Is That Charity Really A Good Cause?

Be Careful With Your Charitable Contributions

By Sharyn Alden, Contributing Writer
November 27, 2000, 2:41 p.m. EST

During the holidays, one of the most emotional times of the year, most of us are approached by at least one charitable organization looking for a donation. Most of these charities, which solicit donations by mail, phone, or in person, are legitimate. Unfortunately, though, many are not.

Hundreds of billions of dollars are raised each year for charities in the U.S. But the Federal Trade Commission says more than $1 billion annually falls into the hands of fraudulent solicitors.

So how do you know that the person who asks for a donation is representing a real charitable organization? It's often difficult to discern the difference. The choice to give or not to give is yours, so if you're not sure to whom you're giving, do some investigative work before you rush to your checkbook.

It's a good idea to do some research regardless of whether you're considering giving a small or large amount of money. Why? You should feel comfortable knowing that your contribution benefits the people, programs and organizations that you want to help.

Where Does The Money Go?

In the December 1999 issue of The Wall Street Journal's SmartMoney magazine, the publication issued its annual report on "which organizations are the best at spending your money." Reports like these are helpful in determining how charities manage their contributions.

The annual report looked at 100 of the country's largest charities in three categories:

1. Program ratio: The highest percentage of public money that is directly channeled into intended services.
2. Fund-raising ratio: Percentage of public money spent on fund raising.
3. Savings Ratio: Percentage of public money put into savings instead of direct use of funds for programs.

Catholic Charities, one of the report's top 10 charities, ranked highest in program ratio for successfully funneling donations into the programs for which the money was earmarked. "When you make a contribution to a charity, you're investing in the organization, so you should ask questions before you pull out your checkbook," says Joe Roos, director of development at Catholic Charities in Madison, Wis. "Your research should tell you what kind of organization they are, what they stand for and what they do."

Go Through This Checklist Before Making A Contribution

It makes sense to be cautious about giving away your hard-earned money. Follow these guidelines so you can make an informed decision when making a donation:

• Ask for written information. If an organization calls you, ask them to send you the charity's name, address, telephone number and supporting material about the organization.
• Visit the organization's Web site. Web sites can help you gather information. That information may add to what you already know about an organization's credibility.
• Ask who will benefit from your donation. Ask for proof that the money will be distributed to the program that you want to help.
• Don't give in to high-pressure tactics. If you're being pressured to give immediately, be cautious: This organization may not be who it says it is.
• Avoid giving money by courier service. High-pressure schemes may include convenient-sounding tactics that include sending a courier service to pick up your donation, pronto. Forget it. Legitimate charities don't operate that way.
• Don't give cash donations. Be suspicious of a charity that insists that you make a cash donation, instead of with a check.
• Make sure you know the difference between organizations with similar-sounding names -- like the American Red Cross and the American Red Cross Stitchers Society (the latter is made up).
• Take a tour of the organization, if possible. Ask to see the organization's annual report. These points are particularly important if you're thinking about making a sizable contribution.

Tax Exempt Or Tax Deductible -- What's The Difference?

Don't be snookered into thinking that tax deductible and tax exempt are one and the same. "Tax exempt" means that the organization doesn't have to pay taxes, which has nothing to do with you.

"Tax deductible" means that you can claim your deduction on your federal income taxes. An organization that is tax exempt may or may not offer tax-deductible contributions. If a tax deduction is what you're looking for, get a receipt, and make sure the receipt shows that your contribution is tax deductible.

If You Suspect Foul Play

Be aware of the fact that many charities, particularly small local organizations or new operations, may not show up on a national database. If you're researching an organization, and don't see its name on a database, it doesn't mean that it's not a legitimate organization. It just means that you'll have to dig deeper to come up with some answers.

If you go through the guidelines outlined here, you should be on the right track to learning where your contribution goes.

For additional help, check with your state's secretary of state or attorney general's office. In most states, it's mandatory for charities to be registered.

If you feel that you've been contacted by an organization which is fraudulently representing the nature of its business, for heaven's sake, don't make a donation or do nothing. Instead, contact your state attorney general or local consumer protection office, and let them investigate the situation.

Many charities use their contributions wisely, and they successfully funnel donations into intended programs. Others, though, may spend a significant part of their donations on administrative expenses or put the money back into fund raising. The more you know about an organization before writing a check, the better you'll feel.

For further reading about charitable giving, check out these sources:

• National Charities Information Bureau: Since 1918, it's been providing tips on giving to charities and providing scam alerts.
• Philanthropic Advisory Service, a service of the Council of Better Business Bureaus
• www.guidestar.org: You can search a large database of more than 650,000 American charities to learn basic facts about an organization.

Sharyn Alden has written about consumer issues for two decades for publications including the Wisconsin State Journal.

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