4 ways to protect yourself when giving to an unknown charity

It’s been one year since our investigation into America’s Worst Charities, and since that time, a lot has happened.

Just to remind you, in 2013, a joint investigation by The Center for Investigative Reporting and the Tampa Bay Times revealed the 50 worst charities in the United States based on the amount of money spent on for-profit telemarketing and direct mail firms. We found that not a lot of donated money actually goes to the intended causes and that the nation’s 50 worst charities have paid their solicitors nearly $1 billion over the past 10 years that could have gone to charitable works.

There are more than a million tax-exempt organizations operating in the U.S. A small fraction – about 6,000 charities – use fundraisers and telemarketing firms to raise money. CIR reporter Kendall Taggart and Tampa Bay Times reporter Kris Hundley spent months analyzing data and tax records to compile the list. It’s a murky regulatory space that’s become clearer now that reporting has shed light on what’s actually going on.

We wanted to remind you of some important consumer tips to help protect you from bogus charities. And we also wanted to give you an update on all the things that have changed as a result of our work.

1. As a donor, always be mindful of where your money is going.

The most egregious charity offender we reported on was Kids Wish Network, which gave less than 3 cents of every dollar raised to sick children. But that was just one charity. The investigation found that over the past decade, these charities have relied on deception to generate more than $1.3 billion in donations. About 75 percent went to pay charity executives and the solicitors who raise the donations.

As we outlined, it’s important to realize that even asking for donations over the phone costs money:

Cold-calling donors is one of the most expensive ways to raise money. Charities that use paid telemarketers often let the fundraisers keep 80 to 90 cents of every $1 raised. Most of the money you think is going to needy veterans or dying kids is paying telemarketers’ overhead and profit.

Databases like the Charity Checker, which we produced with the Tampa Bay Times, curate reviews from a variety of watchdog sites, including BBB Wise Giving Alliance, Charity Navigator, GreatNonprofits and GuideStar. Check it out to see how a charity you’ve heard from or want to give to is ranked.

2. Don’t be afraid to ask questions.

With the above tips in mind, ask these questions the next time someone calls you for a donation:

Who is calling?

Ask if the caller is a paid telemarketer. Get the exact name and location of the charity he or she represents. Beware of charities that mimic the names of well-established groups and of claims that you’ve given before to a charity you’ve never heard of.

How much of my donation will make it to this cause?

How much gets to the charity? How much does the fundraiser keep? Don’t let them brush off your questions with generalities. Callers know the exact percentage. Make them tell you.

Where exactly will my donation go?

Ask for examples of the charity’s good deeds. Be skeptical of vague claims like “promoting awareness” or “educating the public.” And if the group claims to help a local veterans hospital or children’s burn camp, check it out. Call the local nonprofit that supposedly benefited and ask if it’s ever heard of the charity that’s asking for your donation.

3. Understand how the charity regulation process works.

For most of the country, it’s up to state regulators to keep charity operators in line. Even when scam charities get caught and are forced to shut down, many simply start over again under a new name.

Even more confusing, it’s hard to tell who is in charge of enforcement. Tax attorney Paul Streckfus told us that regulation falls largely on a patchwork of state agencies.

Some charity experts say the federal agency does not aggressively go after fraudulent nonprofits because they don’t pay taxes. That means cases against them don’t generate revenue.

The IRS has been more reluctant to take on charities for high fundraising costs because such cases are difficult to win, experts say. …

“The IRS needs somebody at the top with real guts, who says, ‘It’s my responsibility to weed out this corruption,’ ” Streckfus said. “There’s a great vacuum out there when it comes to the regulation of charities. And there’s no evidence there will be any improvement.”

If not the IRS, then who? It turns out that many state regulators don’t offer donors a way to check up on a charity’s past violations. As a result, the public continues giving blindly to the nation’s worst charities.

Thus, we went to work piecing together the first public database of more than 8,000 disciplinary actions, which you can access here:

America's worst charities | State disciplinary actions database

4. Stay on top of how charity regulation is changing.

Some states are taking action to expand their toolkit for going after bad charities. Here are some of the policy changes that have been made since our investigation.

In California, a proposed state law could provide more resources for regulators:

AB 2077, introduced by Assemblyman Travis Allen, R-Huntington Beach, would allow the attorney general’s office to direct more of the estimated $7 million generated from charity and professional fundraiser registration fees to enforcement.

State law requires charities that fundraise in the state to register with the attorney general. The Department of Justice estimates that there are 52,000 delinquent charities in California. At least 130,000 additional charities operate in California despite having failed to register, according to an Assembly staff analysis.

Florida passed legislation that significantly strengthens the state’s charities laws. The sweeping changes include:

  • Nonprofits and professional solicitors banned in one state will be banned in Florida as well.

  • Additional manpower to aid regulation and stronger financial penalties for wrongdoers.

  • The bill also puts teeth into an existing law prohibiting people convicted of certain financial crimes from soliciting for charities.

Since the Times/CIR series was published, charity regulators in five states have opened investigations.

How has the way you give donations changed? Let us know in the comments below.

Related links

Charity Checker aggregates ratings and reviews in one place

How to dig deeper into a nonprofit’s finances

Don't get fooled by bad charities

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