The Beltway of Giving: Following Your Dollars

As August draws to a close, fundraising drives are sprouting up across the U.S. targeting old and new individual donors for support. As donors, we have hard decisions to make with more than 1.5 million tax-exempt organizations in the United States vying for our dollars. In fact, individual giving increased by 3.9 percent last year, according to Giving USA’s Annual Report on Philanthropy for the Year 2011, accounting for nearly $218 billion in contributions to organizations.

Despite this positive influx in giving, nonprofits nationwide have struggled during difficult economic times leading to reductions in programs, cuts in staffing and sometimes shutting their doors for good. This can result from funding cutbacks and often lack of stringent financial oversight. Nonprofits are witnessing firsthand the struggles that come with budget shortfalls, and many are now in “the red”, carrying significant debts. It is a precarious situation that staff and boards of directors must quickly address so that future donors, foundations and corporations can have confidence in an organization and continue supporting programs without hesitation. As donors, we sometimes waver in our support of organizations for fear that our money may not be spent wisely or that we can truly solve a social problem.

“No one wants to give their hard-earned money to an organization that isn’t financially sound,” says Barbara Harman, president and editor of the Catalogue for Philanthropy of Greater Washington. “We all want our gifts to have impact, but it isn’t just a question of financial stability. Donors should want to know whether the organization they are giving to is worthy, whether it’s doing a good job, whether it’s effective in meeting the needs of the community.”

Supporting a non-profit that is truly in need can mean your dollar stretches father. “If donors only invested in healthy organizations, there would be very little nonprofits out there to support,” said Brett Norton, director of development for Fair Chance – a Washington D.C. based organization that works to identify promising community-based youth and family organizations in Wards 5 through 8 and increase the sustainability of their programs. “Donors should have realistic expectations for what their dollars can accomplish and realize they are only one piece of the solution.” Authors Thomas Tierney and Joel L. Fleishman in the book, “Give Smart,” address this same issue. They argue that a donor’s good intentions can lead to wishful thinking that they can solve complex problems with only a few dollars.

Assuaging your fear as a donor is achievable. Donors can invest their dollars fully informed and to align themselves with causes where they then make a difference – both big and small. It is important to research the potential impact of your investment and the stability of a non-profit. You owe it to yourself and your hard-earned money to do your due diligence. With just a few clicks through online resources, donors can research potential organizations and understand how their dollars are utilized. A number of resources are ready for your use, for example:

•Guidestar: Donors can track down financials and nonprofits’ annual Form 990 which they are required to submit to the Internal Revenue Service each year. Form 990 provides information on the organization’s mission, programs, and finances – such as employee salaries and annual revenue. However, these forms are often more than a year old. Visit www.guidestar.org

•Charity Navigator: Analyzes financial data from Form 990 for organizations that acquire at least $500,000 in giving from individuals and have a total annual revenue of more than $1,000,000. Visit www.charitynavigator.org

•Catalogue of Philanthropy: Working with Raffa auditing firm, audits nearly 250 metropolitan D.C. nonprofits each year for cost-effectiveness, sustainability, and financial transparency. They then select 70 who are featured in the Catalogue, a publication that enables donors to choose and donate to nonprofits by theme (i.e. education, human services, nature, etc.), region and the donors overall interest. Visit www.catalogueforphilanthropy-dc.org

•Twitter & Facebook: Nonprofits use social media networks to keep in contact with their supporters and attract new ones. Consider sifting through their posts, photos and tweets to learn more about programming, events and what messages they portray to the outside world.

•Annual Reports: Review annual reports from the non-profits you are considering, and speak with the executive director and board president to learn more about the accomplishments, goals, funding needs and challenges the organization is facing.