Conduct ‘Due Diligence’ before Donating to a Charity!

There are millions of people in India, who are intending to give away a sizable donation, to any charitable organization in occasionally and each year. Whether it’s due to a personal experience, their religious beliefs, passionate about charity work or a desire to make the world a better place and the most probably get some tax advantages on their tax returns. Though, donating financially to a charity or non-profit organizations (NGOs) is definitely a noble cause that giving to others can make you feel an inner pull and create an improved sense of well-being, did you ever think that whether your money are going to right charity organization or the non-governmental organization (NGO) means one is donating to be genuine. Because these days, dubious people are floated many NGOs that have misused the funds and indulging in financial mismanagement and also submitted forged documents, hence it is totally defeated your taken action in line with your spiritual beliefs by offering your resources to others in need can bring a sense of inner peace and contentment. In short, the majority of donors do not actually examine how the organizations they fund make a difference in their areas of focus. Conducting research on the possible recipients of your giving insures that your money go as far as possible. While doing your homework could reveal whether your chosen charity really does the work you thought it did or not. This cobra post would tell you how could you to make the ‘due diligence’ report of any NGOs.

Know about your Charity Organization

While donating to a charitable organization or non-profit group, evaluate the organization’s mission, programs and services to determine if they are aligned with your personal philanthropic agenda. Because of, different charities may have different missions even if they are working on the same cause. You must go for charity’s website where they should clearly explain the organization’s goals, how it plans to accomplish them and its past results. You may also verify the NGO’s registration and the cause they claim to support. As far as possible, you should go to visit the organization to get a fair idea about their operations. Ask if there is a strategic plan and a fundraising plan in place and how they are being implemented. This will give you a sense of where the organization is headed and whether or not they will have the resources to get there.

Review the Organization’s Financials

This is very important, given that many organizations 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 todays problems. If your money is going into the corpus, ask to see the organizations financials on a nonprofit’s assets, liabilities, reserves, expenses and revenue sources. As a donor, you can ask the NGO for its financial statements and annual report. Donors who have knowledge on financial statements can make a reasonable evaluation. You can also access additional financial information in an organizational audit as well as in copies of current and previous years’ budgets. While assessment of these copies, make sure expenses seem reasonable given projected income and the scope of the organization’s work, and pay attention to the diversity of the organization’s funding sources. If the organization receives government funding, look at how it has coped with delayed payments and social service funding cuts. While reviewing organizations’ expense allocations it is important not to dwell on so-called “overhead” or “expense ratios that means a measure of how much of each donation is spent on programs versus administrative and fundraising costs to guide decisions about which organizations deserve your charitable investments. 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.

Check the Charity meets Credibility Alliance norms

Credibility Alliance defines itself as a consortium of voluntary organizations committed towards enhancing accountability and transparency in the voluntary sector through good governance. It is the non-profit sectors equivalent of Sebi listing norms. Over 500 NGOs voluntarily comply with the norms CA has drafted after discussions with experts. While using Credibility Alliance’s services, you need to simply check if a particular NGO is in the list or not. If your NGO doesn’t find in Credibility Alliance’s list, you have another checkpoint is to search in Give India. This organization is a philanthropy exchange that provides a simple, technologically sophisticated and, most importantly, least expensive non-direct platform to donate to the desired NGOs. Give India arranges with corporates and other organizations for the employees to donate through salary deductions in a smooth manner to the target NGO. Give India’s website, Giveindia.org, has an alphabetical list of NGOs that are eligible to receive donations through Give India.

Impact of the charity work

You would obviously want to know what your money has helped achieve. Suppose you donate Rs10,000 to help one special needs child, the biggest bugbear is what percentage of your gift will reach the end beneficiary? Fundraising agencies often retain 50-70% 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. If the organization you’re researching doesn’t get cost of fund raising on its website, don’t be afraid to call and ask for data, even if your donation is relatively modest.

Donations are tax deductible

Another good way to assess due-diligence of NGOs, they should be able to give you a receipt with an 80G registration number that is currently valid while 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. However, the organization’s tax exempt status does not necessarily indicate that the charity organization or the non-governmental organization (NGO) one is donating to is genuine. Here, genuineness would mean that the charity should have a clearly stated social objective, carries out its operations at the least cost and adopts best practices and high levels of governance and integrity.

Final Report

If you know a good charity and want to support it, there’s nothing better than giving money to it yourself, you should conduct due diligence on nonprofit organizations before donating to charity by adopting the best practices as outlined above, you can feel confident that they are investing in organizations that are effectively governed, transparent, accountable, fiscally responsible and aligned with their core values. In short, treat your charitable giving just as you would any other investment. Do the research, and make the best decisions. After donating financially to a charity or non-profit organization, you must have to feel an inner pull to become more involved with the cause by donating your time and skill as well.

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