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.

Give Locally If You Can

If your goal is to combat global warming, or to alleviate hunger in Africa, you of course need to find a charity that works internationally. But otherwise, look for local groups in your community. They're easier to research, you can literally see the impact of your support and their success leads to the direct betterment of your community. If you have smart friends, ask them what groups in town they prefer to donate to.

So now you know what you're looking for in a charity this holiday season. What are things you should be looking out for and trying to avoid with your holiday giving?

Politely Decline the Clipboards on the Street

The area where we find the most fraud is with the clipboard people in the street or those knocking at your door. Think about it -- ever see Harvard or the Red Cross going door to door or trying to track you down in your city's streets? Too often, these are disreputable groups, with little to no accountability.

Sadly, there's enough fraud here that I would recommend that you don't give any money to people with clip boards on your street or to those jars at your convenience store. The truth is that charity giving should feel corporate or clinical, and if anything about your donation doesn't feel completely professional, there's a decent chance you're about to get scammed

Never Give Over the Phone

Be wary of fundraisers who pressure you to make a contribution over the phone. Never divulge your credit card information to someone soliciting you via the phone. Instead, ask the fundraiser to send you written information about the charity they represent and do some research on your own. Once you feel comfortable with the charity, send the organization a check directly in the mail, or give through their Web site, thus ensuring 100 percent of your gift goes to the charity and not the for-profit fundraiser.

Many phone calls soliciting charitable donations come from for-profit professional telemarketers that keep a sizable portion of your donation for themselves and don't really care about the cause they're promoting. Find out if the person with whom you are speaking works for a telemarketing company or is a volunteer or employee of the charity itself. Professional, for-profit telemarketers typically negotiate their fees ahead of time and know exactly how much of every dollar raised goes to the charity and how much stays with the telemarketer.

Companies often charge the charity 50 to 90 cents of each dollar raised. Ask the person on the other end of the line to tell you how much of your donation will actually end up with the charity. By law, they must tell you.

Throw Coins in the Bucket if You Want, But Know You're Having Little Impact

For many, holiday giving is synonymous with throwing coins in the Salvation Army buckets. This is all fine and good, but you should know that the main purpose of those buckets is as a marketing tool for one of the world's largest nonprofits.

It's really hard for the spare change to add up to a lot of money; in most cases, they have to pay a guy to stay there and ring the bell, so they're merely hoping to raise enough per hour to break even on the bell ringer. It's an effort to get their mission statement out and in that way, those omnipresent spokespeople for their cause are invaluable. The general rule is that loose change doesn't add up to much. If you really want to help the Salvation Army, keep the change in your pocket and go home and write them a real check.

This holiday season, it is expected that charitable giving will again be down, as it was in 2008 for the first time in 40 years. This is, of course, horrible news for the most vulnerable people of our community, as more and more of our citizens are at-risk than at any time in recent memory.

Charities have seen a perfect storm line up against them: Foundation assets are down, corporate philanthropy is weakened, government funding is disappearing, and individuals, the backbone of the charitable world, are struggling to make ends meet at home, before they have the capacity to help others. More of our nation's most vulnerable citizens are at-risk than at any time in recent memory. The best way we can help them is to make smart charitable decisions this holiday season.

Trent Stamp is executive director of The Eisner Foundation in Los Angeles. Previously, he was the founder of Charity Navigator, America's leading charity watchdog.

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