Be A Smart Philanthropist

Category: Finance

Even in hard times, Americans make giving back a high priority. About 95% of American households give to charities, according to surveys by the National Philanthropic Trust, a nonprofit that tracks charitable donations and activities. Smart donors favor charities that actually benefit needy people, and not the execs and administrators. Here's how to tell them apart...

How To Find the Best Charities

If you have a phone or a mailbox, you probably get solicitations from various charities regularly. But how can you tell if a charity is legit? How can you find out if they're funneling donations to the people they claim to be helping, or if the cash is mostly spent on fundraising, salaries and perks?

The average annual household contribution to charity is around $3,000, says the NPT. For sure, that average includes large donations as well as spare change tossed into the Salvation Army’s red pot. But Americans definitely feel the urge to give back to the less fortunate.

But where there’s money, there are scammers looking for undeserved gains. Even charities that seem legit on the surface don’t necessarily exist to help the downtrodden; some are just money-laundering schemes for their owners. CNN did a number on “the worst charity in America” back in May, 2016.

Charity Ratings

The National Vietnam Veterans Foundation collected more than $29 million in donations from 2010 to 2015, according to required IRS filings. The foundation’s site claims it exists solely for the purpose of "aiding, supporting and benefiting America's veterans and their families."

But CNN found that less than 2% of all donations received by NVVF in 2015 actually did any good for any veterans. The rest went for things like “travel” ($133,000), “awards” ($21,000), “other expenses” ($70,000) and even $8,000 for “parking.” The CEO and founder of NVVF, J. Thomas Burch, pulled a $65,000 salary in addition to his parking and other expenses.

The best part: Mr. Burch is a veteran, and he works as an attorney for the Veterans Administration! The VA told CNN there’s nothing improper about an employee also running a charitable organization, but after hearing CNN’s findings the Inspector General has taken an intererest in Mr. Burch, who drives a Rolls Royce to and from his government job.

Outrageous Expenses

When I get a phone call that starts out like this: "Hi, my name is Mike, and I'm a paid caller on behalf of (some charity)," I hang up immediately. You can bet that any organization using a paid caller to solicit funds is giving a big chunk of your donation to a telemarketing firm. If the caller doesn't say, I recommend that you ask if they are a volunteer or a paid caller.

Other organizations spend millions on direct mail campaigns to raise funds, and end up giving only a tiny fraction of those funds to people in need. A mailer from the United States Deputy Sheriff's Association caught my attention recently. This group claims to be "Serving the needs of county law enforcement nationwide," but only $150,000 of the $3.3 million they raised in 2014 was used for that purpose. Would you like to know how I found that information? Read on!

Check Before You Write That Check

Before giving your hard-earned money to a cause, make sure the money will be spent as you intend. Look up any charitable organization in Charity Navigator’s database of IRS filings. If you're looking for a charity in a specific niche, browse by categories such as Animals, Art & Culture, Education, Environment, Human Rights, or Religion.

You’ll find out how much a charity spends on fundraising, executive salaries, and other overhead. You’ll also find smart tips on how to give in-kind donations (hint: don’t send cocktail dresses to earthquake victims).

Charity Navigator also has a Fake Charities page, which lists several dozen bogus charities. You might think that "Disabled Veterans of America" or "Fresh Start Opportunities" sound legitimate enough. But these and others on the list are actually soliciting funds in violation of federal tax law. (The scammer who ran the fake DVA was sentenced to up to 10 years in prison.) Click on any of the fake charities listed on this page, and in addition to details on the organization, you'll find a list of similar charities that ARE legit.

Don’t let the flim-flammers kill your kindness. Give from your heart. But also use your head. Your thoughts on this topic are welcome. Post your comment or question below...

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Most recent comments on "Be A Smart Philanthropist"

Posted by:

27 Sep 2016

Unfortunately, even some legitimate charities waste most of their money on salaries, TV ads, travel, etc. There are several good charity rating sites. In addition to (mentioned above by Bob), there is,, etc. If you are not careful, you may be giving to Donald Trump's charity foundation which uses its money to pay his legal bills. By the way, the Trump Foundation is not rated because it is a "private foundation" and doesn't file most information returns that the rating sites use.

Posted by:

27 Sep 2016

Once again you gave us a most excellent article. Thank you.
I had to share this on my Facebook for others to read.

Posted by:

27 Sep 2016

A charity that relies strongly on unpaid volunteers to raise money could actually be shortchanging itself. Is it better to spend $10,000 raising $100,000, or to spend $300,000 raising $600,000?

Posted by:

Old Man
27 Sep 2016

Based on first-hand reports of associates who worked with/for many of the larger charities, as well as reports from third parties, I quit donating to them long ago. Now I donate to local charities where I can actually see where my money/goods are used. There are a few national ones that keep the donations in the local area, which I sometimes also support.
All solicitation mail goes straight to the recycling bin. Phone solicitors are told not to bother me again. I don't donate to ad campaigns.

Posted by:

Dennis King
27 Sep 2016

Great advice Bob!

Can't go wrong giving to the Red Cross.

Posted by:

27 Sep 2016

First I declare an interest. I am a disabled person, son of a disabled person and husband and care provider for another disabled person.

Even the legitimate charities have a problem. Many have very highly paid workers who have qualifications in 'charity' and move from one cause to another without any thought for the people who they leave behind.

In answer to the 10% or 50% question above I would prefer the 590.000 going to the people it was given to benefit rather than to paid workers who have moved on from selling used cars. In fact I would prefer to go without and have never received one penny piece of 'aid' from a charity.

The real problem is what do the people who need do if we stop being charitable? Even 10% of something is better than 100% of nothing when people really need it.

The changes can only come with stricter regulation of charities.


P.S. I am a UK Citizen with an extended family here and in the US, my wife retains her US Citizenship.

Posted by:

Paula Reusch
27 Sep 2016

Excellent article. I wish I had a dime for every phone call or piece mail I receive in the name of charity. My elderly mother was told by her mailman that she receives the most mail on his route and it
is almost all from organizations soliciting donations.

Posted by:

Anne K
27 Sep 2016

I never, ever, give money to any organization that calls me. Period. Charities that we used to donate to have lost our support this way.

I refuse to subsidize telemarketing, which I believe to be a criminal invasion of privacy and invitation to being scammed.

If we all made telemarketing unprofitable by refusing to talk to then and certainly refusing to open our wallets to them, maybe we'd once again be able to enjoy an uninterrupted dinner and peaceful evening.

Posted by:

27 Sep 2016

I do not make contributions over the phone. I tell them so and hangup. No worries!

Posted by:

27 Sep 2016

Charity Navigator is great!!

I donate only to charities that use at least 80% of their income for the program; that don't call me on the phone; and that don't send me any free goodies. That narrows the list considerably.

Posted by:

27 Sep 2016

I give money mainly to local well known charities, and often in the form of supplies that the charity has on an Amazon wish list.

Ultimately if you can manage it, donating your time to a favorite charity or organization is well worth the effort. (I spend Sunday afternoons helping out at the local animal shelter)

Posted by:

Frank Buhrman
28 Sep 2016

One caveat: charitable work can be done on a very small scale and be worth your dollar, but the smallest charities may not be large enough to deal with all the paperwork. My sister worked with a group that ran a daycare center for disadvantaged children. They didn't have the resources to keep up with all the requirements, yet the work they did was first-rate, and there was very little waste. You have to do some digging on our own in cases like this, but your money can end up a lot of good.

Posted by:

29 Sep 2016

I've been using Charity Navigator and occasionally Charity Watch for years. I used to want the charity to have a very high percentage of the donations go to the programs (i.e. the actual work of the charity). However, I've come to understand that having a very hard percentage is difficult for a new or small organization. Spending some money on soliciting donations is sometimes necessary. So I've eased that goal somewhat to 80%. I do not like charities that waste their money sending me unsolicited "free gifts" -- usually stuff I have no interest in -- hoping to guilt me into sending money. I don't object to offering a premium that I can chose to accept or not.

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