Wall Street Journal - December 31, 2004
Elizabeth Bernstein, elizabeth.bernstein@wsj.com

In the past few weeks, Gail Werner-Robertson has been contacted for donations by about 80 charities, from the Salvation Army to a local family-services group and a Ronald McDonald House -- and that was before groups started seeking relief funds for last Sunday's devastating tsunami. Though Ms. Werner-Robertson thought many groups made a good case, she quickly narrowed the list to those she felt would spend her money best right now.

"It's time-consuming to sort through it all," says the Omaha, Neb., wealth manager. "You have to do your homework."

For charities and donors alike, the waning days of 2004 have brought heightened pitches during what's already the busiest season for giving. Since Sunday's disaster, groups like Save the Children and Mercy Corps of Portland, Ore., have stepped up fundraising efforts, while the American Red Cross has raised close to $30 million in pledges.

The world-wide donations push comes as charities embark on appeals to everyone from last-minute donors to New Year's resolution makers. Other drives this season: Planned Parenthood is making a political push with new fundraising letters warning of "four more years of an anti-choice administration," while the National Rifle Association has been encouraging support for organizations such as the Military Pets Foster Project. And in New York, anti-hunger organization City Harvest increased its solicitations by 50% this year to two million mailings.

All that makes it more challenging for donors to decide -- and to know where their money will make a difference. With givers increasingly setting conditions on how charities spend their money, philanthropy consultants say it is reasonable for a donor to expect more influence in how a gift is used when the donation is big enough.

For our look at how to make donations that matter, we chose a gift level of $5,000, which philanthropy consultants cite as the entry level to large giving. That's also roughly in line with the $4,000 average charitable contributions by households with incomes between $100,000 and $200,000, according to a 2002 study by the Center on Philanthropy at Indiana University. Give2Asia.org, for example, says donors have to give $5,000 or more before they can specify which programs they want to fund. (However, the group has decided it will let donors of any sum earmark funds for tsunami relief.) When a $5,000 check arrives at the AIDS Foundation of Chicago, "I am on the phone with the donor literally within minutes to say how grateful I am," says Mark Ishaug, the executive director.

How can you get the most from a $5,000 donation? The answers ranged from the common sense -- give to a small organization where your gift is proportionally more important -- to the challenging. Donate your car by midnight tonight, for example, and you'll cheer up a charity equipped to accept such gifts. You also may qualify for a bigger deduction than next year, when a change in the 2005 federal tax law will typically mean donors can deduct only the amount the charity receives for the sale of the car, if it's over $500, instead of the current fair-market value. (Ask your tax attorney whether you can still get a 2004 deduction by pledging the car today and delivering it early in the new year.)

Charities say they are grateful for donations of any amount, of course, but privately they complain that it is a bureaucratic headache to let supporters designate how contributions are spent. Contributors don't know best where funds are actually needed, they say. Given the choice, some say they wouldn't allow even the largest donors' input into the spending process.

Finding just the right organization to support has always been an issue for donors. But the decision has become increasingly difficult in the last few years as the number of tax-exempt organizations increased, fueled in part by new tech wealth of the late 1990s and the Internet information boom. Between 2000 and 2003, the number of tax-exempt charitable organizations rose 18%, tomore than 960,000, according to the Internal Revenue Service.

Simultaneously, total gifts to U.S. nonprofit organizations have leveled off, with giving relatively flat at about $241 billion since 2000, according to the annual report of Giving USA Foundation. Some of that has been driven by the uncertain economy. Questions about the allocation of funds earmarked for Sept. 11 relief have also played a role. A recent study by New York University professor Paul Light shows that as of 2002, some 17% of Americans had no confidence in charities -- up from 8% in the summer of 2001.

It's actually become easier to assess philanthropic groups. While most charitable organizations have long been required by law to provide their 990 forms -- which show assets, liabilities, amount spent on staff and board salaries, and how much money a group gives away and spends on overhead -- many now post them online on their Web sites. You can also read 990s online at GuideStar.org, a site that lists more than one million charities recognized by the IRS and displays each organization's 990.

Here are our tips for smart ways to give $5,000:

Give to a charity that will spend your money now

With the cost of relief efforts in South Asia expected to run in the billions of dollars, charitable organizations that provide aid are scrambling to wire funds and transport medical supplies and equipment.

Earlier this week, Atlanta-based CARE USA wired $50,000 to each of four countries -- Malaysia, India, Thailand and Sri Lanka -- and is continuing to send more money as it receives and assesses field reports. (Its administrators expect the effort to continue for up to 18 months.)

Mercy Corps, which has raised $3.4 million for tsunami relief since Sunday, says it has been wiring advances to its Indonesia office while it further assesses need. It says a donation of $5,000 can fund temporary shelter for 75 families, or supply food for 165 tsunami survivors.

Closer to home, your donation may be more effective if it goes to groups that are particularly strapped in January and February, such as domestic-abuse centers and homeless shelters, says Atlanta philanthropy consultant Calvin Edwards. "It's a cold winter," he says.

The Wheelchair Foundation in Danville, Calif., says it will typically translate a $5,000 gift into 66 wheelchairs for physically disabled people in a developing country in just three months.

The foundation -- which has given away 310,000 chairs since 2000 -- says it can work quickly because it contracts to manufacture the wheelchairs in bulk and has arrangements with non-governmental aid organizations in many countries to get the chairs through customs quickly.

Designate funds for a specific purpose

For New Yorker John Dalsheim, giving with an impact meant writing a $3,900 check to cover the Catholic-school tuition of a high-school junior. Arranged through a group called Student Sponsor Partners, the annual donations let Mr. Dalsheim experience his philanthropy personally -- he also mentors the young man -- and address the financial adviser's larger concerns about the course of education in the U.S. "I didn't want to be giving to a charity where the funds might end up supporting a large and inefficient bureaucracy," says Mr. Dalsheim.

Philanthropy consultants say other donors express similar feelings and that the easiest answer is to earmark funds for specific programs. At the $5,000 level, most charities allow donors to specify where they want their money to go. The USO, for example, allows donors to funnel support specifically to U.S. troops stationed away from home. A $5,000 donation will buy 200 care packages for the troops, 833 phone cards of 100 minutes each, or 2,500 packages of beef jerky for Operation Beef Up Our Troops.

Give locally

Another way to help make sure your $5,000 goes a long way next year is by giving to a small nonprofit group with an annual budget in the $1 million to $5 million range. The AIDS Foundation of Chicago raises $2.5 million annually in private donations, which it uses to help fund local agencies that provide housing, food and other services for AIDS patients. Mr. Ishaug, the executive director, says a $5,000 contribution can provide two months of housing and support, or 1,660 meals.

Atlanta philanthropy consultant Mr. Edwards says remembering to give locally is important especially now, at a time when world attention is focused on the tragedy in South Asia. "There's a sucking effect," he says. "A much-publicized international disaster attracts funds away from small local charities, because of the emotional appeal and the genuine need that exists there." Several general charities interviewed for this story said that it is too early to tell whether donations in the last few days for tsunami relief will affect their fundraising efforts.

To locate a smaller charity in your area, consult a philanthropy database like GuideStar.org. The site lets people search for nonprofits in their area by city, ZIP code or keyword. You can also consult the Web sites of national nonprofits, such as the Red Cross or the YMCA, which often allow donors to search their sites by ZIP code, or contact local community foundations.

Consider giving services or 'in-kind' gifts

When thinking about a giving plan for next year, don't discount the power of an "in-kind" gift, which allows you to make a difference without actually writing a $5,000 check. Some charities will accept donations of everything from stock certificates to condo time-shares, and the gifts can be especially effective if channeled to large, national groups like the United Way that are equipped to convert the gifts to cash or direct them to an agency where they are needed.

There can also be flexibility in this kind of giving, as James McPherson discovered when looking for a way to help one of his pet causes, the Gettysburg National Battlefield Museum Foundation in Pennsylvania. A Civil War historian, Mr. McPherson leads groups of business executives and alumni on private tours of the Gettysburg battlefield. Instead of requesting a lecture fee, Prof. McPherson now asks groups to contribute $1,500 to $2,500 to the museum's foundation. "I don't need the money as much as they do," he says.

Give now, decide later

If you have cash to donate, but can't decide today where to give it, several options let you give the money now and allocate it later. One choice is a donor-advised fund, often set up through a foundation related to a financial institution. After making the initial contribution (as little as $5,000 at some institutions), the funds grow tax-free. The donor can make recommendations on how the money is invested and distributed to charities, but the ultimate choice lies with fund administrators. In addition, many community foundations and United Ways offer their own donor-advised funds.

Charity Checks takes the idea one step further. The California-based nonprofit lets people order certificates that can be given as gifts next year to friends and relatives, who then donate them to their charities of choice. Last year, about $100,000 of Charity Checks were purchased. Every dollar spent goes to charity, and the person who purchases the checks gets a tax deduction. (Tip: Charity Checks purchased now expire in June, but the company will extend that date through next Christmas if you ask). Added bonus: You get a jump on next year's holiday shopping.

--Reed Albergotti contributed to this article

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