For business owners and entrepreneurs, an increased capacity for philanthropy is one of the most rewarding aspects of their career. Not only are there tax benefits to charitable giving, but you can take pride in knowing that your work isn’t just putting food on the table and providing employment for your team: it’s making a real difference in the world.
But how do you know what charities are worth giving to? Unfortunately, deciding on recipients isn’t as easy as looking up a charity’s website and reading their mission statement. While we would love it if all charities were on the up-and-up, some are more charitable than others.
Plus, there’s the issue of controversy – as a business owner, your charitable giving reflects not just on you, but on your company as a whole and the people who work for and with it. Your philanthropic efforts speak loudly – so make sure it’s a message you can stand behind.
Here’s how to make the right pick among the many non-profits and charities out there!
Guidelines for Choosing Charitable Giving Recipients
1) Check with charity research organizations
Filtering through each website for potential charities is time-consuming and potentially ineffective depending on their transparency in reporting. Thankfully, there are multiple highly reputable charity research organizations dedicated to making charity and non-profit information easy to access.
Two big players are GuideStar and Charity Navigator. GuideStar, we must note, has premium features that must be unlocked with a subscription. Even without one, however, you can see a fairly detailed overview of an organization’s mission statement, strategies, numbers, and organizational demographics. Charity Navigator goes a step further by providing a score for each charity.
These scores are based on several factors, including:
- Accountability and transparency (ie. Governance, policies, and transparency)
- Financial performance metrics.
If you’re curious, here are charities that have scored a perfect 100!
2) Look for the 75% threshold
Every non-profit is going to have expenses beyond that of their program. While this may be true, you want to give to charities that are efficient and consistent in giving at least 75% of their revenue to their programs and/or cause versus paying organization officers. The last thing you want is to line the pockets of greed under the guise of helping a cause you care about. Watch out for charities that sit on too much cash or devote too much money to paying their officers. It’s one thing to make a living; it’s another to fleece donors.
3) Stick to your philanthropic mission statement
If you know a charity is reputable, how do you know if it’s a good fit? Start with writing your own philanthropic mission statement. You can do this on a personal level or through the lens of your business. This includes highlighting the causes you wish to champion and why.
It’s far better to establish a sustained relationship with charitable organizations and causes rather than picking based on a whim or trend. This makes your giving more meaningful and intentional. Don’t know where to focus?
Think over the last year. Maybe a recent health struggle has you wanting to give to cancer research or a trip to the wilderness makes you want to give to nature conservation efforts.
4) Consider the scope of your impact
Because there are so many charities to give to and so many causes to choose from, you’re going to have to narrow your scope. Do you want to give to local organizations or global efforts? The big benefit in giving locally is that you can more readily see the impact in your community, and you may feel as though your donation will make a bigger difference to an organization with limited reach and resources.
At the same time, global organizations often have more experience and reliability; while you may never see the direct impact of your philanthropy, you can, after researching, know that your organization is making the most of your money through academically backed methodology that reaches the most people and places possible.
One isn’t better than the other; you may want to do both or alternate year-by-year.
5) Tax-status is key
Lastly, you’ll want to confirm tax-exemption status. Being called a charity or nonprofit doesn’t automatically mean they’ve properly registered as a tax-exempt organization with the IRS. You can check registration status here.
