How to Tell if a Charity Is Legit
Don’t be scammed by “charities” designed to make themselves rich
$187 million. That’s the amount of money four cancer-related “charities” have been charged with bilking out of donors.
The four charities, which solicited donations by phone, certainly sounded legitimate enough: Cancer Fund of America, Inc., Cancer Support Services Inc., Children’s Cancer Fund of America Inc., The Breast Cancer Society Inc. Donors were told their money would benefit cancer patients, including women with breast cancer and children. So it’s little wonder that so many people opened their wallets. But according to the Federal Trade Commission (FTC), “The overwhelming majority of donations benefitted only the perpetrators, their families and friends, and fundraisers.” The money was allegedly spent on cars, cruises, concert tickets and even college tuitions.
The charges brought against the sham charities by the FTC and attorneys general from all 50 states represent one of the largest actions ever against charity fraud, according to the FTC.
Whether or not you were tricked this time around, how can you ensure you won’t get fooled next time? Some tips from the experts for avoiding a charity scam:
1. Think twice before you give over the phone. Many charities, both bogus and bona fide, pay professional fundraisers to make those calls. If you agree to contribute, a portion of your donation —sometimes a very big portion — will go to the fundraiser instead of the charity. Charity Navigator, an independent evaluator of charities, notes that some charities spend nearly 90 percent of their income on fundraisers and less than 10 percent on programs and services.
If you’re inclined to give when you get the call, hang up and do some research, Charity Navigator suggests. Then, if you do decide to donate, give to the charity directly (such as by mailing a check) and cut out the middleperson.
Related: Fight Back Against Robocalls
2. Check them out first. Several independent organizations investigate the operations of charities and evaluate them for potential donors. So before you respond to a phone solicitation, letter, e-mail, or other plea for your cash, see what they have to say about the charity. These organizations include, in alphabetical order:
- BBB Wise Giving Alliance, a Better Business Bureau (BBB) affiliate, judges national charities on whether they meet 20 different standards relating to their finances, board oversight and whether they’ve been the subject of complaints to the BBB. National charities that meet all 20 standards are considered “accredited” and are entitled to display an accreditation seal. Many local BBBs have similar information about local charities on their websites.
- Charity Navigator rates charities from zero to four stars based on their financial health, accountability and transparency. You can search by a charity’s name or browse categories such as animals, the arts or medical research to find one that’s doing the kind of work you’d like to support financially.
- CharityWatch, formerly the American Institute of Philanthropy, gives charities grades from F to A+ based on how much of their income goes to fundraising and overhead and how much goes to programs and services. CharityWatch says its top-rated charities generally spend at least 75 percent of their budgets on programs. Charity Navigator also cites 75 percent as the mark of a highly efficient charity, although it says that can vary by the size of the organization and its particular cause.
Some state agencies also require charities that raise funds in their states to register with them. These agencies can be a source of information on both national and local charities. The National Association of State Charity Officials has a list of the relevant state agencies on its website.
It’s worth checking more than one of these websites, as their information may differ. You can also do some sleuthing on your own by reviewing the charity’s audited financial statements and IRS Form 990, which may be available online. However, even that approach isn’t foolproof: The action against the four cancer charities includes the charge that they falsely inflated their revenues in publicly filed financial documents and filed false and misleading statements with state regulators.
If you have any doubts, stick with a familiar charity that you know to be on the up and up. There are many to choose from, and they’re the ones that deserve your dollars.