What Nonprofits Should Your Business Donate to?

While generating profits is the ultimate bottom-line for most businesses, the benefits of giving back to one’s community can’t be underestimated.

But with thousands of worthy nonprofits to give to, how does a business decide who should be the beneficiary of its largesse?

“If you are a discriminating giver, you will need a set of guidelines that can tell you if your donation will mostly be spent on a charity’s mission and not peripheral activities. These days you have to use your head far more than your heart to see that your charitable dollars are well spent on causes you care about,” the New York Times reported.

According to John Hall, CEO of Influence & Co., a company that assists individuals and brands in growing their influence through thought leadership and content marketing programs, there are four main points to consider before writing the check.

First, select a charity whose values dovetails with the business. In a Forbes article, Hall encouraged to “find something that you are not only personally passionate about, but that also fits with your business...Looking for something that jives with your organization will make it much easier to get buy-in from your team, clients, and partners.”

Any legitimate charity will be upfront about where its money is going and what its values and goals are - this information should be readily available on the company’s website and its representatives should be comfortable discussing this in detail without succumbing to pressure tactics in order to secure the donation.

He also advises to adhere to a charity evaluation tool to make sure the charity selected is transparent and productive. Two highly respected evaluators are CharityNavigator.org or GuideStar.org.

GuideStar, for its part, underscores those two points. The charity evaluator also recommends that as a first step, a business must have an honest look at which causes are most important. Location is also something to consider - does the business want to support a small local charity or a large, national or global one with a substantive reach?

As for Charity Navigator, the site provides a treasure trove of information about a charity and is a must-see site for preliminary due diligence when selecting a nonprofit.

For example, when looking at the International Fellowship of Christians and Jews Charity Navigator provides critical information about how the charity is run and gave it three out of four stars. It also provided a breakdown as to how the nonprofit spends its money. IFCJ, for example, spends the overwhelming majority of its budget on its programs (73.6%), with the rest going to administrative and fundraising expenses.

Other charities with similar ratings in the Jewish World are the American Jewish Committee and the Jewish National Fund - USA, which has a perfect four star rating.

However, there are many charities whose score is not as flattering. Take, for example, the Anti-Defamation League, which received two stars. The big reason behind its low mark? Its 43.6% liabilities to asset score. This number is significant because “charities must be mindful of their management of total liabilities in relation to their total assets. This ratio is an indicator of an organization’s solvency and or long term sustainability,” Charity Navigator explained.

IFCJ’s Founder and President, Rabbi Yechiel Eckstein, has his own criticism regarding how his peers in the Jewish world run charitable organizations.

“We have a rise in anti-Semitism around the world, we have Jewish refugees [in Ukraine] who want to flee to Israel, you have Holocaust survivors in the hundreds of thousands, and I’m not even talking about Israel yet,” Rabbi Eckstein lamented.

“Where is the wealthiest Jewish community in the history of the world to meet these basic needs of their brethren around the world? Why is it us who are providing security to Jewish institutions around the world?,” he asked rhetorically, blasting American Jewish nonprofits.

Just as it is a vital decision which charity a business selects, so too is the way in which a business selects the charity important. Hall suggests that selecting a charity should be a team effort. Rather than a top-down decision, backing the nonprofit should be something the entire staff should get behind in a coordinated team effort.

“A big mistake that a lot of companies make is having a CEO or founder choose a charity, and then expecting the rest of the team to be passionate about it without having any input in the decision,” he said.

Finally, Hall cautions against biting off more than one can chew. In other words, committing to a financial amount that the business can responsibly afford is key.

“Verify that what you’re promising to an organization can be sustained — whether you have a great year or a terrible one,” he wrote.

And, of course, sometimes it’s important to call in a professional. If the donation in question is a large one, it may be prudent to hire a wealth manager, estate-planning lawyer or certified financial planner to contact these charities and dig deep in the organization's ledgers to confirm that money is being spent wisely and all is above board.