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From CBIA News, May 2002

Creating a company giving program

Donating money, expertise or other help to local nonprofits is a good business practice

A soft economy may seem like an odd time to suggest starting a company giving program. Yet most of the 400 businesses surveyed recently for the Connecticut Council for Philanthropy said they had increased or maintained their level of giving to community causes over the past two years. Giving to the community is a smart business move. It can increase employees’ pride in working for your company, making it easier to recruit and retain people. It can enhance your reputation in the community. And it can help to strengthen the community, which ultimately is good for everyone.

Many ways and means

As our cover story this month shows, corporate giving can take many forms. Companies give money directly or by setting up corporate foundations. They make in-kind contributions of goods and services. They allow their employees to volunteer during the workweek, or otherwise encourage volunteerism. Many companies also set up workplace fund-raising programs, with or without a payroll deduction option, for groups such as the United Way or Combined Health Charities of Connecticut. Some companies match their employees’ charitable contributions. 

Getting involved in corporate giving “is fairly easy to do,” says Tom Barnes, chairman of the Barnes Group Inc. in Bristol. Although his 145-year-old family business is no longer “small,” it has been involved in charitable giving for many years, says Barnes. He offers this advice: “First, make a commitment to set some money aside. Use your employees to build a feeling of teamwork and identify a cause. Get employees involved. Decide what interests you as an owner. It’s not that difficult to do. There are thousands of charities out there. I’d love to see every owner of a small to midsize company serve on at least one board. Once you commit your time, you become interested in the work the group is doing. Then it becomes easier to commit your money.”

Formalizing a giving program

Suppose you decide you’d like to set up a formal giving program — something beyond, say, a United Way campaign. Here are some recommendations from the Connecticut Council for Philanthropy and from the booklet “Creating a Giving Program: A Guide for Small and Mid-Sized Companies,” published by the Forum of Regional Associations of Grantmakers (see below). 

Identify internal resources: Consider all of your assets. Expertise, employees, products and services, as well as money, can be used to improve the community.

Focus your giving. Create a mission statement and goals for your giving program that align with the values of your company. For example, a children’s shoe store might decide to donate to organizations serving children. Or a computer software business might select school technology projects. Focusing your giving will increase the impact of your contributions.

Establish a budget. One approach is to designate a percentage of your pretax net income. In small companies, the average percentage is about 1%, according to the Forum of Regional Associations of Grantmakers. 

Decide how to structure your giving. Options for donating include the following:

  • Direct cash grants, such as unrestricted awards that an organization can use as it sees fit; restricted awards that must be used for a specific purpose; capital grants for construction, renovation, property purchase, or the building of an endowment; employee matching gifts; “dollars for doers” (cash grants to organizations for which employees have volunteered); and challenge grants, which are given on the condition that the recipient also raise money from other sources.

  • A direct-giving program, which is funded, operated and controlled by the company; donations are reported to the IRS as tax-deductible charitable contributions. (Up to 10% of pretax net profits may be deducted for qualified charitable contributions.)

  • A company-sponsored foundation, a separate legal entity that is funded primarily by the company and has its own bylaws and governance structure.

  • A donor-advised fund, which is a fund created within a community foundation or other public charity.

  • Noncash contributions, such as in-kind donations of products, supplies, services, and so on; loaned talent for a single event or on an ongoing basis; and employee involvement programs, such as fund-raising walks. 

Identify a decision maker and contact person. Some companies have a designated “giving officer” make all funding decisions. Others have a committee of company executives and other employees. A corporate foundation must have a board of directors to oversee the foundation’s activities.

Have written guidelines. Explain your giving policies and the criteria you use for selecting recipients. Being clear from the beginning about what you will and won’t fund will make it easier to say yes or no later on. Your guidelines should also tell how to apply and should name the contact person. 

Communicate your giving. Besides letting employees know about your giving program, you might want to post it on your Web site and otherwise publicize it to target audiences and the news media. 

Monitor your giving. For example, as time and resources permit, occasionally do site visits to the organizations you support. This will let you see how your contributions are making a difference in the community and can help you make future grant decisions.

Keep records of your giving. To show that grants were made to qualified charitable organizations, keep on file the organization’s IRS tax determination letter. Also keep any correspondence or reports from the organization and a record of your donations. Retain these files for about six years. 

For more information

The following organizations can give you more information and advice on company giving programs:

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