How to Help Clients Evaluate Charities
Submitted by American Endowment Foundation on August 28th, 2015
By Ken Nopar, Guest Columnist
Many clients are confident that their generous donations are having a positive impact upon the non-profit organizations and causes that are most important to them. Consequently, they do not seek the advice of their financial, tax, and legal advisors in this area even though the advisors can be helpful in numerous ways.
However, some clients do need guidance. These clients may be new donors who have had a recent liquidity event or are entering a new phase in their lives, while others are longtime donors who may have questions about their past or future giving.
While most advisors feel that it is not their responsibility to identify charities that clients should support, they can certainly help many of their clients understand how to best vet and work with non-profit organizations. As a result, their clients will be able to feel a great sense of accomplishment, satisfaction, and pride in knowing that their support is having a significant effect.
Here is a brief summary of helpful suggestions that advisors can share with their clients. When evaluating charities, clients should:
- Look at the charity’s mission and determine if this is important to them.
- 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?
- 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 also verify its tax-exempt status.
- 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?
- Identify who is 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, she or he should meet with some board members.
- 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?
- Discuss with the leadership how the donor can be most helpful. Besides financial contributions, are there other ways that the donor can help?
- Visit the organization if possible or volunteer to really get to know the people and quality of the work.
- Determine the organization’s reputation.
- Have a good feeling about the organization and feel that their contributions and efforts are appreciated.
It is important that clients do not demand too much of the charities, especially when their donations are not significant and the staff is small. However, because clients need to feel confident that their donations will be put to good use, it is in the charity’s interests to welcome donors’ inquiries and treat them well. The likelihood of long-term relationships increases when the communication between the donors and the organizations they support is excellent.
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Ken Nopar is the principal of Nopar Consulting, a philanthropic advisory firm specializing in training and advising financial services firms to have the charitable planning conversation with their clients.