Strategic Approach to Philanthropy Boosts Impact and Donor Satisfaction
Over the holiday season, most of us were inundated with appeals for our money from alma maters, churches and organizations addressing every imaginable social cause. Our response to each request was probably somewhat arbitrary. We dashed off checks to those that rose above the clutter without really taking the time to figure out how much we could truly afford to give or how our donations would make a difference.

For most of us, regardless of asset level, personal philanthropy boils down to ad hoc responses to appeals from charitable organizations, rather than a proactive exercise in determining an affordable level for our giving, prioritizing causes and assessing the best means of making an impact. Yet just as disciplined investing generally yields greater financial returns, a more focused approach to personal philanthropy often results in greater impact - and greater personal fulfillment.

When we don't take time to determine how much we can actually comfortably afford to donate for philanthropic purposes, the tendency is to underestimate our giving power "When donors 'eyeball' how much they think they can give, they may feel the need to lowball the amount to protect themselves," says Tim Stone, executive director of NewTithing Group, a philanthropic research organization based in San Francisco.

Furthermore, donors who underestimate their giving power "often fail to anticipate the tax benefits of charitable donations," adds Stone. For those in higher tax brackets, tax benefits are often greatest when a donation comes from a long-term appreciated asset, rather than cash, because this avoids capital gains penalties.

To help donors determine how much they can comfortably give without straining their lifestyle, NewTithing Group has come up with an approach that takes into account not only a donor's income and investment assets (excluding homes and personal possessions), but also the annual fluctuation of those assets, anticipated expenditures and tax savings from charitable gifts. (A donor education guide, Beyond Taxes: Secrets to Fulfilling Philanthropy, and The PrudentPal Charitable Giving Planner can be found on NewTithing's website at http://www.newtithing.org.)

Once a donor has determined a comfortable giving level, he or she should then develop a plan that maximizes the impact and personal gratification of his or her philanthropy. According to Kris Putnam, founder and president of San Francisco-based Putnam Community Investment Consulting, Inc. (PCIC), step one is to clarify the issues that are most important to the donor. "Have you or has someone you are close to been the victim of abuse or discrimination? Suffered from a disease? Been given an opportunity that has changed your/their life? Become concerned about a pressing world issue (e.g. the environment, poverty)? "

Step two, Putnam explains, is to determine what approach to take. If, for example, a donor chooses domestic abuse as a priority issue, he or she could support shelters for abuse victims, legal aid organizations that advocate on behalf of victims, and organizations that provide education and training to help victims end the cycle of abuse.

Putnam advises donors to research their priority issues and organizations that address them, and to do due diligence around these organizations' financial performance and their track record. Internet resources such as Guidestar.org - which provides comprehensive information about the programs and finances of more than 1.5 million U.S. charitable organizations - are valuable tools in this evaluation process. Donors should also pay attention to "word of mouth" and organizations' reputations among professionals working in the relevant issue areas.

The next step is to decide whether a charitable contribution will go to a specific program run by a selected organization or to support the organization's core operations. While direct program support is appealing to many funders who wish to see measurable results from their donations, Putnam points out that investing in core operations can yield even greater results. Contributions that allow an organization to decide where money will be spent - on strategic planning, for example, or on improving fiscal management systems and upgrading facilities - can strengthen the organization and its ability to make an impact.

Donors with larger charitable giving budgets can consider options such as opening a donor-advised fund with a local community foundation or financial institution, or establishing a private foundation. Donor-advised funds are essentially accounts earmarked exclusively for charitable giving that provide the donor with the opportunity to make grant recommendations to the sponsoring organization. In many ways, establishing a donor-advised fund is similar to starting a private foundation to support issues the donor is focused on, but without the hassles and paperwork that go along with operating one. However, private foundations allow donors to exercise significant control over their charitable contributions, while helping minimize capital gains and other taxes.

Whether making a relatively small donation to a local charity or starting a private foundation, each of us can make a greater impact on issues of importance to us - and feel a greater sense of personal satisfaction -- by taking the time to be proactive and strategic about our giving. And we can spend a lot less time mulling over the many requests that fill our mailboxes daily.

Additional Resources: Information about Putnam Community Investment Consulting is available at http://www.putnamcic.com. New Tithing's donor education booklet, "Beyond Taxes: Secrets to Fulfilling Philanthropy," includes information on how to inculcate the spirit and practice of charitable giving in your children (http://www.newtithing.org).

See http://www.aafrc.org for information about the Giving USA Foundation, which publishes Giving USA, the annual yearbook on American philanthropy. Recent reports on the growth of philanthropic giving among baby boomers include "Baby Boomers Plan to Increase Their Giving This Year, Survey Finds," a 2006 article in the Chronicle of Philanthropy, and "Boomers on Track to Give 20% More to Charity Than Average Donor," a 2006 report by the Fidelity Charitable Gift Fund. Also see http://www.tacticalphilanthropy.com for information on charitable giving by boomers.

(This article originally appeared in the Winter 2006/2007 issue of Bay Area Summit)

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