Supporting a Charity – Finding the Right Group
It’s always a great idea as a small business to get involved in charitable causes, not to mention as a human being. If you can do so on a personal level by providing goods and services, in this day and age, that doesn’t require you to dig deep into your pockets, even better! True, there are tax benefits to supporting charities (to a degree – check with your accountant and the tax codes), but the real benefit is the difference you make both to the charity and in your own life.
Before you go jumping in and start supporting a charity, however, you need to do some homework, first! Not just for tax purposes, either, although as a business that is important. For ethical and humanitarian reasons, you need to make sure that you are picking a charity that is both legitimate and going to make a difference.
There are some very basic questions that you need to ask about any group before you decide to support them, whether it be financially or through your time & effort.
- Are they incorporated or registered? Federal registration as a 501(c)(3) non-profit is not necessary unless you plan to deduct your donations from your Federal tax return.1 They should, at the very least, be registered as a company with some local civic authority, which in most states means registering with the Secretary of State 2 as a non-profit Corporation. If they are a legitimate non-profit, they should have absolutely no problem providing you with this proof of registration upon request!
- What is their stated purpose? Do they have a Mission Statement? I know this sounds like a silly question, but think about it. Lots of groups can claim to be non-profit, but have they actually taken the time to write a Mission Statement and then follow it? Are their activities in keeping with their Mission?
- Do they have financial statements available for inspection? By law, non-profit groups must file, at a minimum, annual financial statements that are made available to the public showing how their money is spent. Do they make these financials available on the internet where you can easily find them, or do they make you ask for them and wait? The ease of getting these documents is, to me, an indicator of how open the group is and how much they may have to hide.
- How much of their budget actually goes to support their cause and how much goes to “administrative overhead”? How much are the employees and officers of the company being paid to run this non-profit? For example, according to one website recently checked 3 the national average compensation for a CEO of a non-profit agency is approximately $350,000 a year, plus bonuses and benefits, including health care ! Over 1/4 of a million dollars a year in salary to run a non-profit, taken off the top from your hard earned money, while they beg for money to support their cause? Change that to places like the Metro New York City area and you are looking at salaries in the range of $890K per year.
- Do they actually want your help? This may sound like a silly question, but it is actually quite serious. In 20 years of working with non-profit groups, you may be surprised how many times I have approached non-profits and been told that “we have it covered” when offering services and/or labor in lieu of cash contributions. In the world of 501(c)(3) non-profit groups, Cash Is King and Ego Is Everything. Just like any other large organization, bureaucracy tends to take over and the civil servant runs the show. Monkey with their system and you will piss them off. I recently contacted a large animal care organization known mostly by letters (you can probably guess who in two tries) and offered assistance with their website, which is sorely in need of help, but was turned down because I didn’t know the right people to kiss up to in the organization. Like I said – Ego Is Everything.
- How long have they been operating? They may sound great in concept, they may meet all of the above criteria but unless you know the people running the show personally and really trust them, be wary of any group that has been running for less than a year. Non-profit registrations are granted without any type of background checks by the government, as long as the paperwork checks out, so it’s up to you to do the checking yourself.
Ultimately, it’s going to come down to your gut feeling. As a small business, it will probably be easier for you to work with a small charity, because there will be more opportunities for you to participate. However, that doesn’t mean you can work with a big, recognized charity through a local branch. In fact, if you are just starting up as a business, especially a home-based business, this may be your wisest move of all so you don’t get burned. On the other hand, larger charities tend to have more overhead while smaller ones make a more direct impact, so working with a smaller non-profit can give you “more bang for your buck”, so to speak.
Whatever you decide to do, do your homework first before you jump in with both feet. Not only is your money on the line, but so is your personal an professional reputation.
It is worth your time and effort, though, because the rewards are limitless. The satisfaction, the completeness, you feel after supporting a worthwhile cause – be it an hour or several days – cannot be adequately described in words. It simply has to be experienced. There is nothing else in the world like it.
Footnotes:
1. Check with your accountant regarding deductions for tax donations and reference IRS guidelines for Charitable Contribution Deductions (see http://www.irs.gov)
2. Search Google for “Secretary Of State Non-profit Registration”. Many states of online searchable databases of registered non-profits. The IRS also has an online search engine of registered 501(c)(3) groups available here, which is normally kept up to date within approximately 30 days.
3. Non-profit executive compensation search conducted 7/26/09 at SalaryExpert.com