Information, not just good intentions, should guide giving

While hurricanes, earthquakes and tsunamis greeted our world with incomprehensible destruction this past year, that destruction inspired extraordinary American generosity — and illuminated a serious need to make our giving more effective.

In the wake of Hurricane Katrina especially, we were reminded also of the critical role philanthropy plays in American life. We rely on nonprofits and foundations to use our donations effectively and efficiently, and to apply our giving as it was intended — for the benefit and well-being of our fellow citizens.

Philanthropy is an investment in the health of our community. And, like any investment, the strength of a charitable contribution relies not only on the nonprofit that puts it to use, but also on the informed donor who gives wisely and responsibly. We must demand results from nonprofits and, as donors, we must do our homework.

For many donors, gone are the days of simple check-writing. Philanthropy has become a complex industry, offering us a wide range of products to manage our giving during and after our lifetimes. Today, making a donation requires us to navigate and evaluate these products — in addition to an ever-growing plethora of nonprofit organizations.

The fastest-growing form of philanthropy is the donor-advised fund, which resembles a private foundation but offers greater financial efficiencies and tax benefits. Both nonprofit and for-profit organizations have rushed to capitalize on donor interest in these popular funds, but, as several high-profile cases unfortunately have shown, even these vehicles for giving are not foolproof. In the hands of the wrong advisers and donors, donor-advised funds have been misused for noncharitable purposes, such as tax shelters.

These cases have drawn the attention of legislators, who are now working to curb abuses. Senate Bill 2020, now before Congress, would increase federal regulation of donor-advised funds while stimulating overall American giving and improving accountability among nonprofits. The bill is designed not only to reduce abuse of charitable vehicles, it also would give Americans tax breaks for small, nonitemized donations and allow deductible donations to be made from retirement accounts.

While such legislation is intended to reinforce our giving, we are ultimately responsible for making sure our contributions are being put to good use. So take the time to investigate your options. A philanthropic investment, like any investment, should follow thorough consideration of risk and returns.

Thoughtful and thorough research can constructively guide our giving and help us determine the efficacy and fiscal health of nonprofit organizations. Whether you choose to give to long-standing blue-chip organizations or to entrepreneurial organizations dedicated to new solutions for community problems, ask yourself, is this organization having the impact you want it to have?

Transparent and accountable organizations often provide considerable information on their Web sites, and sites such as Guidestar.org and Charitynavigator.org can help you gather information, too. In our region, we are fortunate to have many excellent nonprofit organizations working for the good of our communities; by doing your homework, you will ensure they are rewarded for their work.

Ask yourself how you want to make your charitable contributions, as well. Do you want to work with a fund administrator and establish a donor-advised fund? Or would you rather manage your giving on your own? If you decide to work with a fund administrator, consider the firm's experience with philanthropic products. Pay attention to the integrity of its board of trustees. Look into its business practices and make sure the firm conducts due diligence with all grantees.

Community foundations, established for the benefit of the regions and cities they serve, can provide invaluable support to donors in all of these regards. As trusted public resources, they are some of the oldest providers of donor-advised funds and their extensive knowledge of local issues and nonprofits can ease the demands of responsible philanthropy for donors and investment managers alike. Community foundations track results. They regularly review nonprofits' practices and finances, conducting due diligence through grantee site visits and evaluations.

No matter which causes or communities you support, the right research and the right information will help you to make the gifts you truly want to give. After all, this season is about generosity.

Phyllis Campbell is president and CEO of The Seattle Foundation, the oldest and largest community foundation in Washington state.