When you make a charitable donation, do you just mail a check and forget about it, or do you care how the organization uses your donation?
How can you best ensure your hard-earned funds are being properly used by a charitable organization? While it seems to make sense that organizations use their money wisely, how can the donor be sure the organization is putting donations to the best possible use?
First of all, it’s always a good idea to check the credentials of a charity before you give and make sure it is really genuine. Is it important to you if the organization has a tax-deductible status?
However, even when the charitable cause is genuine, the money that you are donating may still not necessarily go to the right place due to downright inefficiency. Charities are run by idealistic people, but are they also business-minded? Even though the directors may be honest and hardworking, they may still not be putting the donations to the best use. They may be doing great work – but with a little business or financial guidance they could be doing even better.
I was once involved with a donor who sponsored the purchase of several hundred library books for a school in Israel. Months later, the donor arrived at the school expecting to see a fully-stocked library (or at least the empty shelves if the students checked out all the books). They were disappointed to find cartons of books sitting in the corner. They were told, “We bought the books with the money you gave, but had no money to build bookcases.” Needless to say, the donor was shocked that they hadn’t approached him earlier, for he surely would have sponsored bookcases too! After all, without them, his donation was useless.
For this reason, if you are thinking of making a significant donation to a particular organization, consider employing the services of a family office to oversee the donation. A family office carries out due diligence into the activities of non-profit organizations on behalf of the philanthropist. This work is extremely useful to both the donor and the recipient. The donor has peace of mind of knowing that the money given is being used for the intended cause in the best possible way, while the charity gets a chance to efficiently further its mission.
Indeed, this was the happy ending of the library story. The donor hired a family office to oversee the library, from the construction of bookcases until the books reached the hands of the students.Doug Goldstein, CFP®