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The Giving Season

During the holidays, gifts not only come wrapped in paper and bows, but also in the form of money to help charitable organizations in need. SPEA Professor Kirsten Grønbjerg talks about things to look out for.

Expert perspectives: “’Tis the season to be charitable , and many charities try to capitalize on the general holiday spirit by including end-of-year appeal letters and special holiday events among the variety of fund-raising approaches they employ year round. This is also the time—before the end of the tax year—to remind potential donors about the tax advantages of making charitable contributions, although legislation now winding its way through the senate and congress promises to change the tax incentives—increasing them for some donors (those not currently itemizing their deductions) but reducing them for others (itemizers making fairly modest donations).

“Competition for charitable contributions is high—and growing. There are now over 1 million charities registered with the IRS, but that excludes the very large number of small charities (revenues of $5,000 or less) and most of the estimated 350,000 or more congregations in the U.S. that are also eligible to receive charitable contributions but are not required to be registered with the IRS. The level of competition, and the fact that donors rarely know in any detail how charities operate, feed concerns about charity scams and the cost of fund-raising.

“However, while there are bound to be some people who will seek personal gain when the opportunity arises, there is no evidence of widespread charitable fraud. It is also not particularly useful to become overly concerned about the cost of fund-raising, since there is no good way to establish a single fixed formula for the percentage of funds that should be used for program rather than fund-raising or general management. Some causes need to spend more money to make their efforts understood than do others, and younger and smaller charities tend to find it more difficult to get their messages across.

“Although most people give to organizations they know, information about most charities is available on the Web. For example, the IRS (www.irs.gov) has a searchable database of all registered charities as does www.guidestar.org. The latter includes also scanned images of Form 990 (financial information) for the larger ones. These resources allow potential donors to learn a great deal about a charity. This season of giving can and should be an opportunity for everyone to give back to his or her community. While not everyone has money to give, we all can offer our time or in some way support the great things nonprofits do. That’s the spirit of the season.”

The SPEA toolkit: Kirsten Grønbjerg is a professor at SPEA and the Efroymson Chair in Philanthropy, Center on Philanthropy at Indiana University. Her research focuses on the nonprofit sector—its structure and composition, funding relationships, management challenges, and community dimensions.

Click here to read more about Prof. Grønbjerg.

Click here to read more about the Center on Philanthropy.