Scam artists show up in the wake of every disaster. Like vultures circling above road kill, they swoop in on any opportunity to take advantage of the disadvantaged, capitalizing on your compassion and manipulating your emotion.
Charities and nonprofits are the perfect vehicles in which these scammers can hide in plain sight. “Charitable organizations” run the gamut from upright and successful, to well meaning but incompetent, to corrupt, greedy and devious—and everything in between.
How do you know where a particular organization fits along this spectrum? We’d all like to think our hard-earned dollars are going to be used for the highest good, but how do we really know?
Many Charities are NOT Above Lying and Cheating to Get Your Money
The Tampa Bay Times and the Center for Investigative Reporting (CIR) partnered with CNN in a yearlong investigation to evaluate America’s worst charities and created a list of the 50 worst.
The results of their investigation are shocking, in terms of the measures some people will sink to in the name of profit. Take Kids Wish Network, for example. Kids Wish Network tops the list of the 50 Worst Charities, giving nearly $110 million to corporate solicitors and massaging donations with a variety of unsavory tactics.1
For example, Kids Wish did what many devious organizations do: it adopted a name that mimics a well-known charity in order to fool donors—in this case, Make-A-Wish Foundation of America.
Every year, Kids Wish Network raises millions of dollars in donations supposedly to help dying children and their families. But for every dollar donated, only 3 cents actually goes to those children and families.
The other 97 cents goes into the bank accounts of the company’s operators, and for-profit companies hired by Kids Wish to drum up donations. I wish I could say Kids Wish was an isolated case, but unfortunately, they are just one of many.
According to CNN1:
“In the past decade alone, Kids Wish has channeled nearly $110 million donated for sick children to its corporate solicitors. An additional $4.8 million has gone to pay the charity's founder and his own consulting firms. No charity in the nation has siphoned more money away from the needy over a longer period of time.”
Is Your Favorite Charity on this List?
To identify America's 50 worst charities, the Times and CIR examined tens of thousands of pages of public government records from 36 states. They were looking for a specific kind of charity—those writing fat checks to for-profit corporations to raise the vast majority of their donations, year in and year out. Of course, the more money that’s given to solicitors, the less that is used for direct aid.
Several watchdog organizations say charities should spend no more than 35 percent of the money they raise on fund-raising expenses. However, the investigation identified hundreds of charities giving their hired solicitors more than twice that much—often more than two-thirds of the take. Investigators found these organizations to be rampant with fraud, waste and mismanagement.
Data from this investigation show the worst charities devote less than four percent to direct cash aid. Some gave even less, and five on the list gave zero percent. The top 10 worst charities are listed in the following table, alongside the percentage each spent on direct cash aid.2
Name Total Raised by Solicitors Total Paid to Solicitors Percentage Spent on Direct Cash Aid 1 Kids Wish Network $127.8 million $109.8 million 2.5% 2 Cancer Fund of America 98 million 80.4 million 0.9% 3 Children’s Wish Foundation 96.8 million 63.6 million 10.8% 4 American Breast Cancer Foundation 80.8 million 59.8 million 5.3% 5 Firefighters Charitable Foundation 63.8 million 54.7 million 8.4% 6 Breast Cancer Relief Foundation 63.9 million 44.8 million 2.2% 7 International Union of Police Associations, AFL-CIO 57.2 million 41.4 million 0.5% 8 National Veterans Services Fund 70.2 million 36.9 million 7.8% 9 American Association of State Troopers 45 million 36 million 8.6% 10 Children’s Cancer Fund of America 37.5 million 29.2 million 5.3%
Nonprofit Applications Given a Free Pass by IRS
Even some very large, notable nonprofits have been known to engage in unsavory and outright unethical behaviors, managing to pull the wool over the public eye. Ken Stern, author of With Charity for All andformer CEO of NPR, is very critical of many large charitable organizations, including the American Red Cross and D.A.R.E.
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Some nonprofits excel in collecting donations but fail miserably when it comes to distribution, such as the American Red Cross’s bungled 9/11 Fund3 and disastrous deployment of aid and personnel in response to the 9/11 disaster. In an LA Times article, Ken Stern wrote the following4:
“In brief, its response was, well, disastrous. Material and personnel were deployed to the wrong places. Logistics broke down so badly that the organization was unable to get supplies, volunteers, food or cots for first responders quickly to the Pentagon — which was all of 2 miles from its national headquarters and emergency response center.”Part of the problem is the incredible lack of accountability by the IRS when it comes to charitable organizations. Stern reports that, according to a Stanford study, the IRS approves more than 99.8 percent of all charity applications. Almost anyone with a stamped government form can be a “charity.” Research shows that many nonprofit hospitals are no more charitable than for-profit hospitals, and far LESS charitable than government hospitals. The system is deeply flawed from the get-go.
The New York Stock Exchange is a Nonprofit?
You may be shocked at some of the organizations managing to finagle nonprofit status, hitching them a free ride on the tax-exempt train. For example, until recently, the New York Stock Exchange was a nonprofit entity enjoying a tax exemption and awarding its CEO, Richard Grasso, a $140 million salary package in 2003.4 And then there are tax-exempt “social welfare” organizations that funnel millions of dollars in donations into electoral campaigns. One of the most prominent is American Crossroads, founded by GOP rock star Karl Rove, but similar groups are scattered across the political map.
You can’t assume well-known charitable organizations are acting in your best interest, despite what you may hear in the media. For example, in the case of some large cancer charities, your money will go toward research to create toxic and sometimes deadly cancer drugs, questionable screening programs like mammography, and into the bank accounts of its numerous well-paid executives, as opposed to educating the public about true cancer prevention. Susan G. Komen and the American Cancer Society are prime examples. And the American Dietetic Association (ADA) is heavily sponsored by junk-food industry giants, including Coca-Cola, Pepsi, Mars and Kellogg. So, how can you separate the angels from the demons when a charity calls?
Tips to Help You Avoid Being Scammed
Although your family may want to enjoy eating dinner in peace, politicians and charities are exempt from Federal “do-not-call” laws. However, telemarketing outfits calling on behalf of a charity DO have to honor do-not-call lists—and can be fined for failing to do so.
NEVER give out your credit card or banking information over the phone, and NEVER donate if you’re feeling pressured.
Following a few specific guidelines will help you navigate your way through a charity call, without falling victim to a scammer. Charity Navigator and the Center for Investigative Reporting list five basic strategies. For more detailed information, please visit their websites as both have helpful articles on this topic.5,6
- Find Out Exactly Who's Calling: Ask if the caller is a telemarketer or a volunteer or employee of the charity itself.
- Ask Where Your Donation Goes. By law, the caller must tell you how much of your donation will actually end up with the charity.
- Get It In Writing. Ask to be sent a copy of the charity’s annual report or a brochure about their organization.
- Do Some Research. Tell the caller you will get back to them—ask for their organization’s name, address and phone number. Don’t donate without first doing your due diligence.
- Eliminate the Middleman. If you suspect it’s a telemarketer on the phone but you wish to support the charity, contact the charity directly to make your donation.
Resources for Finding Good Charities
A number of excellent online services can help you find the best charities, or check out someone claiming to be one. You may find the following websites quite helpful:
- Better Business Bureau (BBB) Wise Giving Alliance: Helps donors make informed giving decisions by providing access to comprehensive reports about individual charities. Three times per year it publishes the Wise Giving Guide, which summarizes the latest charity ratings. To check out a business or a charity, visit give.org.
- Charity Navigator: Browse charities by state or city or by ratings; has several Top 10 lists and informative articles.
- GuideStar: Another resource to check out a charity, searchable by state or city; you can also read or submit charity reviews.
- CharityWatch (American Institute of Philanthropy): Allows you to search for top-rated charities by your issue of interest/cause; each charity is graded on the A-F scale.
- GiveWell: A unique site that offers in-depth charity research, resulting in a VERY short list of recommendations for charities that meet their specific (and very rigid) criteria; their end goal is to determine which charities provide “maximum impact.” Very interesting and innovative company, which is a nonprofit itself.
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