years, raising enough money to help buy many cameras for California fire departments. But the insight completely changed our own charitable giving efforts. Now we ask questions before making a donation to determine what percent of our dollar actually is going to help the needy.

According to the American Institute of Philanthropy (http://charitywatch.org/tips.html), there are more than 2 million nonprofit organizations in the U.S., all competing for a share of your money. They offer the following tips to donate sensibly.

▪ Know your charity. Charities are obligated to provide detailed information to donors. Ask questions. Never give to a charity you know nothing about.

▪ Find out where your dollars go. Ask how much of your donation goes for general administration and fundraising expenses, and how much is left for the services you want to support. If they can’t answer, that’s a red flag.

▪ Don’t be pressured. No legitimate organization will do that.

▪ Don’t be misled by a charity’s familiar name. Some questionable charities use a name which closely resembles the name of a legitimate organization. Check it out with the state charity registration office.

▪ “Tax exempt” does not mean “tax deductible.” “Tax exempt” means the organization does not have to pay taxes. “Tax deductible” means a donor can deduct contributions to the charity. Request the charity’s tax-exempt letter. If it does not have one indicating its status with the IRS, you cannot claim your contribution as a tax deduction.

As a final caveat, just like spending for the holidays, it’s wise to set a charitable donations budget. You can’t give to everyone, so choose (and check out) those charities that focus on issues important to you.

You have worked hard to earn your money. Your heart is in the right place in wanting to help others. This holiday season, before you open your wallet, take the time to make sure that your donation will do more than pay administrative costs or a fund solicitation company, and will truly benefit those in need.

This story was originally published November 29, 2014 at 4:01 PM with the headline "Claudia Newcorn: Be smart when it comes to making charitable donations."