There are more than 500 registered non-profits that have 501(c)3 status in the greater Sioux Falls area, each with their own mission, vision, values, staff, and board of directors. Some non-profits operate on state or federal contracts or through grant programs, but most small non-profits rely primarily on charitable contributions from individual donors. One consequence of this funding model is that well-known business leaders, community leaders and philanthropists can get requests from 50-100 different local charities each year all seeking donations. Given that not all non-profits are equally effective, donors have a responsibility to do some due diligence on the charities they give to so that their charitable donations make the greatest impact.

Now, I have a confession to make. I have made some mistakes with my giving in the last year, because I wrote checks based on excitement for a cause without doing the due diligence to determine whether or not the recipient organization has the capability of executing on their mission. I accidentally contributed to an organization that did not even have their 501(c)3 status and wrote a couple of checks that upon reflection, I would not write again. This is bad stewardship on my part, and I need to do a better job with due diligence and accountability on the organizations that I support. Therefore, I am putting some guard rails in place to ensure my giving is more effective in the future.

Here are the criteria that I plan to use to evaluate charitable requests:

Enter your email address below to receive a steady stream of tricks, tips and ideas to help you build a better and more profitable business.
  • Gifts must fall into one of my interest areas. There are a few categories that I am interested in giving to including (A) my local church (B) Christian ministries focused on evangelism (C) projects and organizations that support entrepreneurship (D) community development projects backed by the business community such as the Levitt Shell and the Arc of Dreams. If something does not fall into one of these buckets, I won’t be writing a check because you can’t give to everything, and you make more of an impact when you focus your giving on specific issues.
  • Must have 501(c)3 status. If an organization does not yet have their 501(c)3 status in place, that tells you they are just getting started and may not have all their ducks in a row yet. I am also uncomfortable when an organization uses another charity as their fiscal agent (effectively borrowing their 501(c)3 status), since most charities are not setup to be fiscal agents and using a fiscal agent is a bit too easy of a way to get charitable status. The notable exception to this is the Sioux Falls Area Community Foundation, which does a fine job of serving as a fiscal agent for specific projects.
  • Must have a written budget. Non-profits should be able to tell their donors how they are going to spend their money. The way to do this is to write out a budget of what they hope to raise in a year and how they spend it. Some organizations even create “good, better, best” budgets knowing that the income they receive will be variable each year.
  • Must have a board of directors. I will make some exceptions for small organizations with very narrow missions, but non-profits should generally have a board of directors that oversee the work of their organization and its use of funds. Without a real board of directors in place, there is no accountability on how donor funds get spent.
  • No same day answers. If I take a meeting to hear someone’s charitable pitch, I will thank them for their presentation at the end of the meeting and make no further commitments. I feel like I need a day or two to think about a potential gift and do some research on the organization before I can make a good decision about it. I will always follow up a day or two later with a yes or no answer, but never the same day.
  • No responses to requests by mail. I do not like receiving postal mail from non-profits, because mailings are a tangible expense that could otherwise go to a non-profit’s mission. If you were supporting a non-profit, would you like them to spend the money that you give them on sending you mail asking for more money? I sure don’t, which is why I generally do not give in response to a solicitation for a gift via paper mail.
  • Relationships take priority. People give to people as much as they do to specific organizations or causes. I will prioritize gifts to organizations staffed by individuals that I have longstanding relationships with over organizations I have less familiarity with and organizations that are seeking to develop a relationship with me for the sole purpose of soliciting a donation.

These guardrails are not perfect and will not stop me from making an investment in a non-profit that fails to fulfill its mission, but it is a good start. By putting a few basic requirements in place, one can avoid a lot of charitable giving mistakes. Hopefully, these guidelines will help you consider what types of organizations you want to support and what you should verify before committing to make a charitable gift.