t's better to give than to receivebut it wasn't always easier until the advent of online
E-philanthropy, as the phenomenon is known, is the act of making charitable donations online. And it's becoming increasingly popular as more and more nonprofits scale the electronic fence.
Online giving still is in its infancy, which means there are many pitfalls for givers who don't do their homework. You'll still have to do some legwork by mail and phone. But the Internet is a great place to find and research a good charity before you click away the family silver.
Find a worthy cause
With almost 1.5 million private nonprofits and charities in the U.S., you should have no problem finding a cause to suit your interests. Because of the vast number of nonprofits, however, it's impossible for any one government agency or organization to monitor them all. Clearinghouses such as America Online's Web site helping.org lists 620,000 nonprofits on its site, but it doesn't endorse them.
If you prefer to give closer to home, the Local Independent Charities of America can point you to a worthy cause in your area. Yahoo allows you to search organizations from its home page under the heading "Business and Economy." Your chamber of commerce, Better Business Bureau, or state government also should have a listing of local nonprofits and charities.
Is this the start of a new revolution?
Just how much money e-philanthropy will make for charities is anyone's guess. The American Association of Fund-Raising Counsel, New York, estimates that the total of all donations made in the U.S. last year reached $190.16 billionan all-time high. But so far, only 1.2% of contributors say they give online.
The Salvation Army, a charity behemoth with a presence in 107 countries, has only allowed Web site donations for six months, so it's too early to gauge its success, the charity says. Save the Children has had considerable activity through its site, and receives an average of $147 from each of its Web site donors.
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Online giving for the enlightened mall rat
Shopping portals such as iGive.com and GreaterGood.com have blurred the line between for-profit and nonprofit organizations.
These portalsmany prefer the term online shopping mallact like the front door of a mall. After you register, you "enter" the mall and buy products from vendors registered with the portal. Often you pay the same or less than if you bought directly from the vendor's site. "You can shop for anything from toothpaste to clothes to luggage," says Jason Sherman, spokesperson for iGive.com. The iGive.com portal, started in 1997, was the first of its kind.
In most cases, the vendor pays the portal a percentage of the purchase price. The portal then splits the commission with a charity of your choiceat no extra cost to you or your chosen cause. Some sites, such as www.4Charity.com and www.charitymall.com say they don't take a cut of the commission.
Tax-deductibility is still a fuzzy issue for shopping portals. The National Charities Information Bureau (NCIB), an organization that promotes informed giving and evaluates charities, says donations to charities that result from these purchases are not tax-deductible.
In 1999, however, iGive.com designed a patent-pending system that allows members to deduct the portion of their purchases that were donated to qualifying organizations, but adds that it may not apply to every person or situation.
To date, GreaterGood.com has generated more than $2 million for the causes on its site. iGive.com's 115,363 members have raised about $788,000 for more than 9,000 causes with an average donation of 8% of the purchase price. At iGive.com, members can elect their own causes and the portal will conduct a background check.
"We allow people to raise money for anyone, as long as the organization doesn't advocate violence and isn't political," Sherman says.
As a result, the portals have given exposure to many small nonprofits that would have been overshadowed by better-known charities like the American Red Cross or the American Cancer Society.
Not all the sites are as forthcoming as iGive.com or GreaterGood.com so you need to be particularly cautious. Before you sign up, read the terms of the agreement. They often can be found under the "FAQs" or "About Us" sections of a site. And don't be afraid to call the charity to ensure that your donation arrived.
"We're still fairly early into the online experience," says William Massey, president of the NCIB. That means less information is available about the charities registered with the portals. That's likely to change in the future, he adds.
It's an e-jungle out there
Anyone can nail up a shingle in cyberspace and call it a charity. So how do you separate the worthy from the unworthy? Whether you're donating through an online shopping mall, the organization's own Web site, or by snail mail, you'll want to know a few things about your cause: Its mission or purpose, whether money is spent efficiently, how much of your dollar is used for programs, and how much for other expenses, such as administration or fund raising.
The NCIB and the Philanthropic Advisory Service (PAS), an arm of the Council of Better Business Bureaus, suggest a charity should spend at least 60% of every dollar on programs.
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Conduct an open book exam
One measure of a good charity is something you can't always find onlineits willingness to share financial information freely. Another simple standard is, "Do they do what they say they are going to do?" says Massey.
A good place to start your research is the organization's own Web site. Also, contact a local chapter of the charity directly and ask for a copy of its annual report and IRS Form 990 (some organizations post this information on their sites). Any reputable charity will be happy to send you its financial information.
The NCIB, PAS, and the American Institute of Philanthropy (AIP) provide a host of resources on their sites, and a set of standards for nonprofits and charities. The PAS lists detailed information about 200 of the most-asked-about charities from their total assets toin some casesthe CEOs' salaries.
The NCIB lists 400 major charities, as well as links to the Internal Revenue Service (IRS), the Federal Trade Commission, and government offices in each state that register charities. The AIP also rates 400 charities.
Although states are primarily responsible for monitoring nonprofits, the federal government provides a few safeguards. Many nonprofits are listed as 501(c)3, that is, they have been granted tax-exempt status by the IRS (religious organizations are not required to file for tax-exempt status). Generally, contributions to a 501(c)3 are tax-deductible, but check with the organization first.
All tax-exempt organizations are required to file a Form 990 every year with the IRS. The form is a statement of the organization's financial activities. Guidestar has thousands of Form 990s and other financial information stored in a searchable database of 640,000 organizations. You also can contact your IRS district office for a copy.
By itself, 501(c)3 status is not a stamp of legitimacy from the IRS or anyone else. And many sound charities are too small to qualify for 501(c)3.
No matter how you donate money, remember your financial situation is unique. Keep accurate records, hold on to your receipts, and consult a financial adviser before you make a gift of any significance.
|© 2000 Credit Union National Association Inc.