The last 3 months of the year see the highest volume of donations and charitable giving. The holidays highlight the spirit of giving and the deadline to make tax-deductible donations for the year is December 31. The 2012 Guide Star Survey shows that nonprofits received 50.5% of annual giving in the last 3 months of the year, October through December.

In 2013, the giving in the US was $335 billion or about 2% of GDP. Nonprofit organizations perform many functions in our society, from caring for youth and adults, caring for animals, caring for the environment, education, the arts, health, and an unlimited number of services.

Nonprofit organizations allow those with a passion for something to make a difference by devoting time, energy, talent, and money to a specific purpose. And nonprofit organizations allow those who care about a cause to participate in providing solutions.

Giving USA’s 2013 Annual Report on Philanthropy shows the breakdown of charitable giving:

People can make a difference in their community. However, not all charities are created equal. Some do a better job of managing your resources and providing solutions. As with investments, a bit of due diligence is needed.

make a giving plan

Charitable giving, as with business and finances, planning goes a long way toward improving results.

You do not want to arbitrarily respond to mailed solicitations or phone calls seeking donations. Try to avoid knee jerk reactions.

Be proactive: create a giving plan. What causes concern you? What are you passionate about? What organizations have a mission that aligns with your passions?

When you find an organization that is working for a cause you support, give it a try. Want to give your hard-earned money to an organization with a leaky bucket?

Evaluating a charity can seem daunting. Fortunately, there are organizations that can help you with this process.

Charity Navigator, found at http://www.charitynavigator.org, rates charities on various topics. Enter the name of the charity and you will get a report. However, for Charity Navigator to review a charity, you must have income of $1 million or more.

What about a local charity? If they have receipts for more than $50,000, they must file Form 990 with the IRS. It’s the reporting process of non-profit organizations… that is, the tax return. You can access a nonprofit Form 990 from http://www.guidestar.org. They have records of 990 forms filed by non-profit organizations, as it is a public record.

The 990 form reports several factors: What program is the charity operating? How much money is spent on the program? How much money is spent on administration and how much on fundraising? A healthy organization will limit fundraising costs and administration costs to 25% of the income received. This leaves 75% for program costs.

You also want to see the CEO or Director salary. Is it comparable to other organizations of its size?

Trying to determine if they are getting results from their programs is a bit more challenging. Hopefully, they are sharing their programs and results on their website. Most charities are open to discussing with you. They need to be tracking their results and able to share that with you.

With investing, you want to be diversified. The opposite is true in charitable giving. Giving small amounts to various charities will fill your mailbox with requests from other charities. Also, small amounts don’t really cover the cost of fundraising and do little for the cause.

When you get a phone call from a charity asking for money, ask for a website or have something mailed to you. Never give out personal information over the phone.

You have to do your homework. There are too many ‘sounds like’ charities. Are you giving to who you think you are giving?

Once you’ve verified the organization, mail the check directly to the organization or make a donation online. Many charities use fundraising companies to make their phone calls. These companies retain a percentage of your contribution. Giving cuts out the middleman directly. More money goes to his cause.