By Wayne B. Titus III, CPA/PFS, CISA, AIFA®
Founder of AMDG FInanical, Plymouth, MI
A Member of the FourSIGHT Alliance
“Money is like manure: You have to spread it around and make things grow. If you pile it up and let it sit, it just stinks.” – said by Barbra Streisand’s widowed character in a movie I don’t recall except for this line. Of the many ways to use and spend money, donating to charity often helps the most people. Giving is also good for the donor. Dr. Karl Menninger, the renowned psychiatrist, when asked what to do if you felt a nervous breakdown coming on said, “Lock up your house, go across the railway tracks, find someone in need, and do something to help that person.” One important common belief of many religious traditions is giving. Giving is American. Giving is also a tradition forever challenged and tested.
More than 80% of the money raised by charities in this country comes from individuals. Today these charities face ever-rising costs, loss of government funding and increasing demand for their services, all in a flagging economy that people are watching closely if not nervously. In this environment, charities vie for scarcer donation dollars. Faced with this situation, charities respond by asking for larger contributions from more donors and by asking more often. Donors, for their part, increasingly plan their giving, which tends to limit emotional spontaneity and the habitual or repeat giving that charities often counted on in the past. This move to more intelligent giving means more donors now demand accountability of the organizations soliciting their support, and the industry built around charitable donations continues to grow to feed this demand for increased charity oversight. I like intelligent giving. It creates a more efficient and responsive philanthropic marketplace in which givers and the charities they support work in tandem to overcome our nation’s most persistent challenges.
To further intelligent and heartfelt giving, it is wise for a charity and its donor to reach agreement on where a donation will be used. I’m talking about the two types of money a charity needs: money used for current expenses (cash flow) and money being pooled to generate more money in the future (endowment). A charity obviously needs both. To earn the enthusiasm of a donor for contributing and to sustain a good relationship, the donor needs to know to what good his or her donation will do.
A good question any donor should ask when solicited is, “Can your charity clearly communicate who you are and what you do?” If a charity struggles to articulate its mission and programs, it probably struggles to deliver them. Also ask the charity’s biggest concern: cash flow to sustain itself and its programs or long-term endowment to sustain the charity in the future? It should not matter what the answer is if the charity can tell you clearly what it is managing (or not managing) to do. After all, a charity is a business – albeit a non-profit business – and should be run efficiently and effectively. You want to help your charity to live on and help people in the future, not be throwing good money where it is unlikely to be used well. That is good stewardship on your part, and good stewardship is what charitable giving is all about.
Past performance is not a guarantee of future results. Any indices referenced are unmanaged and cannot be invested in directly. See Disclosures.