[MONEY] Are You a Smart Philanthropist?

Category: Finance

Even in tough times, Americans make giving back a high priority. About 95% of American households give to charities, according to the National Philanthropic Trust, and nearly 20 percent of charitable giving happens in December. But smart donors favor charities that actually benefit needy people, 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 piece 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 CEO and founder of NVVF, Thomas Burch, pulled in a $65,000 salary but claimed expenses for “travel” ($133,000), “other expenses” ($70,000) and even $8,000 for “parking.” He also drove a Rolls Royce to and from his government job at the VA. I say "drove" because in November 2016, the U.S. Attorney General announced a settlement with NVVF and its founder for "squandering millions in donations." In June of 2017, Burch was charged with embezzling $150,000 from the charity, and was recently sentenced to five months in prison.

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 (as much as 75 to 90 percent) 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 (itself a 501-c3 non-profit organization) also has a Fake Charities page, which lists several dozen bogus charities. You might think that "Disabled Veterans of America" or "The Autism Resource Center" 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.

CharityWatch (also a 501-c3) is another charity watchdog organization that rates charities. It does provide lists of top-rated charities and other useful information, but requires a donation for full access to its reports. The BBB's Wise Giving Alliance is another trustworthy source of information about charities. You might also want to check out this list of The 50 Worst Charities in America.

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 "[MONEY] Are You a Smart Philanthropist?"

Posted by:

Stephen
01 Dec 2017

We give to Big Brothers and Big Sisters up here in Prescott AZ. Can't go wrong with that because it's local and we are involved. It really does make a HUGE difference for these kids.


Posted by:

Sherman
01 Dec 2017

I hate the term "Non-Profit". All that means is that revenue minus expenses is zero, and, expenses are easy to manipulate - just raise the executive officers salaries at year-end until profits = zero. Too bad the term "non-profit" has become synonymous with "charity". Bob is correct about the scammers - they are everywhere.


Posted by:

Drew
01 Dec 2017

Great article Bob. I sit on the board of a small family foundation that gives to 35 agencies around the country. We look for non-profits that are able to put about 85% of their funds towards the program they are serving. Administration and fundraising costs totaling 15% of their funds seems reasonable to us.


Posted by:

Baron Von Richten
01 Dec 2017

Good article Bob but it came too late for me. I gave $10 million to the Clinton Foundation - Haitian Relief Fund only to discover later that less than 1% of donations actually went to help Haitians after that devastating hurricane. I will never give a plugged nickel to those 2 grifters again.


Posted by:

John
01 Dec 2017

Well, Barron, it may not be quite that bad...

https://www.washingtonpost.com/news/fact-checker/wp/2016/06/13/did-the-clinton-foundation-raise-hundreds-of-millions-of-dollars-for-a-hospital-in-haiti-that-was-never-built/?utm_term=.6f78ad8da2f5

and

http://www.politifact.com/truth-o-meter/article/2016/sep/01/fact-checking-clinton-foundation-controversy/


Posted by:

Carl Demmons
01 Dec 2017

Thanks for these!
Do you know of any others who cover Canadian Charities?
Thanks,
CD


Posted by:

Graham
01 Dec 2017

I live in the UK, I am sick of begging ads appearing on the T.V. night and day.
My main objection apart from not knowing if they are genuine charities is that some of the big boys have reserves for up to 10 years which means that smaller charities than can't afford to advertise on T.V. or anywhere else are missing out.
I think that all charities should be made to indicate in their communications the value of their reserves and the percentage of funds that get to the service they are collecting for.


Posted by:

Carl Demmons
01 Dec 2017

Please remove my recent post. I only want my first name posted.
Thanks


Posted by:

Steve
02 Dec 2017

Check your acronyms cap; big difference between dav and dva.


Posted by:

Ken Tucker
05 Dec 2017

Another thing to watch for is the names of these unsavory groups. They often choose names that are very similar to legit charities hoping you'll not notice the difference. The NVVA is a lot different than the DAV!


Posted by:

Gillian
09 Dec 2017

About Canadian charities, the Financial Post just published this article:
http://business.financialpost.com/financial-post-magazine/charities-of-the-year-our-annual-picks-of-canadas-most-efficient-and-accountable-charities

You can look up Canadian charities on https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/information-about-a-charity.html - the direct link to the search page is https://www.canada.ca/en/revenue-agency/services/charities-giving/charities-listings.html

This group also reviews Canadian charities - https://www.charityintelligence.ca/az-index


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