Herein lies the importance for a financial counselor. It's the rare accountant that, from time to time, is not called upon by client or counsel to provide guidance concerning contributions. Whether the matter is selecting specific assets, timing donations, or evaluating tax consequences, unique expertise is required.

To be truly effective, a professional must not ignore another aspect. It involves the matter of informed giving. Will a donation to a foundation be applied in a way the client envisions? It's a major dilemma. A few statistics give you an idea of the problem's scope. In 1997, average giving by 26 major foundations, each worth $1 billion or more, was 4.7 percent of assets. To put giving in perspective, expenses and overhead are included in this category. Consider 2001, when the nation's 64,000 foundations, then worth about $371 billion, donated only $23 billion for charitable purposes. Of that sum, $4.3 billion -- some 16 percent -- represented overhead.

But the real puzzle is determining how assets are used. Look again at 2001. In that year directors of the 20 wealthiest private foundations each received more than $400,000, even as the value of their investments sagged. Add to that the practice of nonprofit organizations providing senior officials with elegant accommodations, plentiful benefits, and loans that are subsequently forgiven -- in emulation of for-profit corporations -- and the picture comes through clearly.

You might ask whether there's some way of distinguishing good charities from not-so-good ones. Within limits, yes. Statistical data, based on IRS Forms 990 filed annually by all non-faith-based charities earning more that $25,000, is available. However, meaningful evaluation requires reading between the lines -- a tough job if you don't know what to look for. In getting down to fundamentals in giving, I believe that the ultimate recipient must be both deserving and identified. This, of course, raises formidable issues. Unless you possess intimate knowledge of a particular foundation's operation -- something to which only an insider is privy -- you cannot vouch for its adequacy. I've heard the contention, perhaps justified, that all large national charities, such as United Way and the Red Cross, must be ruled out for donations, as there is no way ever to know what happens to the huge sums that annually disappear into these organizations. This, of course, gets to the nub of the matter: Are any suggestions for charitable giving possible that are not suspect?

On that last question, you're in luck. Not all donations must flow into a black hole. Although it requires some organization, a method is available whereby a client can be assured of meaningful giving. The key to this is Section 501(c)(3) of the Internal Revenue Code. This enables an individual to establish a "private foundation" into which contributions may be made for the charitable purposes the donor specifies. Now that you know what's available, let me suggest how it may be used.

Imagine for a moment that your client is an architect with a love for his profession. What better gift might he make than to enable young engineering and architectural students to pursue that career? He establishes a foundation into which he contributes money. These funds become available for scholarships to students chosen by the foundation directors whom he selects, perhaps faculty members at a nearby community college. Selections are made from among students having completed two years at the college. They receive payments on a monthly basis while pursuing their junior and senior years at a university, and your client monitors their performance. Deserving students thus benefit directly to the extent of nearly 100 percent of your client's tax deductible contributions. This is enlightened giving.

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AL JACOBS has been a professional investor for nearly four decades. His business experience ranges from property management and securities investment to appraisal, civil engineering, and the operation of a private trust company. He is the author of Nobody's Fool: A Skeptic's Guide to Prosperity, available at http://www.onthemoneytrail.com, or through Amazon or Barnes & Noble.