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Donating money? 5 MUST asks

By Venkat Krishnan N, OutlookMoney
August 04, 2006 15:16 IST
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If you know a good charity and want to support it, there's nothing better than giving money to it yourself. If, however, you don't know where to give, go through an intermediary like CRY or HelpAge, which will send your money to organisations that work in the field.

There are also sites like where you can read about over 100 charities that meet the Credibility Alliance norms, and donate directly to the one you would like to support.

But how do you know your money's going to the right charity? And will it be used in the way you want? And, yes, what benefits do you get from giving (apart from those in karmic terms)? Here are five questions that closet philanthropists should ask before whipping out their chequebooks.

How will the charitable organisation use my money?

This is very important, given that many organisations raise funds almost compulsively. They hold frequent fundraisers, and the money invariably goes into a bloated corpus fund.

A healthy corpus is important, but not at the cost of ignoring today's problems. If your money is going into the corpus, ask to see the organisation's financials. If it stashes away more than 10 per cent of its annual income, it's too much. If, however, the charity is raising money for a specific purpose, say to build bathrooms in a slum area, donate as much as you want.

What percentage of my gift will reach the end beneficiary?

The biggest bugbear is the prolific growth of fundraising agencies. They often charge a hefty fee of 50-70 per cent of the money raised, which means that the charity itself gets a pittance.

If a professional fundraiser approaches you, ask if he is an employee of the charity. If not, take a written statement from him on the percentage of money that the charity will get.

Though fundraising expenses are bad, they are inevitable. A reasonable figure will be fundraising overheads of 30 per cent.

What is the impact of the charity's work?

You will obviously want to know what your money has helped achieve. If you donate Rs 10,000 to help one special needs child enter the mainstream, wouldn't you prefer the organisation to successfully help that one child rather than use your money in a failed attempt to help 10 such children?

However, most charities will not be able to measure their efforts specifically; they are more likely to tell you that they help educate 10 children than that seven of the 10 children passed with a first class.

Ask for specifics, but don't let that stifle your charitable impulse; after all, significant long-term change is difficult. Your Rs 500 will not make a five-year-old a school topper, but it will definitely help to make him literate.

Does the charity meet Credibility Alliance norms?

Credibility Alliance is the non-profit sector's equivalent of Sebi listing norms. Over 500 NGOs voluntarily comply with the norms CA has drafted after discussions with experts. If your NGO doesn't meet them, check how else they can prove their credentials.

A good board, financial disclosures in the annual report, a fixed address/phone number and an invitation to visit them whenever you like are all indications of a good organisation. On the other hand, a charity that is reluctant to disclose remunerations to trustees is unlikely to be worth trusting.

What tax benefits am I entitled to?

Most charities should be able to give you a receipt with an 80G registration number that is currently valid (check the validity of the 80G certificate). This entitles you to deduct 50 per cent of your donation from your taxable income. Some charities offer higher deductions. With a 100 per cent deduction, you can afford to donate one-third more to the charity with the same net outgo from your pocket.

The author is director of online charity, GiveIndia.

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Venkat Krishnan N, OutlookMoney

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