Do's and Don'ts for Holiday Charitable Donations

This holiday season, even with rising unemployment rates, a dismal dollar and an exploding federal deficit, Americans will do what they've always done: They'll give money to the less fortunate.

In fact, 50 percent of all charitable donations by individuals this year will be made between Thanksgiving Day and New Year's Eve. The reasons for this are pretty simple: This is the time of the year when many of us are reminded how fortunate we still are; this is the time of the year when holiday bonuses are issued, freeing up a few extra dollars in the family budget; and of course, this is the time of year when taxpayers realize they need to make a few charitable gifts to ease their tax burden in April.

VIDEO: Watch Out for Holiday Scams
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No matter the motivation, now is when Americans reach for their checkbooks and do what they can to help those who are struggling. And with dollars being stretched tighter than ever, it is imperative that charitable donors make sure their gifts go not just to any charity, but to an exceptional charity.

After being in this business for most of my adult life, I can tell you that not all charities are created equal, and while most are well-meaning, not all are high-performing. If you want to make sure your charitable contribution brings you the most bang for your buck, no matter how much you have to give, here are some helpful hints to guide your giving and ensure you don't get scammed.

Make Sure Your Charity Is Efficient and Effective

Charities have an obligation to their donors, the taxpaying public and the people they serve to operate as fiscally efficiently as possible. Look for charities that are able to allocate at least 75 percent of their operating expenses directly to their charitable programs, whatever they may be.

Twenty-five percent can go to overhead and fundraising costs, but at least three-quarters of every dollar they spend should go to the direct implementation of whatever they do, whether it is cleaning up the beaches, protecting abused women or running an after-school program.

How do you find out this number? One way is to research them online through CharityNavigator.org, or at the Web site of your state Attorney General. Another way is to simply ask the charity what their program ratios are. Good charities love to tell prospective donors about how efficient they are.

You'll hear a lot of talk this time of year that a particular charity is a "really good cause." That's nice, but it's not enough.

There are a million good causes. You need to go a step further and find a charity that is also doing good work and doing it efficiently. With your private investments, we look for a proven track record of success, but in charities we too often get caught up in what their mission is, rather than what they have done. Look at the charity's track record. If they have done good things in the past and can point to legitimate accomplishments, that's a good sign.

Look for Exceptional Leaders

Great organizations are often the by-product of great leadership. In a crowded marketplace with many redundant charities, those that succeed are usually led by visionary and extraordinary management. The difference between good nonprofits and great nonprofits is often one great leader. Read their bios on their Web site. See what they have accomplished, what kinds of awards they've won, how long they've stayed at their job and if they have the respect of their peers.

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