A portfolio of giving - Part 2

Part 1

Due diligence

As with any financial investment, due diligence is important in selecting organizations to which you want to make a donation. One must understand the group’s mission and its financial position.

Its Web site can be a useful place to examine what it has accomplished and hopes to do in the coming year. Many charities do extensive mailings and other outreach to provide this kind of information.

The best managed charities will describe their accomplishments, goals for the future, and key financials in a newsletter or report; the worst seem to bombard donors with emotional appeals that alone can be a red warning flag.

Some donors feel they are funding their own harassment when an organization floods them with mail.

Asking to receive the organization’s annual report, however, is a good idea.

Fortunately, one does not necessarily have to do a financial analysis on each nonprofit.

There are watchdog organizations with specially trained analysts who examine the charities’ filings and financial reports. Remember that “a wise man listens to advice” (Proverbs 12:15 NIV).

Just as some investors only buy stock in companies that list on the New York Stock Exchange and thus meet certain minimum standards, donors may also wish to look for certain minimum A U.S. charity should be an IRS registered 501(c)(3) organization so that you know your gifts are tax deductible. Some may also wish to check whether an evangelical ministry being considered is a member of the Evangelical Council for Financial Accountability (ECFA).

Efficiency

Financial advisors often recommend that investors keep an eye on costs—commissions, loads, and fees that can be a drag on performance with a dramatic cumulative impact over the years.

In a similar way, donors should look carefully at an organization’s overhead costs.

This is an indication of how efficiently it is using money for actual program costs, as opposed to administration and fund raising. Groups like MinistryWatch.org rate organizations on financial efficiency and other criteria.

A diversified, carefully selected portfolio of giving can result in effective and efficient giving. We can be good stewards and fulfill multiple goals with our offerings.

As many thousands of other donors make similar decisions, contributions will accumulate and grow to fund organizations that are doing the right things in the right places. As a result, these ministries will have a broadly diversified and stable source of funding.

In the “marketplace” of nonprofits, those ministries that are good stewards with their resources will be entrusted with more.

Jim Steenhagen