News broke this week that four cancer charities were charged with fraud for raising over $187 million in donations through deceptive means. This is awful news for the nonprofit sector, which already struggles with debunking myths and misperceptions (including the much talked about Overhead Myth). Many would-be donors struggle with how to give to charity without worrying about their donations falling into the wrong hands. My advice: don’t let a few bad apples stand between you and the causes you care about, but do learn your lesson about checking a charity’s legitimacy before you give. Here’s how:
Things to do before you give:
In order to avoid scams, it is important to do your research when giving to charity. Here are some good things to do before you donate:
- Find out if the organization is eligible to receive tax-deductible contributions by looking them up on the IRS website.
- Look the charity up on GuideStar, and look at their financial documents as well as their impact report. In this article, Chuck McLean, GuideStar’s Vice President of Research, gives some helpful tips on what to look for when vetting a charity’s form 990.
- Find out if or how the Better Business Bureau has rated the charity. You can look this up at Give.org. Please note that regional charities will have a separate Better Business Bureau listing and will not appear on Give.org. If you’re having trouble finding a charity’s rating, usually a quick Google of the charity’s name + “Better Business Bureau” will do the trick.
- If you get a solicitation call from a fundraiser, don’t be afraid to ask them the hard questions. The Federal Trade Commission has put together a helpful list of questions to ask if you get a call from a fundraiser on behalf of police or firefighters, and many of these would be applicable for any solicitation call.
There is no one surefire way to tell if a charity is being ethical, but there are often warning signs of a scam, if you know what to look for. Here are some red flags:
- If you look them up with the Better Business Bureau and see a red exclamation mark at the top of their charity review, that is a pretty literal red flag. This signifies that the charity did not disclose their financial information to the Better Business Bureau, and points to a lack of transparency about how the charity spends its donations.
- If they are vague about who they are or where the money is going. If someone asks you to donate, but doesn’t specify what charity the money is going to, and cannot give you a receipt that your gift is tax-deductible, then there is no way for you to tell if they are legitimate (and they probably aren’t).
- If they ask for cash. Sending cash in the mail is never a good idea, and making donations to a charity in cash makes them harder to track and easier to steal.
- If the fundraiser is making a commission. If a percentage of your donation is going directly to the fundraiser who solicited you, then they are violating the ethical standards of the Association of Fundraising Professionals. This practice is unfair to donors, nonprofits, and the community (this paper explains why).
- If they use high-pressure tactics. An ethical fundraiser will not strong-arm you into making a donation, and will give you the time you need to look up the charity and learn more about the work that they do.
Now that you know how to avoid fraudulent charities, why not check out my post on how to find the best ones for you? As always, thanks for reading!