In the wake of tragedies large and small, they pop up like mushrooms after a rain. With tales of woe and heartbreaking images of children or helpless animals, they beg for assistance. They are the tragi-charities. One hit wonders seeking to cash in on the tragedy of the day from floods and fires to missing children and more.
A financial advisor could help you put a charitable plan together to benefit the causes you care most about.
The pop-up charity business is usually local, occasionally regional and rarely national. Mostly they are the products of individual scammers who smell an opportunity to cash in using the name of a victim who may or may not even be real. They count on local press coverage and a quick website. These ‘charities’ usually rake in a few thousand dollars and disappear.
The Tampa Bay Times and The Center for Investigative Reporting put a list together in 2013 of the 50 worst charities in America. These organizations raised almost $1 billion for corporate fundraisers. Below you will find a roundup of that list, which was based on federal tax filings over 10 years.
Then there are the professional long term operations. They utilize direct mail or telemarketers to solicit millions of dollars in donations from unsuspecting individuals and businesses. Are you concerned you’ve already been scammed or just want to make sure you won’t be in the future? Here are some of the worst offenders:
The Tampa Bay Times and The Center for Investigative Reporting broke the charities up into five main categories: children, cancer, police/law enforcement, veterans, fire and other. As we stated earlier, these 50 charities account for almost $1 Billion in donations. Most of the money went to the people who collected the donations.
The percentages spent by these “charities” on direct aid to victims range from 0% to a high of only 11.10%. Most of the organizations spent between 0.10% and 8.6% of what they collected in direct cash aid. This is a far cry from what well-meaning contributors intended for their contributions.
It’s important to remember that these numbers are just for the 50 worst offenders. Charity watchdog organizations say no more than 35% of donations should go to fundraising costs. Only two out of the 50 listed met this criteria. However, they still spent only 0% and 1.10% on direct cash aid.
The worst of the worst paid more than 90% of what they collected to solicitors. Roughly two-thirds (33 out of the 50) paid between 70% and 89% to solicitors. Overhead costs consumed large chunks of what was remaining. Only the very small amount left, may get to the people who actually need it!
Breaking Down the Hustle
Con artists refer to what they do as a hustle. A hustle is like the 70’s disco dance. It’s made up of series of regular steps timed to the beat of the music that can be improvised as needed. Charity hustles work the same way. They improvise and evolve to stay one step ahead of unsuspecting donors.
One very common hustle is the name game. For example, a very well known and respected group is the Make a Wish Foundation. This organization spends the vast majority of its donations on children. Kids Wish Network, however, spends only 3 cents of every dollar collected on kids. But their website and solicitations are designed to look and sound like Make a Wish. In fact, they count on the confusion to gather contributions.
The IRS Is Not the Answer
When a solicitor for one of these groups calls a prospective donor the pitch will include the truthful statement that they are a nonprofit organization. Nonprofit however does not mean they are a charity. It only means they do not seek to make a profit on their activities. A profit according to Investopedia.com is revenue that exceeds expenses. The IRS has pretty broad rules for being a nonprofit organization. A charity is only one type of nonprofit.
Trade groups like those that represent the fast food or soft drink producers operate as nonprofits. Political organizations including both the Democratic and Republican parties are nonprofits. Lots of different special interest groups are nonprofits, including some private businesses that pay their executives quite well.
Seeing Through the Hustler’s Tell
The tell is a poker term. It means an opposing player does something to indicate he or she is bluffing. There are all sorts of questions that you could go through to determine if the solicitor on the other end of the phone is from an honest to goodness charity or not. They all require time and patience to learn and implement. The most sure-fire solution is to ask for the name of the organization and a means to contact them so you can make your donation at another time.
When you do this, depending on the experience of the solicitor, you will either hear a lot of fast talking or angry response or you will be provided the information. Legitimate charities with nothing to hide will tell you how you can make your contribution later and hustlers will get annoyed.
Before you make a contribution to any organization it is wise to know who they are and what they do. No legitimate fundraising effort is so urgent that if you do not make your contribution right at that moment someone will suffer. A day or two or even a week is not going to make a difference. So take the time to research.
There are a number of websites where you can check the status of a nonprofit. It only takes minutes but allows you to feel better about your donation. GuideStar.org requires that you sign up for a free account in order to receive very detailed reports on organizations. CharityNavigator.org provides a limited amount of information without a free membership. More detailed information is available to members. The Better Business Bureau has been around for decades. They provide free information that is easily digestible at a glance.
Tips for Charitable Giving
Photo Credit: flickr, © iStock.com/RapidEye, © iStock.com/P_Wei