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December 3, 2014

Charity Checkout Contributions

by Anne Paddock

In the United States, nearly every retail organization asks if you would like to make a charitable contribution to a good cause at the check out counter. Retailers love it because it makes them look caring (even if it’s on the back of customers) and often gives a tax write-off while charities love it because a lot of money is raised with very little cost (some companies do take a percentage as an administrative fee) while most customers dread it because they feel trapped and shamed into giving and this happens over and over every single day.

As an experiment, I tracked how many times I was solicited every day for a week and the average was 4 times a day which is enough to make me feel like everyone has their hands in my pocket. The solicitations have occurred at grocery stores (Publix, Whole Foods Market, Safeway), pharmacies (CVS, Walgreen’s), and retail stores (Williams-Sonoma, Petco, Costco, E-bay, Amazon, Pottery Barn, Brooks Brothers, Macy’s, Dick’s Sporting Goods, and Walmart). Although consumers may still think shopping for food, medicine, household goods or clothing is a single purpose endeavor, retailers view your presence in their store as an opportunity to obtain even more from your wallet.

People feel pressured to give when a cashier loudly asks “Would you like to donate $1 to The St. Jude’s Children’s Research Hospital?” or would you like to round-up your bill and donate it to a local charity? If you say no, you feel like a jerk and none of us likes to feel like a jerk. On the other hand, if you say “yes,” you don’t always know where your money is actually going and this is an extremely important point.

Most people don’t research the charities that fall under the Charity Checkout – campaigns that pressure/inspire consumers to donate money at a point of sale. In 2012, more than $358 million was raised by 63 large retailers (and that doesn’t include all the smaller retailers) according to Cause Marketing. Out of curiosity, I started reading about some of these charities and learned that the best source of financial information is to look at the IRS Form 990, which every charitable organization must file. Information on revenue, expenses, assets, liabilities, and compensation of officers, directors, trustees, and key employees are listed.

Most sites will advise the gift giver to consider what percentage of each dollar goes to the recipient and this is indeed an important piece of information. However, this doesn’t tell the full story because many charities have a separate fund-raising arm (St. Jude’s Children’s Research Hospital has the ALASC (American Lebanese Syrian Associated Charities)) whose purpose is to raise funds for St. Jude’s Children’s Research Hospital. Technically speaking, every dollar that is given to St. Jude’s from ALSAC is going to the hospital; it’s just that most people don’t know their donation first goes to ALSAC where approximately 35% is deducted for fundraising and management costs, 15% for their fund balance (which had a $2.9 billion in assets at their year-end – 6/30/13), leaving 50% to St. Jude’s.  In other words, only 50 cents of every dollar donated and collected by ALSAC went to St. Jude’s Children’s Research Hospital last year.

So what is a kind person to do?

1.  Don’t make donations at the checkout. Not only are these not tax-deductible, but many of these donations go to paying fundraising costs and administrative fees leaving less for the intended charity.

2.  Google the charity before making a donation and read the IRS Form 990 which will provide key information about the charity: total revenues, fundraising costs, compensation to executives, total assets, and more. If you don’t understand the form, ask a friend who has an accounting background to interpret it for you.

3.  Make donations as close to the recipient as possible reducing the amount that goes to professional fundraisers, highly compensated managers, and office expenses.

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