10 Things we know to be true – and cannot ignore

Pay attention and allow your giving to have meaningful and lasting impact

There are many things in life that we know to be true but unfortunately often ignore:

  • If it’s too good to be true, then it is too good to be true.
  • Let your conscience be your guide.
  • Don’t eat yellow snow.

Passed down from generation to generation, these simple lessons are essential to integrate into our lives.

If you have ever entertained an unbelievable offer, have found yourself struggling with a decision that you feel conflicted about or if you have lived through a Canadian winter, there are some things you must not ignore. Just as we educate ourselves to protect against unwanted consequences, with the right guidance and experience, disaster can be avoided, so too, when it comes to charitable giving. Having the benefit of guidance and experience can play a valuable role in helping you purposefully invest your hard-earned money in a cause or project.

One would never buy a car or give a large sum of money to just anyone to invest without doing your due diligence – or have someone you trust to provide you with the information you will need. At R&D Philanthropy as your trusted advisors, we help you merge your passion and purpose so your charitable giving will have meaningful and lasting impact.

The following “white snow” issues are issues one should never avoid, and they should be top of mind as you consider responding to a charitable request or when contemplating making a gift to charitable organization.

1. Make your charitable contribution to a bona fide charitable organization

If it is your intent to help a recognized organization that helps others, the recipient should possess either a Canadian charitable registration number or US designation as a 501(c)(3). With over 85,000 registered Canadian and 1.8 million US charitable organizations, there are plenty of ways to make a difference. Registered charitable organizations are duty bound to follow certain accountability guidelines and to be able to provide you with a charitable tax receipt or eligible to receive tax- deductible contributions.

2. Governance = Responsibility = Accountability

Charitable organizations do not operate in a vacuum. Charities require governing volunteer bodies, frequently known as a Board of Directors, to oversee and approve their strategy, policy, and operational activities. Responsible charities have accountability and operational rules in place to mitigate risk (i.e., fraud, unapproved purchases) and to ensure that the objectives of the charity are always being met. Most organizations publicize their list of Directors, and contributors should always feel welcome to address concerns to leadership. Leadership are ambassadors and promoters and should know how the organization operates or who to ask within the organization for more information. Directors have a fiduciary responsibility and are trustees, serving for the good of the community. If it is not immediately evident, never hesitate to ask who is on the Board and who – lay or professional – you can speak to about your gift.

3. Recipient organizations issue charitable receipts

A bona fide charitable organization has the authority – the privilege – to issue charitable tax receipts. You would never trust anyone with your driver’s license and the same goes for a charity. If you intend to support a charitable organization, make your gift directly to them rather than a 3rd party. Unless the organization is part of a larger network that has the legal authority to accept and receipt gifts on behalf of the intended recipient, beware. If you have a question, ask it. It’s about ensuring your gift is used as intended.

4. Up-to-date filings are a must

Like all individuals, charities complete tax returns to ensure accountability. In Canada, charities complete a T3010 return and most of the information is available to the public. You have every right to access the information and satisfy yourself that there are no issues, no surprises. Especially when making larger gifts, charitable organizations should provide you with confirmation that the charity return has been filed and all filings are up to date.

5. Bona Fide charities spend money on overhead/administration

Lawyer and Charity law expert Mark Blumberg said in a presentation, “if a charity says that they are not spending anything, or very little, on overhead/administration either they are being untruthful, or they are not properly accounting for their expenses”. Mark wrote an excellent paper on the subject, demonstrating that overhead is a necessary and acceptable expense of a charity. As he notes, there is an acceptable limit of 35% of revenues, which mirrors the US Better Business Bureau statement. Similarly, in a recent article in The Chronicle of Philanthropy, in some sectors, charities that wisely spent as much as 35% of their budget on overhead, were more successful that those who ‘starved themselves’.

Charities must spend money on staff, supplies and supports, accounting and record keeping including tax filings and communications with donors to successfully do their work. That charitable organizations must spend money is a fact; how they spend their money is the important factor when evaluating efficiency and effectiveness. It is responsible to honestly.  Organizations that are upfront and report the cost of overhead and fundraising costs, educate their contributors. As a contributor, it is important that you satisfy yourself that the overhead/ administration costs are reasonable.

6. Hiring and paying professional staff is responsible management

Successful charities rely on the expertise of trained professionals to oversee their operations including direct service, administration, and fiscal management. Paid professionals are partners with the volunteer leadership and together they are charged to strategically plan and manage the affairs of the charity. Professional associations exist within the charitable sector as they do in the for-profit world. Like lawyers and accountants, executive directors and other members of the team earn professional designations attesting to their qualifications in their job. Many professional fund raisers, those who generate revenue in the charitable sector, may earn a CFRE –Certified Fund Raising Executive – the gold standard. A CFRE has trained and is tested in the field and operates by a professional Code of Ethical Standards. While not every fundraiser is a CFRE, the principles of responsible fundraising should be employed and shared with contributors.

7. Communication = Transparency

Dave gave his RRSP account to a money manager who sounded knowledgeable. He accepted that he should not watch the day-to-day market swings, so he waited for his monthly statement. When the statement did not arrive, he reached out to the money manager and was advised that statements are available on a quarterly basis. You can imagine the discomfort when the quarter concluded and Dave was not sufficiently informed of the progress of his account.

When you respond to a charitable request, you should expect to have regular and reasonable updates on the status of the project or program. Any gift, large or small, is meaningful for a bona fide organization. If the organization has not initiated regular reporting, ask for updates. It doesn’t matter if your gift is part of a sustaining initiative or a capital project, it is important to know that your gift is being used as it was intended.

A charity that is willing to accept your gift must be more than willing to inform you – positively or otherwise – about the status of the project or program. Generally, organizations are only too willing to provide you with detailed updates including budget to actual figures, progress timelines and photographs that promote their great work. Reporting and the willingness to report is a valuable input as you assess your desire to make a future gift to the organization.

Contributors have rights and the Association of Fundraising Professionals has established a Donor Bill of Rights which all CFRE Professionals adopt. Fundamental to the Donor Bill of Rights is the commitment to inform for all contributors to “fee free to ask questions when making a donation and to receive prompt, truthful and forthright answers”.

8. Ask to see your gift at work

Some of my greatest moments were introducing a contributor to the project they funded. As a contributor can be exciting to make the commitment. When dealing with a capital campaign or special project gift, unless there are confidentiality issues, you are entitled see what you have contributed to. Most organizations are only too happy to have their contributors observe their investment at work. Contributors are entitled to ask to visit or get physical updates on funded projects. Organizations know the best way to establish a lasting relationship and the potential for future gifts, is by being accessible. Be proud of what you are supporting and enjoy the fruits of your labours!

9. Understand what you are supporting

While it may seem obvious when asked to make a gift, contributors should know that the funded projects they are asked to support are within the “objects” which describe the purposes for which the charity has been approved to operate. So too if a contributor asks the charity to undertake a project outside of its objects, it must be aware of its operating boundaries. While feeding the hungry may be necessary and honourable, if the charity has been constituted for the sole purpose of providing educational services, and a major contributor asks the charity to extend its programming reach, it may put the status of the gift and the charity’s tax-exempt status in jeopardy. Contributors are entitled to view incorporating documents.

10. Planning is key to success

Does the intended recipient have an annual budget? Are there timelines for achieving financial or programmatic goals? Who oversees and approves the plans? Who monitors and reports on progress, problems, or day to day undertakings? Charitable organizations, to be successful, require planning. While it is not up to the contributor to determine the plans, they should be available, if asked. Remember, you are not just giving money blindly – you are making an investment in the welfare of the community.

R&D Philanthropy will help you strategically consider, structure, and execute contributions that will merge your passion and purpose so that your gift can have a meaningful and lasting impact. By embracing guiding principles, white snow issues as noted above, we will help you, the contributor, and the recipient charitable organization, be successful today and tomorrow.

Contact us to learn more about how we can work together and strategically plan a process of giving that will be most effective for you.