Any charity that asks for your money should be able to tell you where it will go.
'Tis the season for holiday giving. Every year, we open our wallets to the tune of billions of dollars for charities that fight diseases, promote the arts, and advance countless other causes.
But the hands reaching out for that money aren't always clean. Scammers hiding behind fake charities are angling to get a slice. But by being diligent and proactive, donors can ensure that the money they give goes to the causes they support.
Online Ratings
Anyone with Internet access can run a quick "background check" on a charity by looking it up on one of several services that review charities' financial and organizational information and rate them on their effectiveness, accountability and transparency. The Better Business Bureau's Wise Giving Alliance grades charities with a 20-point checklist called the "Standards of Charity Accountability." Charity Navigator, which bills itself as "America's largest charity evaluator," gives groups a rating of zero to four stars based on their performance relative to others that raise money for the same cause. Another service, called GuideStar, collects financial data and other information from charities and reports on whether they have met specific benchmarks of legitimacy, such as filing the proper tax forms or releasing details of revenue and expenses. These sites, linked in the Resources, all allow you to search for charities by name.
Ask for Information
The charity ratings services maintain large databases, but they don't have information on every single group. Smaller and newer groups, in particular, might not be in their records. If you're solicited by an organization that hasn't been rated, you'll have to do your own due diligence. The Federal Trade Commission, which polices charity scams, recommends that you start by simply asking the person soliciting the donation for printed information about the charity -- who runs it, where it's based, and what it does with the money it collects. A legitimate charity should have pamphlets, booklets or other material and should gladly provide them. If you get the brush-off, don't give any money.
Look at Spending
If you get printed information, read it closely, and pay particular attention to how the charity spends the money it collects. Some groups spend the bulk of what they raise on programs and services -- that is, doing the things that the charity says it exists to do. For others, program spending amounts to only a few pennies of each dollar raised; the rest goes to administration (including pay and perks for the people running the charity) or goes right back into fund-raising. The Better Business Bureau's standards say that at least 65 percent of a charity's spending should go toward programs. Charity navigator sets the bar even higher, recommending that programs account for at least 75 percent of spending.
Call Around
At bare minimum, someone soliciting donations for a charity should be able to tell you the name of the charity and who the money will benefit. Call the agency that regulates charities in your state and ask if the group is legitimate. (The National Association of State Charity Officials maintains a list of agencies.) If a solicitor says money will go to a local organization or institution, such as a fire department or hospital, call that recipient and ask if it has authorized the solicitation. Ask questions of anyone seeking donations. A legitimate fund-raiser will be happy to answer them, or put you in touch with who can. If something seems fishy, don't give. As the Federal Trade Commission says in its checklist for donors, "trust your gut."
Be Wary
Pay attention to the names of the groups asking for money. Bogus or less-than-ideal charities often adopt names close to those of well-known groups to capitalize on confusion -- calling themselves, say, the "American Lung Institute" in the hope that you'll think you're giving to the American Lung Association. Also know that a website ending in ".org" doesn't necessarily indicate a charity. The ".org" suffix is unregulated; anyone can use it. And be especially vigilant in the aftermath of disasters and high-profile tragedies. Scammers go into high gear after such events, when kindhearted people are opening their wallets and looking for somewhere to give. Other groups truly want to help but lack the resources necessary to make the most of donations. If in doubt, your best bet is often to go with a well-known general-service charity or one with a large footprint, such as the Red Cross, the United Way or the U.N. Children's Fund.
