If you're hoping to make a charitable contribution in 2013, the deadline is fast approaching. But before writing that check, you may want to do some homework.
About 25 percent of all online donations happen on Dec. 30 and 31, and, too often, many people don't take the time to research the charity, said Bill Parent, director of the Center for Civil Society at UCLA.
"It’s a lot of the seat of the pants giving that happens at the end of the year," Parent said.
If you don’t do the research, San Francisco consultant Hope Neighbor warns you could miss nonprofits that will help more people with your donation.
“It is important that when we give that money away, that it is going to do some good," she said.
Her firm, Hope Consulting, did a study that showed only 35 percent of all donors did research in 2009 before they gave to charities. That’s because it’s not a decision they have to live with every day or the most important decision they have to make, Neighbor said.
“Americans tend to research things that are really important to them [such as] choosing their children’s school,” Neighbor said.
How to do the research
If you want to research a charity, here are some tips on where to start. Parent said donors should think about where they want to have the most impact and where their dollar is most needed.
Once a few nonprofits have been identified, go to Guidestar.org. This website shows financial information for nonprofits. You can look up how much the nonprofit gets in donations and how much it pays its top executives. You should also take a look at the charity's mission statement.
You should also go on the IRS' website and determine whether the nonprofit is registered with the IRS, so that you can receive a tax break.
“With access to the Internet, there’s no excuse about not doing research and not knowing about where people might have needs,” Parent said.
Parent also recommends checking out ratings websites such as Charity Navigator. This website tracks the financial health of charities and rates them. The site has lists such as "10 Charities Routinely in the Red" and "10 of the Best Charities Everyone's Heard Of."
But Abby Fifer Mandell, executive director of the Society and Business Lab at USC, said people should be cautious about making donation decisions solely on ratings websites. She said some ratings websites factor in a nonprofit's overhead costs versus the money going toward programming. She believes there are other factors at play when people decide their charity.
"After all, we don't decide what department store we shop at based on how much they spend on marketing and staffing," Fifer Mandell said. "We decide if it's a product we want to buy."
Globally vs. locally
If donors are concerned about making the biggest global impact, Fifer Mandell said they should consider big-name international relief organizations, which would include nonprofits like the Red Cross. She said these organizations are deeply knowledgable about local cultures and the needs on the ground around the world.
"Their job is to know what communities and neighborhoods and organizations need the most help at any given moment and how they need they help," Fifer Mandell said.
She said if donors are focused on one part of the world, they may want to research groups that serve that part of the world.
Parent said donors should also consider donating locally and to look for where the money is needed most. He said only 12 percent of all donations go to human service organizations. The bulk go to universities, churches and civic organizations.
If they don't have time to do the research, he recommends donating to nonprofits such as the United Way that has been effective at evaluating where needs in a community are.
Fifer Mandell said people can also help by supporting products and services from social enterprises in Southern California. For example, the Homeboy Industries' the Homegirl Cafe employs young women and men who were once at high risk for being involved in gangs. If donors wanted to dine at the Homegirl Cafe, that money would also benefit the community.
End of the year rush
Many donors rush to donate money at the end of the year for the tax benefits.
Jason Melillo, an audit partner with Pasadena-based Krost, Baumgarten, Kniss & Guerrero, said there are several ways donors can give and receive a tax break, while stretching their contribution even further.
Donors should check with their employer to see if their workplace has a program to match the donation, Melillo said.
He said donors can also give their stock to a charity. For example, a person originally bought stock for $1,000 and it has climbed to $100,000. She can donate the $100,000 worth of stock to a charity and not have to pay taxes on it. The charity can cash the stock for $100,000 and also not pay taxes on it, Melillo said.
With 2014 coming up soon, Melillo said it's a busy time for him and other CPAs.
Parent with UCLA's Center for Civil Society, will be among those donating money toward the end of the year. He'll do his Christmas shopping on Dec. 23 and work on his charitable donations the following week.