Let’s Get Real About Transparency and Donations

“Truth never damages a cause that is just.” ― Mahatma Gandhi

There has been a lot of talk about transparency in the political arena lately. However, my post is focused on transparency in giving. How can you be certain that your donation will serve others and not be used for administrative purposes? Can you earmark specific donations to an organization that has a tax-deductible status? What are the best crowdfunding and fundraising websites? And, how can you be certain that your donation to one of the crowdfunding websites will be used appropriately?

I’ve researched the best way for me to solicit donations for my little La Paloma Library in Nicaragua. I’ve debated on whether to apply for a 501(c)3 tax-exempt status or continue as I have been, seeking small donations through fundraisers and crowdfunding websites.

I am preparing for the future because what will happen to my little library if I move off the island, travel more often, or return to the states? Can it survive without me? I’ve invested my money and time in developing a comprehensive program to meet the needs of the teachers and the students. It is my legacy. So, in preparing for the future, I want to leave a program that will last beyond me with solid plans and financial support.

So, Let’s Get Real about Transparency and Your Donations…

I. Everything you need to know about your donations to a 501(c)3 tax-exempt organization

This section gives me a headache! First, you have to determine if an organization is a charitable organization with a 501(c)3 tax-deductible status. According to the IRS tax-deductible donation rules:

The 501(c)3 groups receive the major part of their support from the public rather than from a small group of individuals. They also use the bulk of donated money to further their stated exempt-organization goals. The 501(c)3 groups include churches, hospitals, schools and groups that provide disaster aid, such as the American Red Cross, the Salvation Army and similar organizations.

If you would like to earmark your donation to be used for a specific purpose, it is important to know that charitable organizations welcome recommended designations, but that all gifts go to the organization and are subject to its control and final discretion. 

When a 501(c)3 organization receives a charitable gift the organization is required to submit a written receipt to the donor stating (1) the donee organization has ultimate discretion over the destination of the contributions; (2) a confirmation that the donor intends for the organization, not the individual, to be the gift recipient; and (3) an acknowledgment of the donor’s preference to support a particular individual.

The last point is ambiguous in this area of giving because qualified organizations must remind donors that improperly earmarking gifts may compromise the deductibility of the donation.

For example, if an individual wanted to make a monetary donation to my library, I could partner with a 501(c)3 charitable organization so the gift could be tax-deductible. However, there is no guarantee, according to the IRS laws, that an earmarked donation will be used for my library.

This is where transparency is needed. All donors to a 501(c)3 organization must receive a written receipt of their donation as well as be informed that the charity has the final say about where the money will be used.

It is too complicated for me, a one-woman operator. I can’t see the advantage of partnering with a 501(c)3 organization because of the excessive requirements by the IRS with no guarantee that my library would receive earmarked donations. And because of the tangle of bureaucracy involved in becoming a 501(c)3 organization, I would rather keep it simple. In addition, many of my donors are foreign donors whose donations are not tax-deductible because it only applies to U.S. citizens.

Tax Deductible Donation Rules

Fuego y Agua donations for my library and the La Paloma Elementary School.

La Paloma Elementary students check out the new book donations.

II. Crowdfunding and fundraising websites

Crowdfunding websites allow individuals and businesses to solicit donations for any kind of project by accessing a large number of potential donors. There are advantages and disadvantages to using crowdfunding websites and the potential for abuse is always a concern.

Best Crowdfunding Sites for 2016

I have used YouCaring to Help Los Ramos Rebuild after a devastating landslide that destroyed their community and for donations to support The Divine Women’s Soccer Team.

Transparency in seeking donations on a crowdfunding website is important. I believe it is imperative to respond to each donor, to be specific in how their donations will be used, and to be open, honest, and accountable for  the money spent.

For these reasons, I always write a blog post with photos about how the donations have been spent and help the recipients of the donations write a letter or make a video thanking the donors. Goodie Bags for Los Ramos    Los Ramos Says Many Thanks

Goodie bags for Los Ramos

Goodie bags for Los Ramos

Filling bags with oil for the goodie bags

How do you know if a person is reputable who makes a crowdfunding website?

I have had some experience with this. After the landslides occurred that destroyed Los Ramos, a man posted on his Facebook page that he was seeking donations to help Los Ramos recover. I corresponded with him through private messages to see how I could help. I asked him specific questions about the people in Los Ramos. I know most of the people in this community because I have been involved with them for over 10 years and our god-daughter is from this community. I went to Los Ramos and asked them if they had received donations from this man ( I showed them a picture) and no one had ever seen him before.

He couldn’t answer any of my questions, which I thought was odd. He started a GoFundMe crowdfunding webpage asking for donations. He received over $1,000 in donations, but didn’t account for any of the money. No one in Los Ramos received any donations from him. So, I researched his name and found that he was wanted in Florida for scamming people. I contacted GoFundMe about his page and had his page removed for fraud.

Later, I saw him in Moyogalpa. I confronted him and told him I was aware of his fraudulent actions and I would contact the police. I think he used the funds to come to Nicaragua for a little vacation. Don’t mess with me when it comes to the lovely people of Los Ramos!!!
The next day, he left town, deactivated his Facebook page, and we never heard from him again.
People that fraudulently ask for donations to help others and then use the donations for their own personal use are, to me, despicable people…the scum of the earth.

III. Private donations through volunteering

I love volunteers, and I have had many volunteers come to my little library in La Paloma. Many of them do service learning projects, read to the children, and do fun projects with them. Usually, before they leave, they ask what we need the most and make donations.

Since I am actively involved in the library, I know what the students and teachers need the most. Most of my books are from donors throughout the world. Many donations are made by people who read my blog, and want to volunteer in the library. When Go For Hope organization came for a service learning project, they donated many supplies.
Service Learning and the La Paloma Library. Through a partnership with Go For Hope, they have helped the students and teachers by providing school supplies, and donating funds for a new roof for the library and a safe to keep our electronic equipment secure.

Go for Hope Service Learning group

Go for Hope Service Learning group

Fuego y Agua Ultra Marathon runners donate to the La Paloma Elementary School

Fuego y Agua Ultra Marathon runners donate to the La Paloma Elementary School

Martha volunteers in the library and collects donations for a projector.

Martha volunteers in the library and collects donations for a projector.

Truth never damages a cause that is just! There are many wonderful organizations, both private and public, that work hard to serve their local communities in Nicaragua. As donors, you have many options as to where and how to give.

Research the organization carefully to make sure it will meet your giving needs. Transparency is important. You should never wonder if your donation was received and how it was spent! Accountability is to an organization, as trust is to a donor.

Researching this post helped me decide the direction to go in the future for my library. Stay tuned for my new website for the La Paloma Elementary School and how you can help.

How do you decide where to give your time and money? 


12 thoughts on “Let’s Get Real About Transparency and Donations

  1. I definitely agree with this informative article that raising funds through crowdfunding platforms such as Kickstarter, GoFundMe, and CrowdRising requires hard work, focus and dedication to be successful. This means prioritizing research, planning from the start and being dedicated to making it work.Some entrepreneurs market their solutions through Kickstarter, Indiegogo, CrowdRising or some other platform before really finding positive results for there funding projects and business ventures. But I do suggest to take a quick look and research on the very easy and accessible CrowdRising Platform.It will bring record breaking funding results for your funding projects and business ventures in no time. http://www.crowdrising.net/ref/silentmoney

  2. In Guatemala, I’ve been sponsoring scholarships for the past 5 years for children between pre-school and 5th grade levels. Sometimes a child’s age does not coincide with the expected grade level due to reasons related mainly to the family’s economic situation. Also, an unsponsored child may fail to advance due to the family’s inability to pay tuition fees.

    I sponsor a ten-year-old girl who lives nearby (I live in Guatemala) and I co-sponsor another middle school age girl who lives in an area off the electrical and Internet grid, and way too far to visit. I plan to continuing sponsoring the older girl because I have great faith in the administration, goals and teaching methods of the school.

    I do not plan to renew the sponsorship of the younger girl — who I’ve sponsored for several years. I hope to be able to self-sponsor her. I have lost all confidence in the foundation through which I sponsor her. I’ve been a donor with that foundation for these five years, and have cut those donations down to zero. The foundation’s focus has shifted away from their goals at founding and towards raising funds for a myriad of programs. Briefly, they are in the business of fundraising. They appear to use the education scholarship donations for fund other projects. I believe they have lost their way.

    I’m involved with other NGOs in Guatemala in various ways and I may even sponsor another child with a different organization. School ends in a couple weeks here, and begins again in January.

    • Thanks for your thoughts, Jim. I know you are actively involved in helping your Guatemala community and I admire you for it. Do the NGOs that you go through have a tax-exempt status? Can you deduct your donations?
      I think that you are wise to investigate the NGOs from your perspective of living in Guatemala. Would you have known how your donations were spent from the Foundation that you are dissatisfied with if you hadn’t been in Guatemala?

      • Hola! (First: Switching your alerts from Yahoo! to gmail, btw, meant that the comments alert went into a “social” inbox, and alerts to your new posts into the regular inbox. Thus I just today noticed you’d replied. Thought you might want to know. I’ll look into it at this end.)
        All my NGOs are tax deductible and I deduct donations. I’ve cut way back on total donated, but spread those out as I back off the one I’m unhappy with.
        I recommend “Doing good: Says Who” by Newton and Early. It’s on Amazon. There are similar books with the same ‘Doing good” title or theme of effective altruism. This one focuses on Guatemala and the writers are “regular people.” I believe it is in there that you might find references to foundations moving away from their initial altruistic goals and towards treating the foundation as a business, the donors as investors and the people they help as the product.
        No, I would not have known the intricacies of this foundation had I not been very active from the beginning — 2012. And it took a while. And I think they may have been changing their own approach to how they do “business’ over the same time. And after my visit to the office yesterday, they may be wary of me! I would never publish these words on Facebook, neither on my own timeline nor certainly on the foundation’s Face page of course. I’ve seen “complainers” get shot down and intimidated by both the administrators and the group members. The legitimate (“complaint”) concern gets buried in hyperbole by the advocates, who often are little more than uninformed cheerleaders.
        I am comforted, but still cautious with what I write, that most of your readers might be from Nicaragua or the US, except perhaps Steve Burris who I ought to contact, and not Guatemala.
        I shall have more to report on this theme soon — something is under investigation. Meanwhile I’m off to hunt down your post on health insurance. I have something to add to the comments. 😉

        • Thanks for all the information, Jim. I am going to order the book on Amazon. Hopefully it is in Kindle format. I have so much to learn and every comment you made has helped me.
          I am not quite sure I understand what is happening with my responses to your questions. I will check it out.

  3. We give of our time and some money in Panama to a couple of causes and support 2 children, one in Nicaragua and one in Kenya, through Compassion International. But we do not donate to “Big” organizations because to me they are top heavy with sometimes little trickling down.

  4. “I am preparing for the future because what will happen to my little library if I move off the island, travel more often, or return to the states? Can it survive without me? I’ve invested my money and time in developing a comprehensive program to meet the needs of the teachers and the students. It is my legacy. So, in preparing for the future, I want to leave a program that will last beyond me with solid plans and financial support.”

    You have outlined a dilemma virtually all individual founders of charitable organizations face at one point or another in the life of the organization. Often several times. There is nothing wrong in choosing one path at one historical point (like your choice of not creating a US 501(c)3 to support your library at this time) and another path later (like choosing a 501(c)3 status), when an organization grows, matures, expands perhaps.

    By choosing or not choosing a possibility to attract a particular form of donations you not only choose what kind of financial support you want to attract, you are also choosing what kind of donations you FORGO, by not creating a legal instrument enabling the charity to receive them, and – what’s most important – by choosing (consciously or not) what type of an ORGANIZATIONAL STRUCTURE the charity should build to survive its founder and other personnel changes.

    At some point – and preferably at an early enough point – a successful organization must become OUR, not only MINE, that is, it must attract passionate and knowledgeable people who will invest THEMSELVES in it.

    Regulations concerning 501(c)3 are a very useful tool to develop a successful organization, whether it (or rather its US counterpart) actually applies for this designation or not.

    Does your library have a board? Does the board make decisions (or you do) ? Are there people involved who could become an active board? If yes, how will they (do they) make their baby steps in becoming more involved, more committed and more knowledgeable about good stewardship and management of a fledgling organization?

    (I guess I should probably add here some personal explanations, to let you know where I am coming from.
    I am retired now, but I had three career paths during my professionally active life. First, after getting degrees, including advanced degrees in international law and international relations I worked as a think tank researcher in several countries, including USA. Later, I switched to a more hands on tasks by becoming a for profit consultant for internationally expanding for profit corporations. Finally I took an early retirement to devote my efforts to assist – on mostly volunteer basis – charitable organizations in US and abroad, mostly in Latin America, to grow through structural, programmatic and financial development. I spent the last 15 years doing this: the first 10 years more intensively, on a practically full time basis, slacking lately due to declining health.)

    • Maria, thank you so much for your detailed and thought provoking comments. You hit the nail on the head when you said, “An organization must change from MINE to Ours to attract passionate people. I wholeheartedly agree.
      I started my library two years ago, and it has grown rapidly. I think I am at the point where I need to create a board of directors with community members invested in the education of the children in La Paloma, a mission statement, and then take baby steps from there. I still don’t know about making it an official charitable organization through a 501(c)3 status. It overwhelms me with what I feel are too many restrictions. However, that being said, I will continue to research that path in the future.
      I really appreciate your information and look forward to exploring your questions. Thanks again for your thoughtful comments.

      • Since I moved to Europe in 2012, the last US 501(c)3 I was instrumental in establishing (and briefly running) was 6 years ago (for an indigenous Maya organization in Belize) , so the rules might have changed. But if you ever have any questions, I’ll be happy to brush up on the legalese, weigh on my experience in the matter and volunteer to answer them to the best of my knowledge. Good luck!

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