Dontate Wisely to Charities
Avoiding Scams When Contributing to Charitable Organizations
Investigate charitable organizations before responding to appeals for donations. Research all non-profit organizations carefully in order to avoid charity fraud.
End-of-the-year charitable donations are popular with taxpayers looking for last-minute tax deductions, but before contributors pull out their checkbooks, they should do a little research to ensure that the funds they plan to give go to reputable and effective organizations.
General Suggestions from the Federal Trade Commission
The US Federal Trade Commission's website has a helpful article that provides guidelines for charitable giving, including, how to limit mail and telephone solicitations, how to spot a scam, and what to do if you believe you have been the victim of a charity fraud.
Before making a donation, the article suggests donors visit the websites of a charity evaluators such as:
- The American Institute of Philanthropy
- The Better Business Bureau Wise Giving Alliance
- Guide Star
Charity Evaluators
The American Institute of Philanthropy ranks charities based on criteria that include the percentage of income the organization spends on fundraising and on salaries. They give each organization a letter grade from A to F. The standards used for ranking charities are explained in detail on their website, charitywatch.org, but the full report, titled Charity Rating Guide, is a print-only publication, mailed to members of the AIP. Annual membership in the AIP is $40 a year and also includes another publication called the Watchdog Report.
The BBB Wise Giving Alliance uses 20 standards to rate non-profit organizations. These include the charity's purpose, programs, methods of fundraising and financial reports. Reports for thousands of national charities are available on their website, www.give.org.
Guide Star offers non-profits the opportunity to share their data with the public. Organizations register and then upload their mission statements, performance indicators, and audited financial reports to the Guide Star site. Potential donors can search the database but must register with Guide Star before being able to read the reports. Registration is free.
Evaluator with a Difference
GiveWell.net is a new and innovative charity evaluator that looks at non-profits through a broader lens. GiveWell believes individual donors have the power to change the world, but need complex information to make informed decisions about the most effective place to put their money--information not always included in reports provided by other charity watchdog groups.
GiveWell believes non-profits are more than the sum of their financial statements. Holden Karnofsky, co-founder of GiveWell, explained on NPR's To the Point, which aired Dec 26, 2007, that for-profit corporations are evaluated on their overall accomplishments. He believes charities should be evaluated similarly.
Donors often prefer to give to charities with low administrative costs, but Karnofsky notes that numbers alone do not indicate whether a charity is making a significant difference in the world. For example, a charity might spend less than 5% of its income on administrative costs, but if its program is ineffectual or if the charity fails to perform rigorous assessments of its work, the donation may not make much of difference in the world.
Karnofsky said hiring, training, and retaining highly qualified people to work on complex problems in remote regions of the world can be expensive. These higher costs, however, should not necessarily eliminate an organization from consideration, if they are making a measurable difference in the world.
Individual Donors Make a Difference
According to Karnofsky, individual donors account for an astounding 75% of all charitable donations, vastly more than all the corporate and foundation donations combined. There are many, many worthwhile organizations needing money to carry on their good work. With a little homework donors can ensure that their tax-deductible contributions are going to the best and most effective charitable organizations.
