Pause before donating to any cause

Public trust in nonprofits has fallen from 59% in 2020 to 56% in 2022, according to Independent Sector, a coalition of nonprofits, foundations and corporate giving programs that tracks trends in philanthropy.

A likely explanation for this erosion of trust in organizations that are supposed to do good work: news of nonprofit leaders and fundraisers pocketing funds inappropriately.

On September 8, 2022, for example, New York state authorities accused former Trump administration aide Steve Bannon and others involved in a group called We Build the Wall, of ‘committed allegations of money laundering, fraud and conspiracy to deceive donors and embezzle their funds.

And reports surfaced in August that whistleblowers were accusing an Oklahoma-based nonprofit of allegedly embezzling money intended to help Native American women and lining the pockets of its leaders.

As a nonprofit accounting expert, I can see why you might be hesitant to donate to charities these days. But I am convinced that taking certain steps before donating reduces the risk that your money will be wasted.

Online tools

Although the vast majority of charities are legitimate, reviewing a charity before supporting it can help you avoid scams and make more informed decisions.

Often, you can do this quickly by visiting a monitoring website that rates nonprofits. Good options include Guidestar, Charity Watch, Charity Navigator, and the Better Business Bureau Wise Giving Alliance.

Some of these watchdog organizations give ratings or ratings to nonprofits. Others, like the Better Business Bureau, report on national nonprofits and receive complaints about charities acting improperly.

You can check out what a charity monitor says about a group you want to support to get an idea of ​​its trustworthiness.

If you are looking for a nonprofit on these sites but cannot find the group you are looking for, this may be a red flag. But rather than jumping to the conclusion that it’s not a legitimate charity, consider a few other factors.

The group may be too new or too small to monitor.

For example, Charity Navigator only monitors charities with two or more years of at least $1 million in revenue, raising public support of at least $500,000 per year, and operating for at least seven years. , among other requirements. But when you can’t find a charity in a monitoring database, I think it’s worth taking the time to check it out in other ways.

Charities do not pay income taxes, but most of them file annual documents, a Form 990 with the Internal Revenue Service, in which they must disclose financial details and information about their leaders. These forms are often easy to find with simple search engines, as nonprofits are required to make 990 forms available to the public. The Form 990 will show how much is spent to achieve the organization’s charitable purpose.

Before donating to a small nonprofit or group in your local community, you can contact the charity directly to inquire about fundraising goals and day-to-day operations. You can also request information from people you know.

Additional efforts may include researching news and reading media coverage in a trusted media outlet. Charities that have changed names or moved to a new state may warrant special consideration.

Common pitfalls

One thing to watch out for are organizations whose names are chosen to mislead donors. These groups have branding that can make you mistakenly believe that you are giving money to more established and legitimate charities. In some cases, these groups don’t do much of what they claim to do

It’s also best to avoid donating directly to an individual unless it’s someone you know personally and can trust to spend your money wisely.

And you should be very careful if someone asking you to donate to charity behaves aggressively and pressures you to donate money.

How a nonprofit organization spends its funds, what charity watchdog groups track, can provide some insight into whether you want to donate to their cause.

There is some debate about how much or how much of its budget a nonprofit organization should devote to its mission versus fundraising and other types of overhead. If a nonprofit isn’t devoting most of its funds to furthering its mission — like a homeless shelter’s work with homeless people — that’s probably cause for concern.

Disadvantages of Donating Through New Channels

Charitable fundraisers conducted through social media are attractive because of their speed and immediacy. For example, country singer Maren Morris sold t-shirts in early September 2022 that raised over $100,000 in one day to support transgender youth.

But you should resist the urge to respond in an instant when you see a call to donate to an urgent cause through any social media platform; do some independent research on the charity or cause first. One strategy is to perform a reverse image search, as scammers often steal photos of other events and individuals that have emotional appeal.

In the event of a disaster, there will unfortunately be unscrupulous people who will take advantage of public concern. This problem is not new, but it has become easier to run scams thanks to technology and the spread of information on social networks.

For example, when Hurricane Harvey hit Texas, a fraudster illegally obtained information about local residents and filed a relief request with the American Red Cross on their behalf. The problem has become so pervasive that the Department of Justice has established a National Disaster Fraud Center.

Crowdfunding has also become a popular fundraising tool for causes ranging from unexpected personal medical expenses to established nonprofits.

GoFundMe, a popular crowdfunding platform, is privately held and will take a percentage of funds raised. Sometimes people who have created GoFundMe accounts are surprised to find that the company takes 2.9% of all donations made, plus a 30 cent fee per transaction.

If your goal is to provide maximum funds to someone in need, giving them money directly rather than through GoFundMe or a similar platform would increase the amount they receive from you. Unless the GoFundMe is for a registered charity, there is no way to get a tax deduction for the donation, even if you would otherwise be eligible.

Donors should always be on their guard to avoid charity scams. If you identify a suspicious charity, you should report it to local law enforcement and the FBI. If you’ve been the victim of a charity scam, you should also report it to your state’s consumer bureau, as well as the Federal Trade Commission.