My good friend Adriane works as a Consumer Fraud Specialist at the National Telemarketing Victim Call Center. The other day, she was telling me about how charities misuse funds. I asked her to write an article with some tips on avoiding bad charities. Here it is!
‘Tis the Season to Give Back: A Guide To Making Safe Donations!
The holidays are upon us, and during this time we often think about how we can help others. Unfortunately, there are a lot of bad charities soliciting for your dollars out there.
Think back to the last time you gave money to a charity: was it over the phone? Through a direct mail solicitation? By adding an extra dollar onto your bill at a store when you were in the checkout line? Did you ever stop to think, “Where will my money go when I contribute?” or did their charity name tug at your heartstrings, and you felt compelled to give?
Before you open your wallet, even for a small amount, you need to find out how that charity is going to spend your charitable contribution.
First, let’s look at the three main charity pitfalls.
- Charities may be 100% fake. Just because a solicitor tells you over the phone the money will go to set up after school programs for at-risk youth, does not necessarily mean there is anything behind that statement, other than the lie to get your money.
- Money may be misspent on salaries and fundraising. Some charities spend most of what they earn on mailings and high executive salaries, while only a small percentage of the money raised actually goes to their cause.
- Funds may be misdirected entirely, spent money on personal loans and big-ticket purchases. For example, musician Wyclef Jean’s charity raised millions to supposedly help people in Haiti, but instead frittered away the money.
Don’t be scared off. Many great charitable organizations do need your help, so it’s very important for you to be able to discern the good charities from the bad to make sure each dollar given counts!
Here’s a guide to help you be smart about your charitable giving.
There are two great websites that allow you to check up on a charity. The easiest one to use is Charity Navigator. If a charity you want to contribute to is not listed on Charity Navigator’s website (right now they have over 5,000 popular charities listed), use Guide Star.
Use the website Charity Navigator to check out a charity’s rating.
- Go to www.charitynavigator.org and put in a charity’s name to see how many stars they have received, a 4 star rating being the highest.
- Charity Navigator breaks down how the charity spends money, telling you how much has been spent on fundraising, administrative costs, executives’ salaries, and how much money goes to the actual program the charity is running.
For example, look up the charity Defeat Diabetes Foundation. They get a zero star rating. They spend 77.1% of the money they raise on fundraising, while spending only 14.5% on defeating diabetes. In 2009, they raised just over a million dollars. But they spent $876,000 on fundraising costs. Is this the type of organization you want to send your money to?
At the bottom of the screen, you will see a box listing other charities that do similar work that have higher ratings. The Diabetes Foundation of Mississippi gets a four star rating. They spend 88.5% on their program costs, with only 8.8% being spent on fundraising. Here’s the difference, they put $758,000 towards defeating diabetes. This is an amazing organization that is deserving of people’s support.
If you look up Coalition Against Breast Cancer, you will see a donor advisory pop up, stating this organization is under investigation for fraudulently raising millions of dollars and in the process of being shut down.
But if you look up CURE Childhood Cancer, you will see that they have a four star rating and allocate 84.9% of money given to childhood cancer research, meaning in 2010, $1.5 million dollars went to fighting cancer. It is very important to be able to direct your money to the right organization.
Use Guidestar to look up a charity’s 990 Tax Form. Guidestar gives an in-depth look into what’s being reported.
The trick is, you have to muddle through a big tax return to get the information.
• Go to www2.guidestar.org and register for a free login ID. Then enter the charity name and click on the tab Forms 990 & Docs, to see their tax returns. Every charity that has 501c(3) tax-exempt status has to make their tax returns public, so it should be easy to see where they are spending the money given to them.
- On the first page of the return, the site lists how much money the charity raised for that given year.
- Scroll down a few pages and you can see what they paid to their executives.
- Keep going and you will see what they paid for professional fundraising services, telemarketing costs, printing costs, postage costs, basically all the costs associated with sending out direct mail solicitations or phone solicitations.
- If you keep scrolling through the return, you can see if the charity has loaned money out to executives. In Defeat Diabetes Foundation’s case, you can see that they have loaned over $400,000 to the President and Treasurer, who are brothers; so even though their salaries are listed as low, they have still profited from loans they have not repaid since 2004.
You get a letter in the mail, asking you to send in a small amount of money to collect or win a prize. The letter claims the money you send will benefit a charity. Don’t do it!
- Never send money in to “win” a sweepstakes, even if your “donation” is going to a charity. If a charity is collecting money, there is no reason to give it away.
- These mailings tend to target senior citizens and are full of misleading information about how the sweepstakes are being run, what the odds of the sweepstakes are, and use deceptive phrasing.
- If you get a solicitation like this in the mail, throw it out. The organizations running these sweepstakes never announce the winners publicly, it’s hard to verify if they even had a winner.
Ask yourself why a reputable charity, like Doctors Without Borders, has never run a sweepstakes? Because every dollar donated should be spent wisely.
Don’t accept charitable solicitation telephone calls. Why not?
- It’s difficult to confirm whether the person calling really does work with the charity they claim to be calling about.
- Part of the money you give over the phone will be retained by the telemarketing company as their salary for making those calls. Often, a charity will only get a small percentage of the money raised over the phone.
If you get one of these calls, simply tell the person “I don’t accept phone solicitations,” and hang up the phone.
To donate, call that charity directly and ask for their main address so you can mail a check directly to them. This bypasses the telemarketing company’s fees.
Never feel pressured to make a contribution on the spot, such as in line at the grocery store, unless you have already researched that charity.
- Write down the charity name, if you are interested in supporting their cause, so you can think about it and get more information about the organization to make sure giving money is a good idea.
Another way you can contribute is to give locally, so you can see your money at work right away.
- Walk in to your local police station, fire department, animal shelter, children’s hospital, church, library, or community center and hand over a check.
- Find out what programs are under-funded in your area and give money where you know it will make a difference. This way you know the money will be used to support issues in your community.
Hopefully these tips have opened your eyes as to how to make safe contributions so that your generosity can be put to good use. Please share these tips with friends and family, as many people don’t realize how important it is to really understand where your dollar is going before making the decision to give.
If you have any specific questions about evaluating charities, please feel free to email me at email@example.com.
Consumer Fraud Specialist
National Telemarketing Victim Call Center