Don’t Get Taken . . . Make Sure You’re Giving to a Legitimate Charity

The war in Ukraine has brought out the best in most people, but the worst in others. Many of us want to help the victims, especially the children and refugees. There are numerous charities soliciting donations, but how do you know which ones are legitimate?  We all recognize organizations such as the Red Cross, United Way, UNICEF, and the World Health Organization, but sometimes thieves will use familiar organizations to deceive unsuspecting individuals, so it’s always a best practice to verify the source. 

What if a charity you are not familiar with solicits a donation? How do you vet a charitable organization?

Here are some questions to determine the legitimacy of a charitable organization:

• Does the charity’s mission align with mine? Is the organization supporting the cause or efforts that you want to support? Most organizations have a mission statement that tells you the organization's purpose for existing and their plans to work towards a bigger goal. The mission statement should appear on their website and on their printed materials.
• Is the charity financially efficient? Most public charities are registered with the government as 501(c)3 nonprofits that means most donations and income are diverted to the organization's mission and administration, and not employees or private individuals. It also means donations to the organization are tax-deductible and annual reports are published publicly. Reviewing the organization’s annual report will provide information on its fundraising expenses and administrative costs. Please note that churches are automatically considered tax exempt by the IRS (as long as they meet certain requirements) without filing for recognition of 501(c)3 status officially¹.
• Has the charity demonstrated results? A reputable charity will be able to provide examples of work that has been done and goals that have been accomplished. Testimonials from donors and volunteers are also a good indicator.
• Is the charity’s organization transparent? Look for charities that are willing to report back to you on their progress. Transparency is an important factor when deciding. If a charity doesn’t want to let you know what they are doing, that’s cause for alarm.
• Who’s leading the charity? You should research the charity's executives. Ask questions such as how long they've been involved in the cause, previous nonprofit work, other positions they've held at the current organization and overall years of experience. You should be concerned if the charity doesn't have any staff information available or the information on leadership is sparse. Executive compensation is also an important factor. Look at what the leadership earns -- not just in salary but also in benefits, retirement package, bonuses and more. Charitable organizations are required to report the details about the CEO and the top five highest-paid employees to the IRS. According to Charity Watch, it is important to keep in mind that high salaries do not necessarily indicate inefficiencies just as low salaries are not always a plus.
• Are there any red flags? Always be wary about providing your financial information. Pay close attention to how a charity handles donations. Never give personal and financial details over the phone or online. A reputable charity will never ask for money through a wire transfer, prepaid debit card or gift card. The safest way to donate is to use a credit card on a secure website which may require you to provide personal information such as your cell phone number and email address.

There are also several online resources to assist you in determining if a charity is legitimate. Charity Navigator is a 501(c)3 nonprofit charity assessment organization that evaluates and rates hundreds of thousands of US based organizations. Great Nonprofits is also a  501(c)3 nonprofit organization. It’s a US based website where donors, volunteers and clients can review and share their personal experiences with charitable organizations. GuideStar is an information reporting service specializing in reporting on US nonprofit organizations. Their database contains 1.8 million IRS recognized organizations. Charity Watch, formerly known as the American Institute of Philanthropy, is a 501(c) 3 organization that provides information about charities’ financial efficiency, accountability, governance, and fundraising.

As with all monetary transactions, its buyer beware. If you do your research and stick with well-known organizations, you will increase the likelihood that your donation  will be going to a legitimate organization supporting your chosen cause. 

¹https://charitableallies.org/news/does-my-church-need-a-501c3/