The Smarter Giving Guy

Guide lays out the contribution deduction rules

SG Guy — Thu, 26 Aug 2010 22:46:06 +0000

The IRS has issued an updated guide for donors and charities, spelling out the contribution deduction rules. Publication 1771 — with the not-so-jazzy title “Charitable Contributions, Substantiation and Disclosure Requirements” — provides a solid, plain-language statement of the recordkeeping, proof and disclosure rules. A must-have for every any donor who wishes to deduct donations on his or her Federal income tax return, for any organization that accepts donations, and for anyone who prepares tax returns for others. The price is right for this 16-pager: you can download it and print it out for free from the IRS website. IRS Publication 1771 (PDF)

Charity conflict of interest policy sample

SG Guy — Sat, 21 Aug 2010 00:15:04 +0000

Does your favorite charity have a written conflict of interest policy?

IRS Form 990 asks charities whether they have such a policy. While having one isn’t required by the Internal Revenue Code, the Form 990 question is a pretty strong suggestion that a charity have such a policy in place. We agree wholeheartedly with the suggestion.

The IRS has gone so far as to include a sample policy in Appendix A to Form 1023 (application for tax exemption). IRS Sample Conflicts Policy

We’ve also attached a sample policy we created — feel free to use it, subject to the caveats included at the top. SGG sample Conflicts of Interest Policy

Read the IRS website comment on conflict of interest policies.

I love AIP’s work

SG Guy — Fri, 06 Aug 2010 22:24:36 +0000

The American Institute of Philanthropy (AIP) is a charity watchdog and information service. At its charitywatch.org website, it publishes an ongoing list of its top-rated charities (those earning ratings of B+ or better). It also publishes a charity rating guide three times a year, where it provides its ratings for 500+ larger, national charities. The guide is available to members who donate $40 or more, and is quite helpful to those who want to dig deeper into the operations of charities they are considering supporting.

While some disagree with its approach, AIP takes a hard look at the information provided by charities in their IRS Form 990s and audited financial statements. It focuses on percent of spending on programs, cost to raise $100, asset reserve levels, charity compensation and other indicators. It adjusts information provided in charity reports to reflect its independent look at reported spending allocations.

I wish AIP had the resources to cover more charities — almost 500,000 public charities file Form 990 for 990-EZ, and it covers about 550 of them.

AIP’s charitywatch.org site. AIP’s membership page.

“Charity” telemarketer hit with $18.8 million fine

SG Guy — Thu, 05 Aug 2010 22:25:12 +0000

The “charity” telemarketing company Civic Development Group has been ordered by the Federal Trade Commission to pay an $18.8 million fine, the largest penalty ever handed down in a consumer protection case — as detailed in the American Institute of Philanthropy’s latest Report. CDG and its owners have now earned our not-so-coveted Charity Skunk Award.

According to the AIP report, CDG telemarketers lied to potential donors about the portion of moneys that would go to charity, and typically turned over not more than 15% of the moneys raised to charity. CDG fundraised for numerous local firefighter, police and veterans charities and also had contracts with several groups that received “F” ratings from AIP. Read the AIP article.

Read our May 2009 article – where we commented “The connection between sleazy ‘charities’ and paid telemarketing can’t be denied — they frequently travel together” and we encouraged donors to join us in adopting a “rebuttable presumption” approach against donating to charities that use paid telemarketers.

Real police charity, bogus solicitor, don’t give cash

SG Guy — Sun, 01 Aug 2010 21:26:22 +0000

Tampa Bay police apprehended two bogus solicitors using the name of a recognized police charity. The couple had also been active in Orlando, and when apprehended were headed to Louisiana.

While the report doesn’t mention it, I’m guessing they looked for cash donations. If a donor wrote a check to the police charity, the scammers would have to alter the check to get anything for their efforts. If they did that, the donor likely would get their money back from the bank (for honoring a false instrument). But, if a donor gave cash — it’s gone. A good reminder about the perils of donating cash.

Read the Tampa Bay Online story.

At-risk nonprofits get last chance from IRS

SG Guy — Fri, 30 Jul 2010 21:03:05 +0000

Small nonprofit organizations at risk of losing their tax-exempt status because they failed to file required returns can preserve their status by filing returns by Oct. 15, 2010, under a one-time relief program announced by Internal Revenue Service.

Is your favorite nonprofit one of them? The IRS has made the list available to the public — there are more than 35,000 nonprofits at risk in California alone. For many, getting back on track will be quite easy. Neither larger nonprofits nor private foundations, however, are included in the last chance program.

According to the IRS, it will publish a list of revoked organizations in early 2011, and donors who contribute to any of the at-risk organizations are protected until the final revocation list is published.

Read the IRS release.

Charity abuse makes IRS top-5 scams list

SG Guy — Mon, 26 Jul 2010 14:37:49 +0000

The IRS has released a summertime warning on top tax-related scams. Abuse of charitable organizations and deductions grabbed 4th place, in the company of phishing, return preparer fraud, hiding income offshore and frivolous arguments.

Elaborating on charity abuse, the IRS reported

The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.

Read the IRS release.

Calculate a charity’s program spending percentage

SG Guy — Tue, 29 Jun 2010 16:13:29 +0000

Want to calculate a charity’s program spending percentage?

You can do it in three steps:

Find the charity’s latest Form 990 or Form 990-EZ return.
Find the amounts of program service expenditures and the amount of total functional expenditures shown in the return*.
Divide the program service expenditures by the total functional expenditures, and multiply by 100. You now have the program spending percentage for that year.

Warning: Program spending percentages should not be used standing alone. They are just a part of an overall evaluation of a charity and its performance. A charity spending a high percentage on programs, where the programs themselves accomplish little, is by no means an effective charity.

* For a 2009 or 2008 Form 990, see page 10, line 25, columns (b) and (a). For a 2009 or 2008 Form 990-EZ, see page 2, line 32 and page 1, line 17.

Car donation charity a clunker, charges Cuomo

SG Guy — Thu, 17 Jun 2010 02:26:21 +0000

The New York Daily News reports that Andrew Cuomo, NY’s attorney general, has sued a local “charity” called Feed the Hungry over the handling of its car donation program. The suit alleges that less than 2% of the proceeds of the donation program went to helping the homeless. The suit is part of a wider probe of vehicle-donation charities.

While there are undoubtedly charities that operate reputable vehicle-donation programs as part of their fundraising work – in our view vehicle-donation programs in general are suspect. Cuomo’s message: “be cautious and do some research.” We agree.

Read the NY Daily News story.

U.S. giving drops again, individuals still top givers

SG Guy — Mon, 14 Jun 2010 15:41:52 +0000

Giving declined in 2009 for the second consecutive year, according to Giving USA Foundation’s just published 2010 annual report on giving in the U.S.

While total giving showed the steepest decline ever (Giving USA began issuing its annual reports in 1956), total giving was still an impressive $303.75 billion.
Giving by individuals (during lifetime and through bequests) again comprised more than 80% of all charitable giving, with foundation (13%) and corporate (4%) giving completing the picture.
If you include the portion of foundation giving believed to come from family foundations, individual giving comprised 88% of all giving.

The full Giving USA 2010 report and a free executive summary (site registration required) are now available.