Checking Out Charities

How can you know that the organization you’re donating to is legitimate?

By Deborah Jeanne Sergeant

In 2017 Americans gave about $410.02 billion to charities, according to Giving USA 2018, the Annual Report on Philanthropy.

The organization also reported that 9 percent of all donations are by bequest ($35.70 billion in 2017) and that gifts from individuals plus bequests accounts for almost 80 percent of charitable gifts, compared with 20 percent of financial gifts originating from companies.

When you choose to give, how can you know that the organization is legitimate and significantly benefiting the cause you support?

“A lot of retirees receive solicitations from charitable organizations,” said Diana Apostolova, financial consultant with AXA Advisors in Rochester. “Many marketing materials may or may not clearly explain the benefits of making charitable contributions to these organizations and what is the implication on the retiree’s personal benefits, both moral and financial.”

She advises people to talk with a CPA before sending money. Otherwise, knowing what’s a legitimate organization versus a scam or even an organization that’s wasteful with money can be difficult, though with research, one can find good organizations.

Joe Votava, CPA, tax lawyer and CEO of Seneca Financial Advisors, LLC in Rochester, said that checking with the Internal Revenue Service’s list of 501(c)(3) organizations (https://apps.irs.gov/app/eos) can determine if the contributions are deductible as well as lend more credibility to the organization.

“Public charities have to file a public tax return,” Votava said. “Go on the internet and pull up their information. You have to do some research for yourself, but that information is out there because it’s public. We like transparent, public information from these organizations.”

Votava added that community-based foundations can help identify sound charitable organizations, as well as online tools.

Bryce Carey, partner and certified financial planner with NorthLanding Financial Partners, LLC in Rochester, recommends Guidestar (www.guidestar.com) as a resource for screening charitable organizations.

“It’s a fantastic resource,” Carey said. “You can put in any charity and it will give you all sorts of information.”

Charities can highlight their transparency by quantifying their outcome and sharing their budgets. Givers can select the charities that meet their expectations.

“Especially with very progressive charities, like Lollypop Farm, they post their own initiatives and goals on Guidestar so people can understand the objectives of the charity and they post past charitable works they’ve done” said Scott Klatt certified financial planner with NorthLanding Financial Partners, LLC in Rochester.

Lollypop Farm, an animal shelter in Fairport, posts the number of animals saved, the placement rate with different types of animals, and metrics for the organization.

Klatt said that by using Guidestar, they can provide givers with third-party analysis.

“It gives organizations a platform to communicate their message,” Klatt added.

Carey said that his firm uses this Guidestar in conjunction with Fidelity Charitable accounts (www.fidelitycharitable.org), which enables his clients to donate their charitable budget at once and disburse it among the charities they select whenever they would like over several years. Some clients gain significant tax advantages by using this method.

“They can make charitable contributions at their leisure as any 501(c)(3) listed on Guidestar as often as they would like to,” Carey said. “It’s good for people who have charitable aspirations. This is a high-tech system, almost like online banking, where clients can learn more about organizations and donate directly to causes. They have committed themselves to being long-term donors.”

While donating provides a financial lifeline for charities, becoming personally involved also brings additional benefit to the charity as well as helping donors feel more involved.

“Rather than donate to many different organizations, the more they get involved with one, two or three, the more they understand how their donations are used and the more they can affect how the money is used,” Carey said. “We advise our clients to ‘go deep instead of wide.’”