A few times this Fall I’ve been a guest speaker on teleseminars to talk about charitable giving for companies. Surprisingly few if any of the participant companies actually engaged in due diligence before making cash/check donations to organizations. I hear over and over, “We don’t ask them for information. We just think they are doing a good job”. YIKES! Would you purchase from a vendor without looking into their company, product, testimonials, pricing, etc.?
Without a doubt, due diligence is an absolute must. It is important for your giving records, audit, and ensures you are giving wisely. Due diligence doesn’t have to be a long process requiring a lot of time and effort.
To make certain that your contributions are going to sound, healthy organizations and that your gift qualifies as a tax deduction, here are the 3 essential pieces of information you should gather from the nonprofit.
IRS Determination Letter for 501 (c)(3) Tax Exempt Status. If you get anything, get this. It’s an absolute must that qualifies your gift as a tax deduction because there are as many different types of organizations. For example 501(c)(19) are veteran’s groups, 501(c)(7) are social clubs like college fraternities, garden clubs, and sports clubs, and 501(c)(13) are cemeteries.
Financial Statement and Recent Audit. It’s best to get the most recent financial statement and a copy of their audit. This information provides you the picture of the financial health of the organization. Ideally, you don’t want to give to an organization that is hemorrhaging. This would tell you there is a lack of financial management, accountability and oversight by the board of directors.
List of Board of Directors for Past 3 Years and Annual Report. I always suggest a copy of the board of directors (BOD) for the last 3 years. Why? Because there is a process in by-laws that typically BOD members have a term of service. You want to ensure their BOD members are adhering to that because it is healthy for the organization. When BOD members don’t roll off the board as they should, the organization is not in compliance with by-laws and that should lead you to believe that there are other areas they may not be in compliance with. A copy of their annual report gives you an overall glimpse at their successes.
Maggie F. Keenan, Ed.D., Works with companies and small businesses to create charitable giving programs that impact their bottom-line and the causes they give to. www.givingadvice.com
