Are you picking the best charity? How to tell

Deciding to donate to charity is easy. It’s choosing which charity to support that’s the hard part.

With more than one million charitable organisations in the US alone, selecting the right recipient for your largesse can be mind-boggling. Do you choose a charity close to home or one overseas? Support a well-known cause or one that fails to win big headlines? And how do you ensure your donation has the maximum impact?

There are many different ways to help a charity; you can make an online payment; volunteer your time; or for well-known people, endorse an organisation or become a named benefactor. However you choose to help out, two key factors will always influence your donation, according to Tom Hall, head of UK philanthropy at UBS: “that people want to help people and that they want to get the best dollar value social return,” in short, the biggest impact for their money.

UBS chose to focus on causes that have positive outcomes for children. It used research from Nobel prize winner James Heckman that showed tackling childhood development early on garners the most significant economic and social gains, thereby maximising the impact of charitable donations.

For many donors their actions will be heavily influenced by personal experience, donating to causes close to their heart, said Katerina Rosqueta, founder of the Center for High Impact Philanthropy, part of the University of Pennsylvania.

She advises would-be donors to “start with the end. What is the change in the world that you are hoping to make?” This could be providing care to Ebola victims in West Africa or helping deprived children to read in a local school.

Once you have selected a cause, experts who advise on charitable donations recommend doing checks on the organisation that will be the recipient of your money.

“Does their strategy seem clear to you and can you see any evidence of the impact of their work?” said Maya Prabhu, head of philanthropy at UK bank Coutts.

Hall recommends looking at the skills of the senior management team.

“Good governance is essential in any well-run charity,” he said “Look at the composition of the trustee board. How many trustees do they have? Look for the skill base of the [trustee] board. Are they aware of the issues that might affect them?”

Experts warn against selecting a charity based purely on the level of its administrative expenses as the basis for calculating these vary widely, making comparisons difficult.  In addition, according to Rosqueta, some non-profits can justify higher expenses, for example if investing in an IT system.

There are also many online tools that can help you identify well-run non-profits. For US organisations these include: Guidestar, which provides information on the goals, strategies and achievements of charitable organisations; Charity Navigator, which rates organisations based on their efficiency and transparency; and, Great Nonprofits, which operates a large database of user-generated reviews of charities.

Yet, whatever the cause, all donors are united by wanting to achieve the maximum positive change with their cash. They want their money to make a tangible difference. So how do you get the biggest bang for your charitable buck?

One way is to tap into a growing trend in the non-profit sector: charitable crowd funding, where donors club together to fund larger specific projects. Crowd-funding sites include globalgiving.org, piggybackr.com, fundly.com and razoo.com. Gifts via these platforms enable donors to participate in specific projects that appeal to them and, in many cases, track their progress through email updates.

Often, by selecting a charity that hasn’t had much media attention, you can make your donation go further, Hall said. A high-profile disease such as malaria, for example, will receive significantly more donations than a condition such as rabies, he said. That often means that, by supporting these lesser-known causes, you can get in early where the easy-wins are made.

Hall gave the example of a $300,000 donation made by one of the bank’s customers to help stamp out rabies on the island of Bohol in the Philippines. The money funded valuable university research on the infectious disease and, following the publication of this study in a medical journal, the Philippines government then committed further funding to eliminate rabies from the island.

Prabhu said that growing numbers of donors encourage friends or family to get involved to maximise donations. Beyond her own role of advising wealthy investors on charitable donations, Prabhu gives her son a small sum of money each year to give to a charity of his choice. When he was 8 he chose a dolphin charity. This Christmas, after much research, her son, now a teenager, chose Action on Addiction, a charity that works with people affected by drug and alcohol addiction.

Whether it’s Ebola or dolphins, whichever organisation you choose to support, there might be benefits that go beyond the feel-good factor. Tax breaks can increase the amount of your donation, sending more of your money direct to the charity. This means that when it comes time to filing a personal tax return, the tax man gets less of your hard-earned cash.

Eleven countries stand out for their generous approach to charitable donations. They offer individuals valuable tax breaks on gifts to charity, according to a global study by the Charities Aid Foundation and US law firm McDermott Will & Emery. These magnanimous few include Belgium, Canada, France, Germany, Italy, Switzerland and the United States.

The perks can be hugely valuable. In Singapore, for example, a S$100 ($74) donation to certain domestic charities can reduce your income liable to tax by S$250 ($186). In the US, if you are in the 33% tax bracket, the actual cost of a $100 donation is only $67.

There is also evidence to suggest tax incentives foster giving in low-income countries. Adam Pickering, international policy manager at the Charities Aid Foundation, points to research showing 27% of people in low income countries give regularly to charity where there are tax incentives, compared to just 18% of people in countries without incentives.

It isn’t often that governments hand you your money back. So when they do, it’s an opportunity worth taking.