“Rather fail with honor than succeed by fraud.” ~ Sophocles, Greek playwright born in 495 B.C.
Question: How do I distinguish reputable charitable organizations from others that may be scams?
Answer: It’s interesting that you ask this question now because I just received several calls requesting donations for the victims of the South Carolina floods and was leery of making donations to unknown entities. We know that as year-end approaches, the push will certainly be on for donations to numerous organizations. Weeding out the worthy ones from the unworthy can be tricky.
For instance, in May of this year, the Federal Trade Commission levied charges against the Cancer Fund of America, Cancer Support Services, the Children’s Cancer Fund of America and the Breast Cancer Society. Although they are all legitimate charitable organizations, their names can easily be confused with The American Cancer Society. The “imposters” engaged in unethical donor solicitation strategies resulting in less than 3% of the money raised actually going to cancer patients.
Between 2008 and 2012, these organizations hired professional fundraising organizations that solicited donations via telemarketing calls, direct mail and websites endorsed with the names of supposed cancer patients. The fundraisers then took a cut of 80% to 95% of whatever money they raised, retaining a total of $187 million for themselves. The FTC reports that although this is one of the largest charity fraud cases ever filed, the tactics used to defraud donors and charity recipients aren’t uncommon. This information is from the May 20, 2015 edition of The Atlantic, “The Seedy Profitable World of Scam Charities.”
As a general rule of thumb, 75% of an organization’s budget going towards programs and services to support its mission is acceptable. Researching a charity doesn’t have to be a lot of work if you use a website such as CharityNavigator.org to do your vetting and even make an online donation.
Another option is to donate through a Charitable Endowment Fund where you can decide if you would like to keep your donation anonymous and your information will not be shared. It is wise to safeguard your personal information because personal data is a valuable commodity, both to charities and scammers. Stay focused and plan accordingly.
Researching organizations online prior to making your gifts may help you to better focus on what means the most to you. These websites will help you gather information so as to make an informed decision on where your donation is going and how it will be used.
BBB Wise Giving Alliance – give.org is the Better Business Bureau’s evaluation of charities.
Charity Navigator – charitynavigator.org is an independent evaluator rating charities.
GuideStar – guidestar.org researches over 2 million charities online.
GiveWell – givewell.org thoroughly researches listed top charities.
The opinions expressed are those of the writer, but not necessarily those of Raymond James and Associates, and subject to change at any time. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed.
“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”
This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email firstname.lastname@example.org, website: www.raymondjames.com/Darcie.
Here are a Few Ways to Help You Avoid Potential Charity Scams:
1) Always send contributions directly to the charity, even if a professional fundraiser originally contacted you. This will help ensure that 100% of your gift actually goes to charity.
2) If you don’t recognize the name of the charity when a telemarketer calls you and they say that you’ve given in the past, be cautious. Ask the caller to provide specific information about when and how much you’ve given in the past. Check your records before making donations. If the caller isn’t willing to provide evidence of your previous gifts, consider whether you want to support an organization that doesn’t keep accurate records, or in the worst case, is deceitful in solicitations.
3) When you receive those custom mailing labels, stationary, greeting cards or other items in the mail along with the request for donation, consider how much the organization spends on overhead. If you still want to support them, it’s worth finding out what percentage of donations goes to their mission and how much is spent on overhead. In addition, if you don’t donate and still use the labels or greeting cards, don’t feel guilty; you’re giving the organization exposure and their investment in marketing is not a total loss.
4) Be wary of organizations that have names similar to well-known charities but have no connection with the better-known charity. For example, the National Humane Society is not the same as the Humane Society of the United States. Finally, never let a charity’s representative, legitimate or not, pressure you into making a donation. Well-run, established organizations will not rely on these tactics. It’s up to you as a donor to verify that the organization is indeed a 501(c) (3) charity and that your donation qualifies for a tax deduction.