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Getting the Most from your Charity Dollar  

NEW YORK (MarketWatch) -- What do you do with all those unsolicited little gifts that unknown charities relentlessly send you through the mail? Where do you stash all those pads of return-address stickers and all those chintzy key chains and calendars, not to forget the occasional shiny new nickel or quarter or crisp dollar bill?
Answer: If you're smart, you just throw them out.

So advise many professional managers in the world of charities. They argue that effective charities don't need to use giveaways; that unlike the stock market, where it pays to diversify, it is better to invest in just a few charities; that you should concentrate or focus your charity contributions so that they do the most good where you want them to do it.

By contrast, if you fall for the sucker bait and send in countless small contributions -- $25 each or less -- you both blunt your sword and inspire the small charities to buy more mailing lists and send out more little gifts, and so on.

"If you spread your contributions around, your name is likely to wind up on one of those [mailing] lists," says Sandra Minuitti, a spokeswoman for Charity Navigator, which rates the financial health of charities. "The charities just sell them to each other."

She says contributors should be proactive. They should not wait until they get an appeal from an organization they never heard of.

Each family should discuss which causes it intends to concentrate on and then make a charity budget, says Barbara Vanderkolk Gardner, recently retired president of the Fannie E. Rippel Foundation, which supports women's causes.
She adds that if a child is mature enough to receive a regular allowance, and make gifts from it, that child is old enough to participate in a discussion of which causes a family should give to, and how much. That way, the child grows up amid a tradition of family philanthropy.

When you're ready to donate, go to the source, advises GuideStar president and CEO Robert Ottenhoff. "Visit the Web site of the charity itself. That's a good measure of how willing they are to share information with the public."
Ottenhoff also advises asking a charity three questions: Why should I give to you? What will you do with my money? How will you measure the effectiveness and impact of your organization?

Before giving to a charity, assess its financial health. According to Charity Navigator, "the most efficient charities spend at least 75% of their budget on their programs and services and less than 25% on fund-raising and administrative fees."

To see how a charity stacks up, visit www.charitynavigator.org and search by charity name. The site will give a quality rating for the organization from one to four stars (one is poor, four is exceptional), and provide a snapshot of its financial and leadership situation.

The site tells what percentage of its income the charity spends on fund-raising and administrative expenses (vs. program expenses), how much revenue it generates and more. It even offers a side-by-side comparison with similar charities.

By visiting www.guidestar.org, you also can find the charity's Form 990, the annual return that certain federally tax-exempt organizations must file with the IRS. The site lets you view the three most recent 990s of many organizations for free.

One trend in philanthropy is that more people are spending more time studying an organization before they donate. There is no one-size-fits-all formula for how much to give. Two percent of personal income is commonly cited, though professionals say that amount would be a stretch for many donors.

In any event, Americans are remarkably generous. Last year they gave $260 billion to organized charities, with more and more conveniently giving online with their credit cards. Most of the money came from individuals, not foundations or corporations.

Less-affluent people tended to give more than the affluent, and people from the South gave more than in the North, on a per capital basis. The biggest recipients were religious groups, including churches and synagogues, followed by educational institutions and health charities.

In recent years the only category that has declined is the arts. On the other hand, human-services charities -- such as food banks, homeless shelters and meals on wheels -- have seen an uptick, probably because of the attention that Hurricane Katrina drew to the plight of poor people in America.

But when it comes to charities in America, almost all the numbers have been going up, and every sign suggests they will continue to do so.

Marshall Loeb, former editor of Fortune, Money, and The Columbia Journalism Review, writes "Your Dollars" exclusively for MarketWatch.

By Marshall Loeb & Ismat Sarah Mangla,
Last Update: 12:03 AM ET Nov 8, 2006

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