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Help Clients Evaluate Charities

Ten suggestions to share

Many clients are confident that their generous donations are having a positive impact upon the nonprofit organizations and causes that are most important to them. Consequently, they don’t seek the advice of their financial, tax and legal advisors in this area, even though the advisors can be helpful in numerous ways that will enable them to have an even greater effect on their favorite charities.

Other clients need guidance in their charitable efforts and may not know where to turn for help. Some may be charitably minded clients who’ve had or will soon have a liquidity event that will enable them to be more generous in their contributions, while others may be longtime donors who may question whether they’re having the impact they envisioned or whether they should continue to support the same causes and charities or explore different options.

While most advisors feel that it’s not their responsibility to identify charities that clients should support, they can help many of their clients understand how to best vet and work with nonprofit organizations. As a result, their clients will be able to feel a greater sense of confidence, accomplishment, satisfaction and pride in knowing that their support is having a significant effect.

10 Suggestions

Here are 10 suggestions that advisors can share with their clients. When evaluating charities, clients should:

1. Look at the charity’s mission and determine if this is important to them. In an email, Carolyn O’Brien from MissionBridge Philanthropy LLC states, “Effective philanthropy starts with a clear purpose,” so the missions of the donors and their grantees need to be aligned.

2. Review the financial information. Is it transparent and recent? Are the expenses in line with the budget? Has the budget increased or decreased in recent years? Look through the current Form 990 and verify its tax-exempt status.

3. Look at the outcomes. How many people has the organization helped, and has that increased or decreased over time? Given the size and budget, is that number reasonable? Catherine Chapman from Fullanthropy says via email that “Great nonprofits must create lasting change for their clients and the community through the services that they offer” and the services rendered should “be documented in the form of outcomes.”

4. Talk or meet with the organization’s leadership if the donation is significant enough. Has there been much turnover of key staff members? How can the donation be best utilized? Who will be the contact person for the donor?

5. Identify who’s on the board of directors. Are there many or few board members? Are they business or community leaders? Especially if a donor is considering joining a board, they should meet with some board members.

6. Look at the main supporters. Are there many funders or few? Have key funders been involved for some time? Does the client know any supporters?

7. Discuss with the leadership how the donor can be most helpful. Besides financial contributions, are there other ways that the donor can help? It’s important that donors don’t demand too much of the charities they support, especially when their donation to a Section 501(c)(3) organization isn’t significant and its staff is small. Clear communication is essential to help ensure long-term relationships.

8. Visit the organization if possible or volunteer to really get to know the people and quality of the work.

9. Determine the charity’s reputation.

10. Have a good feeling about the organization and feel that their contributions and efforts are appreciated. Susan Winer from Strategic Philanthropy Ltd. said via email, “When donors consider a gift or grant to an organization they are, in essence, creating a partnership that is (or should be) based on open and honest communication about intent, capacity, alignment of interests and financial stability.”

Outside Sources

Should clients need further help, there are numerous options available. For various reasons, many clients don’t expect, and often don’t want, their attorneys, financial advisors or accountants to help them at a deep level or manage all of their charitable activities, yet they would welcome their advisors’ help or direction in getting started or in referring them to outside sources.

Some professional advisors refer their clients who need more assistance to philanthropic advisory firms. These firms strictly help their clients achieve their philanthropic goals and don’t provide financial, tax or legal advice. They may help with developing a charitable mission, involving the next generation in the family’s philanthropic activities, identifying worthy grantees, conducting site visits or assisting them in working with their grantees.

Advisors can also refer their clients to member organizations that have educational conferences and resources for donors, such as the National Center for Family Philanthropy and Exponent Philanthropy. Because the number of donor-advised funds (DAFs) has increased significantly in recent years, some of these DAF sponsors have increased the help they’re providing to their donors. For instance, the American Endowment Foundation DAF now provides helpful content for donors, as well as for professional advisors, and refers its donors to some of the leading philanthropic advisory firms in the country when appropriate.

Everyone benefits when financial, legal and tax advisors engage in the charitable conversation with their clients and ascertain their needs and desires pertaining to their current and future philanthropic goals. Client relationships are deepened, clients are more likely to have the impact they envision, and charities benefit by receiving the support they need that can put them in a better position to help them fulfill their missions.

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