When disaster strikes, people want to help. Following tragedies like the recent Nepal earthquake, they open their wallets and give to organizations that they believe will help people who are suffering. It’s a noble impulse, but one that may ultimately be meaningless if people aren’t careful about which charities they choose to support.
“The news out of Nepal is horrific and the photos are heart-breaking,” said H. Art Taylor, president and CEO of the BBB Wise Giving Alliance, in a statement. “People want to help as soon as possible, and that is wonderful, but donors need to follow some key rules about supporting disaster relief so that their gifts get to those who need them most.”
In the case of disaster relief, the BBB recommends giving to established organizations that already have a presence in the affected area. These organizations are usually the best equipped to respond to major disasters. Watch out for middlemen who are raising money on behalf of other groups (and lining their pockets in the process) and be wary of groups that spring up overnight, since these groups may not have the ability or the intention to provide aid.
Shady charities may get more aggressive following tragedies, but they don’t just wait for disaster to strike to take advantage of people’s generosity. Con artists have year-round operations, using a variety of unscrupulous tactics to divert funds from organizations doing good work. To avoid being taken in by a charity scam, watch out for these seven signs, which often indicate that a so-called charity isn’t totally legitimate.
1. Only wants donations in cash
A charity that only wants donations in cash or via wire transfer may be a scam. “Cash contributions are easily lost or stolen and do not leave donors with proof of their contribution,” warns the office of the Minnesota Attorney General. The FTC suggests making all donations via check or credit card. Also, make sure that money is payable to the charity, not to an individual.
2. Can’t tell you how your money will be used
Legitimate charities will be able to give you specific information about how they use donations. If the answers you get in response to questions about where funds go are vague or unsatisfactory, consider donating elsewhere.
Of course, a charity’s assurances that your money will be used wisely are not ironclad. You should also check up on the group yourself before you donate. The Better Business Bureau’s Wise Giving Alliance, Charity Navigator, Charity Watch, and Guidestar provide financial and other information for many, though not all, charities. You can also look up a nonprofit’s Form 990 on the Foundation Center’s website. This tax form contains information about an organization’s revenue and spending.
3. Can’t prove it’s a nonprofit
Your charitable donations are only deductible if they go to a legitimate, tax-exempt organization. Fraudulent charities may be unable to provide proof that they have tax-exempt status, otherwise known as 501(c)(3) status.
You can confirm an organization’s non-profit status by using the search tool on the IRS website. Keep in mind, however, that being a 501(c)(3) organization isn’t proof that an organization is well run or uses its money wisely.
4. Is a “sound-alike” organization
Fraudulent charities often have names that mimic those of legitimate non-profits. These scam artists aim to confuse or mislead people into thinking that their donations are going to a better known and more established organization.
One of the most notorious of these sound-alike groups is the Kids Wish Network, named the country’s worst charity in 2014 by the Tampa Bay Tribune. The dubious designation came after investigations revealed that less than three cents of every dollar donated actually went to help sick children’s dreams come true. The paper accused the Florida nonprofit of mimicking the name and tactics of the well-known Make-a-Wish Foundation to generate millions of dollars in donations, most of which went to pay for for-profit professional fundraisers and generous salaries for the organization’s top executives.
5. Pressures you to donate right away
Scam artists want to get your money in their pocket as quickly as possible. They don’t want to give you time to research their organization or change your mind about a donation. Don’t fall for this trick.
“Legitimate charities will not pressure you for an immediate donation and are happy to provide information about their charity for you to review and share with neighbors, friends and family,” advises the Arizona Attorney General’s office.
6. Asks for a donation over the phone
Telemarketing for charity is a big industry. But much of the money raised via these unsolicited phone calls doesn’t go to the nonprofit in question. Both high-profile national charities and less-established groups (often sound-alike charities) hire for-profit companies to make calls on their behalf. Those services don’t come cheap. Up to 85 cents of every dollar donated may end up in the hands of the for-profit fundraiser, according to the Center for Investigative Reporting.
Charity Navigators suggest eliminating the middleman when donating to a charity by giving money directly to the organizations you support. You should also be cautious about giving out personal information over the phone, especially if the call was unsolicited. The caller may be an identity thief posing as a fundraiser.
7. Has no proven track record
Calls for donations proliferate in the days and weeks following a natural disaster. Some of these organizations are providing much-needed aid to victims, but others are using people’s desire to help to line their pockets.
“Be wary of charities that spring up too suddenly in response to current events and natural disasters,” says the FTC. “Even if they are legitimate, they probably don’t have the infrastructure to get the donations to the affected area or people.”
Even high-profile charities may turn out to be poorly run. People donated $16 million to Yéle Haiti, a nonprofit established by Wyclef Jean of the The Fugees, following the country’s 2009 earthquake. But the organization was mismanaged and spent large sums on salaries, consultants, travel, and performance fees, while doing little on-the-ground work in Haiti, the New York Times reported. Yéle Haiti shut down in 2012.
Want more great content like this? Sign up here to receive the best of Cheat Sheet delivered daily. No spam; just tailored content straight to your inbox.