The Scoop: Effective Charities

During the holidays Americans are more generous than at any other time of year. Whether it’s the holiday season that makes them think of others, or the desire to donate before the end of the year so they can write it off on their taxes, they open their wallets and support their favorite charity.

But is the charity you are donating to helping others as much as you think it is?

Charity Fraud

James Reynolds, Sr. worked for a chapter of The American Cancer Society in Tennessee for 8 years. After being told to quit or get fired, he left and started his own charity. He named it Cancer Fund of America. He solicited donations door-to-door and hired a for-profit solicitation company to get donations. He advertised that donations would be used to provide direct aid to cancer victims. However, records show that less than 2 cents of every dollar raised has gone to direct cash aid for patients or families. Instead, he persuaded businesses to donate items that his charity then paid to be shipped to cancer patients, which cost $600,000 a year, and the rest of the millions raised were used to pay the professional fundraisers along with high salaries to him and his family members.

He was so successful in lining his own pockets that other family members wanted in. The Cancer Fund of America provided money for other family members and friends to start their own charities. These include Cancer Support Services, Children’s Cancer Fund of America, Breast Cancer Society and American Association for Cancer Support.

Over the years these charities raised hundreds of millions of dollars. The solicitation companies kept a high percentage of the money raised. The heads of the charities earned six figure salaries, and family members and friends received cars, trips, luxury cruises, college tuition, gym memberships, jet ski outings, sporting event and concert tickets, and dating site memberships.

In tax filings they told the IRS they donated certain amounts of money to various groups, but those groups claim they never received them or didn’t receive as much as the charities claimed to have sent. In 2011 Breast Cancer Society claimed their $36 million worth of donated medical supplies came from two sources. But both sources say they have no records of it.

Earlier this year, the Federal Trade Commission and all 50 states joined forces and sued all four charities. Reynolds’ son, his ex-wife and a family friend settled with the FTC and are banned from fundraising and running charities. Litigation against James Reynolds, Sr, and Cancer Fund of America and Cancer Support Services are still ongoing. Children’s Cancer Fund of America and Breast Cancer Society have been dissolved. But the other two are still in business.

This is one of the largest charity fraud cases ever. There have been others over the years. So how do you keep yourself from donating to fraudulent or ineffective charities?

How to Avoid Charity Scams

The Federal Trade Commission has information on charity scams and how to avoid them here. The IRS says to be wary of charities with names that are similar to familiar or nationally known organizations, and also to be leery of scams that occur following natural disasters. For example, there were quite a few scam charities following the flooding in South Carolina in October. The Center for Investigative Reporting has a 3-part series about America’s Worst Charities and tips of what to look for and questions to ask. They warn, “Hundreds of charities claim to help those in need. But of the millions of dollars raised each year, how much goes to cancer patients, disabled veterans and dying children? Almost nothing.”

Fraud.org gives these tips to avoid charity scams:

  • If you’re approached by an unfamiliar charity, check it out. Most states require charities to register with them and annually show how they use donations. See below for more information on where to go to check out charities.
  • Ask for written information. Legitimate charities will be happy to do so and won’t push you to commit immediately. When they call my house I tell them “I don’t commit to anything over the phone. Mail me information.” and they usually respond they can’t mail me information unless I commit a dollar amount. That tells me right there they aren’t a charity I want to give any money to. If, however, they tell me to go to their website for more information then I know they aren’t likely professional solicitors and more legit.
  • Beware of sound-alikes. Some crooks try to fool people by using names that are very similar to those of legitimate, well-known charities.
  • Ask about the caller’s relation to the charity. The caller may be a professional fundraiser, not an employee or a volunteer. Ask what percentage of donations goes to the charity and how much the fundraiser gets.
  • Be wary of requests to support police or firefighters. Some fraudulent fundraisers claim to benefit police or firemen, when they actually get very little money. Contact your local police or fire department to find out if it’s true and what percentage they get. Our local station sends out a letter every year saying they don’t get any money from professional fundraisers that might be calling us and asks us to support them directly.
  • Be especially cautious after natural or other disasters. Fraudulent charities pop up by the hundreds when disasters happen. Check them out using the resources listed below.

Where to Check Out Charities

Thoroughly check out all charities on websites like Give.org, which is run by the BBB Wise Giving Alliance; GuideStar, which provides access to the IRS filings of nonprofits; and CharityNavigator.org, whose mission is to “guide intelligent giving”. For example, if you look up Cancer Fund of America on Charity Navigator, they give you a “Donor Advisory” warning and tell you that the FTC is investigating them. Some charities, like the ones mentioned above, hide their chicanery in their reports. Luckily, there are some organizations, like CharityWatch, who scour those reports and look for the red flags. They gave an “F” rating to those 4 charities before they were sued by the FTC.

You should even consider taking a closer look at well known charities and how much of your money actually goes to helping those in need. Look at their administrative costs, what their mission is and how effective they are. A good benchmark for a charity is to having at least 75% of their income spent on programs or their mission. All charities have some overhead, including salaries and fundraising costs. But you want the majority of your money actually helping the cause.

And don’t forget to consider local charities. Many charities based in your community stock food banks, help victims of domestic abuse, the homeless or refugees who are settling in your area. If you don’t have money to give, then offer to give of your time. Your local BBB has reviews for local charities.

In the end, figure out what causes mean the most to you and your family. Research national and local organizations whose stated mission matches the most with yours. Thoroughly check them out, then donate money or your time. The satisfaction you gain from helping others will be worth the time and effort you put in to making sure they are an effective non-profit organization.

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