Smart giving

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Tips to help even the smallest businesses manage their charitable donations effectively

Story by Lee Marie Reinsch

If you own your own business, you know that besides death and taxes, you can rely on one certainty: Lots of causes asking you for money.

One minute you’ve got the local high school dance team imploring you to fund their trip to American Idol; the next minute, posters of a sick 2-year-old threaten to melt your icy-hard willpower to resist. Groups pledging disaster relief for wildfires, tidal waves, trembling fault lines and hurricanes avalanche your inbox.

“We get tons of giving opportunities, and it’s hard to say no,” said Kurt Gruett, owner with his family of Water-Right Inc. in Appleton.

Eventually – after writing your 1,000th check, it dawns on you that you probably could have built a new wing on the hospital. At least then you would have had naming rights.

“You get to the end of a year or couple of years and you look back and say ‘Have we really made any kind of a statement of what our company stands for and the kind of support we are trying to provide on behalf of all the employees and ownership group of the company?’” said Curt Detjen, president and CEO of Community Foundation for the Fox Valley Region. “You want to be much more clear about defining the impact you are making.”

Organizing the chaos

Many corporations, including Water-Right, have turned to community foundations to pack more punch into their charitable donations.

“We wanted to do it in a logical effort,” said Gruett of the water treatment system business. “We’re a family-owned company, and we wanted to give back to the community.”

Plus, handing over the duties of charitable giving to a community foundation simplifies life for the company.

“This way we can basically tell (solicitors) we have a foundation set up over at the Community Foundation and all of the giving goes through them,” Gruett said.

“It takes a lot of the day-to-day stuff out of the equation, and we don’t have to decide from the hundreds of calls that we get here. We make our decision based on what feels right.”

Community foundations can handle paperwork and responding to requests as well as managing the fund.

“When requests come in that seem like they line up with your company’s priorities, (they are) forwarded on to your company’s giving committee,” which ultimately makes the decision as to whether to give or not, Detjen said.

Freedom from red tape

Water-Right’s experience with the Community Foundation isn’t unusual, according to Tammy Williams, vice president of communications with the Grand Chute-based community foundation. Many others find similar relief from red-tape involved with giving.

The top four complaints Williams hears from the business community are that:

• They’re overwhelmed with requests for donations;

• They don’t want to say no;

• They find it difficult to stick to their giving priorities; and

•They can’t articulate those priorities.

A community foundation can help clarify those issues, she said.

“We’ll ask a number of questions to determine why the company is wanting to give back to the community, what values they’re trying to reflect in their giving,” as well as their pattern of giving in the past, Detjen said. “After having had that conversation, we can typically glean the top two or three major values or objectives the company has in focusing its charitable giving.”

Oshkosh Area Community Foundation Marketing Director Joy Wick said a few other reasons to work with a community foundation include:

Research. “We do what’s termed due diligence for every grant that goes out,” Wick said.

Guidance. “We can help direct companies to local organizations or projects that fit their mission,” Wick said. “We provide tools to help them grow their fund and use their charitable dollars wisely.”

Expertise. “We invest their money smartly. We know charitable tax law inside and out. We know the most urgent community needs and opportunities. We handle all the paperwork to comply with tax laws,” Wick said.

Advocate. “We work with state and federal lawmakers to ensure donors get the maximum benefits of charitable giving,” Wick said. “We also work with local government to maximize the impact of community projects, and ultimately help our donors leave a meaningful legacy.”

Trimming hair, making dough

The crew at A Cut Above Salon and Day Spa in Oshkosh just call it “The Bake Sale.”

But over the past quarter century, the small style house on Evans Street has set aside a nest egg for future giving, and along the way has garnered smiles from many recipients.

“One year we heard the fire department needed new defibrillators,” Kohlbeck said. “Another year it was heart monitors. We have run the gamut here, with everyone having their favorite cause.”

It all started twenty-some years ago when a stylist’s nephew needed stomach surgery. The crew at A Cut Above decided to hold a bake sale.

“We had great success our first year,” Kohlbeck said. “It really turned out to be a very fun bonding experience for our staff and for our clients. Everyone got into it and enjoyed it.”

That little boy they helped is now grown and married, but every fall, the staff at A Cut Above brings in their signature goodies in the name of others who need assistance.

“People come and look forward to it,” Kohlbeck said of the bake sale event.

Regular clients even pre-order their favorites weeks in advance.

“People say ‘I want her German potato salad, and I want her mint bars or almond bark,’” she said.

When they learned about something called an acorn fund at the OACF, the team at A Cut Above decided to go for it. Every year they put part of their bake-sale earnings into their OACF acorn fund. The rest goes directly to its rotating charity.

From nut to sapling

An acorn fund is built with small contributions over time, according to the OACF’s Wick. It’s called an acorn fund because it starts out small.

“Donors can start with an initial contribution of $1,000 and add as little as $250 per year,” Wick said.

The little acorn becomes fully endowed when it reaches $10,000, at which point it can start making grants.

“It’s a way for donors from all economic backgrounds to make a significant and permanent contribution to their community,” Wick said.

“They get a tax deduction for each contribution to the fund, the fund is invested with our pool, which can boost its growth, and of course it’s permanent, so it will support your cause forever.”

The stylists at A Cut Above decided their legacy should live on long after them.

“We thought one day when we’re old and tired hairdressers, we could meet for breakfast every so often and decide where to direct our annual donation,” Kohlbeck said.

Well-endowed funding

At the other end of the spectrum from an acorn fund are endowments. They’re usually linked with major estates or large companies, such as J. J. Keller, Gannett Corp. or Oshkosh Corp.

But you don’t have to be a big corporate player to start an endowment. Five years ago, Kimberly-based Capital Credit Union launched its half-million-dollar endowment after receiving over $430,000 from a legal settlement involving contaminated wells, according to Williams.

An endowment is a “long-term perpetual investment” whose purpose is to grow while giving away a portion of its earnings. It’s invested just like a 401(k), with the long-term strategy of earning a return sufficient to pay out about 5 percent of the fund’s value, plus cover inflation and any administrative fees involved in managing it, according to Detjen.

Contributions rising again

Giving has risen pretty much across the board since the start of the recession four years ago, according to Eileen Connolly-Keesler, president and CEO of Oshkosh Area Community Foundation.

“We saw a drop in 2008-2009 but now it’s up,” Connolly-Keesler said. “People are stepping up.”

She said it could be because of signs the economy is improving.

“The market has done pretty decently in the last couple of years from where it was in 2008, and people are feeling more secure about where they are,” she said.

It could also be that those who are better off are recognizing the increased need in the community, she said, with many people out of work.

It’s impossible to make sweeping generalities about individual companies, she said. Every industry is different and thus every foundation and every fund sees different results.

Lessons handed down from generations

Jason Lasky of Oshkosh is part of the third generation in the metal recycling company, Sadoff & Rudoy Industries of Fond du Lac. Returning to the area after attending college in Denver, he had an epiphany.

“When I came back to Oshkosh, I said if I don’t get involved – whether supporting positive improvements for the city or serving on a board involved in decision-making – I don’t have the right to complain,” said Lasky, vice president of corporate shared services for the company his grandfather E.H. Rudoy founded. “I’ve got to get involved and try to make a difference.”

His grandfather taught his family the importance of giving back.

“The community is why we exist. It’s where our employees come from, it’s where our business comes from, it’s where the supply of our materials come from,” Lasky said.

Once during a bad economic time, his grandfather actually borrowed money in order to continue his charitable giving, Lasky said.

Sadoff & Rudoy has a more free-form approach to giving, although Lasky and his family members all have personal foundations established at Oshkosh Area Community Foundation.

“There’s no really set way of going about it,” he said. “We got together and discussed the needs of the community and what’s going on.”

One reason the company doesn’t have a formal corporate foundation is that philanthropic giving varies year to year, based on business performance.

“When you don’t know how much money you’re going to have in the pot each year, it’s difficult to make capital decisions,” Lasky said.

A few years ago at the recession’s height, Sadoff & Rudoy had to adjust a grant it committed to the Fond du Lac YMCA.

“We had to call and say ‘We owe you this money, but we are going to take another year to pay you,’” Lasky said. “There are times when we’ll defer if we have to, and we always make it up. We’ve been in that situation, and it’s not fun to be in that situation.”

Not everyone is on the up and up

Sometimes a young or new charity has good intentions but isn’t necessarily experienced in getting the money where it’s needed, according to JoEllen Wollangk, regional manager for the Better Business Bureau’s Wisconsin chapter office in Appleton.

“I would highly recommend that people work with charities that have a good track record,” Wollangk said. “A local group might say ‘I want to raise money for Haiti,’ but do they really know how to forward that money to the areas in need?”

Most of the inquiries about charities come from those soliciting nationwide, she said, adding that she recommends sticking to local community charities. This year, BBB Wisconsin had more than 10,000 inquiries about charities, Wollangk said.

Unfortunately not everyone has good intentions.

“Whenever there’s a disaster, fake charities come out of the woodwork,” Wollangk said.

After Katrina, the BBB discovered 1,500 fakes, almost all looking to essentially scam generous donors out of their well-intentioned charity.

“Ask if they file a (Form) 990 and if you can see it,” she said.

That’s the tax form required for all 501(c)3 charities to file with the Internal Revenue Service. It shows how much of a charity’s revenue is spent on fundraising and administration versus the actual cause it purports to serve. Another source she recommends is the website Guidestar.org.

Potential donors can also check out the BBB’s Wise Giving Alliance section on its website, bbb.org.

“We will tell you what we know about that charity, if they are operating ethically, check their licensing, check government action against them, check their complaints history,” Wollangk said.

The BBB has 20 standards for charities that it will review if given the information by the charity. No more than 35 percent of a charity’s intake should go to fundraising and management – at least 65 percent should go to the programming it’s promoting, Wollangk said.

“They should have a board of directors with a minimum of five voting members,” Wollangk said. No more than 10 percent of the board should be paid.

The BBB has a paid accreditation program for charities, but charities don’t have to be accredited in order to be recognized as meeting BBB standards. Being accredited gives them bragging rights, which is valuable to a charity if they do a lot of online or mail soliciting, Wollangk said.

“One of the things we want to warn people about is that a lot of either scams or poorly run charities will use a name similar to a well-known national charity, so donors have to be very careful about look-a-like charities,” Wollangk said.

Having a 501(c)3 doesn’t mean an organization is making good use of the money.

“The government doesn’t control that as much as a lot of consumers or donors think they do. Sometimes a 501(c)3 may give less than 10 percent of what comes in to charitable causes and the rest can go to fundraising and administration.”

Lee Reinsch writes and edits from Green Bay.