Yahoo Finance Is That Charity Legit? 5 Ways to Tell
As Hurricane Katrina bore down on New Orleans and the Gulf Coast in 2005, over 4,000 websites popped up to gather funds for relief efforts. Unfortunately, most of them were scams, intended to either steal well-meaning people's money or their personal information. The problem was so pervasive that it prompted the FBI to create the National Center for Disaster Fraud with the goal of identifying and prosecuting fraudulent charities and disaster relief agencies.
However, it doesn't take a natural disaster the magnitude of Katrina to bring scammers out of the woodwork. "It can happen at any time," says Sandra Miniutti, vice president of Charity Navigator. "It becomes more prevalent in times of disaster because so much money is changing hands."
[Read: Give and Get Back: Charitable Acts That Are Tax Deductible.]
To avoid being a victim -- whether it's to a bogus Hurricane Matthew relief fund or someone trying to prey on your generosity this holiday season -- here are five ways to weed out the scam charities from the real deals.
The organization doesn't have a website. An organization without a web presence is a red flag, but people shouldn't assume having a site automatically makes the charity credible. "They're not really looking under the hood to see what the charity is all about," Miniutti says of some donors. That's a mistake people make with legitimate charities as well. You may want to donate money toward a cause like cancer research, but inadvertently give money to an organization focused on advocacy because you neglect to really dig into the details of the charity's work.
You're being pressured into a donation over the phone. High-pressure phone solicitations are another red flag. Scammers can spoof phone numbers, making it difficult to determine whether you're actually talking to the charity your caller ID says is calling. To avoid getting taken by a scam, tell the caller you'll send a check later after you've had a chance to review their organization. Legitimate charities won't mind. "They may want to receive your donation today, but they would be happy to have it in two weeks," says Kris Putnam-Walkerly, president of Putnam Consulting Group, an advisory organization for philanthropists.
[Read: How to Avoid Taxes on IRA Withdrawals You Donate to Charity.]
They refuse to mail you information or discourage you from stopping by. Along with telling phone solicitors you need time to think, ask that they mail information about their organization. Or, if it's a local charity, ask if you can stop by sometime to see their program in action. Scammers will have all sorts of excuses as to why neither of these options is possible. However, a legitimate charity should welcome your request. "They should be happy to have a conversation about [their work] and tell you about it," Putnam-Walkerly says.
You can't get answers to your questions. If you're still tempted to give a donation over the phone, don't open your wallet before getting answers about how the organization is run, who governs it and how it evaluates its results. "Ask specific questions [such as] how much of the donations go to the cause," says Paul Tarins, president of Sovereign Retirement Solutions in Winter Park, Florida. "If they can't answer questions or direct you to documentation, that's a huge red flag."
[Read: How to Donate to Charity on Any Budget.]
Few dollars actually get spent on the cause. Finally, you can weed out not only scammers but also less-than-stellar charities by reviewing how much money they actually spend on their program. Websites like Charity Navigator and GuideStar make it easy to look up this information. "Charity Navigator is by far the most widely used and highly regarded," Tarins says. "It's extremely transparent."
Once you pull up a charity, you can easily see their program expenses. For a larger charity, Miniutti says spending 75 percent of donations on program activities is a good rule of thumb. However, "smaller, newer charities can't be expected to have that level of efficiency," she says.
"The vast majority of non-profits are operating on the best of intentions," Putnam-Walkerly says. But getting taken by a charity scam once is enough to have anyone close their checkbook for good. Rather than giving up on donating, use these guidelines to ensure you're sending your money to an organization that is doing good work.
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