Charities and nonprofits have felt the impact of 2020. Not only are they seeing a rise in those needing assistance, they're having to provide more using a reduced budget.
Giving Tuesday marks the start of the giving season, and it means more than ever this year. While Americans are opening their wallets, scammers are also ready to swindle those looking to do good.
Here are some tips from the Better Business Bureau on how to protect your donation:
- Get the charity’s exact name. With so many charities in existence, mistaken identity is a common problem. Thousands of charities have “cancer” in their name, for example, but no connection with one another.
- Resist pressure to give on the spot, whether from a telemarketer or door-to-door solicitor.
- Be wary of heart-wrenching appeals. What matters is what the charity is doing to help.
- Press for specifics. If the charity says it’s helping the homeless, for example, ask how and where it’s working.
- Check websites for basics. A charity’s mission, program and finances should be available on its site. If not, check for a report at www.give.org.
- Check with state charity officials. In many states, charities are required to register, usually with the office of the attorney general, before soliciting. Click http://www.nasconet.org/documents/u-s-charity-offices/ for the relevant office in your state.
- Don’t assume that every soliciting organization is tax exempt as a charity. You can readily check an organization’s tax status at www.irs.gov/app/eos.
You may have seen a rise in GoFundMe's and other online fundraisers since the start of the pandemic. While many claim your funds will go directly to the cause, how can you be sure?
Here are tips from the BBB on what to do if you want to directly help after a natural disaster or any other impacting event, like the COVID-19 pandemic.
- Thoughtful Giving: Visit Give.org to verify if a charity meets the BBB Standards for Charitable Accountability. Take the time to find out how the organization plans to address either immediate or long-term needs. The first request for a donation may not be the best choice. Be proactive and find trusted charities.
- Crowdfunding: Keep in mind that some crowdfunding sites do very little vetting of individuals who decide to post for assistance after a tragedy or a disaster. As a result, it can be difficult for donors to verify the trustworthiness of crowdfunding requests for support. It is always safest to contribute to individuals that you personally know. If the post claims it intends to pass along collected funds to a charity, consider cutting out the middleman and visit the charity’s website directly.
- How Will Donations Be Used? Watch out for vague appeals that don’t identify the intended use of funds. For example, how will the donations help victims’ families? Also, unless told otherwise, donors will assume that funds collected quickly in the wake of a disaster or tragedy will be spent just as quickly. See if the appeal identifies when the collected funds will be used.
- Newly-Created v. Established Organizations: This is a personal giving choice, but an established charity will more likely have the capacity and experience to address the situation quickly and also have a track record that can be evaluated. A newly-formed organization may be well-meaning, but will be difficult to check out and may not be well managed. News reports may help identify responding charities but are not a guarantee that the organizations will use donations effectively.
- Give Money Rather Than Goods. Donating money is the quickest way to help and provides charities the flexibility to channel resources to impacted areas.
- Be Wary of 100 Percent Claims. Watch out for claims that 100 percent of donations will assist victims and/or their families. The organization is probably still incurring administrative and fundraising expenses, even if it is using other funds to cover these costs.
- Online Caution: Never click on links to charities on unfamiliar websites or in text messages or email. These may take you to a look-alike website where you will be asked to provide personal financial information, or may download harmful malware onto your computer. Don’t assume that charity recommendations on social media have already been vetted.
- Identify Celebrity Fundraising Plans. Before donating to a celebrtiy’s fundraising effort, look beyond the fame. See if they identify plans for intended use of funds or whether they are collaborating with a well-established charity.
- Financial Transparency: After funds are raised for a tragedy, it is even more important for organizations to provide an accounting of how funds were spent. Transparent organizations will post this information on their websites so that anyone can find out without having to wait until the audited financial statements are available sometime in the future.
- Government Registration: About 40 of the 50 states in the U.S. require charities to register with a state government agency (usually a division of the State Attorney General’s office) before they solicit for charitable gifts. In Canada, all charitable organizations must be registered with the Canada Revenue Agency . If an organization is claiming to be a charity and they aren't registered with the applicable government agency, that's a red flag. While registration with a government agency does not mean the government is recommending or endorsing the charity, it does signify that the group has filed the appropriate required paperwork.
- Respect for Victims and Their Families: Organizations or crowdfunding postings raising funds should get permission from the families to use either the names and/or any photographs of victims of the disaster or tragedy.
- What if a Family Sets Up Its Own Assistance Fund? Some families may decide to set up their own assistance funds. Be mindful that such funds may not be set up as charities. Also, if collected monies are received and administered by a third party such as a bank, CPA, or lawyer this will help provide oversight and ensure the collected funds are used appropriately (paying for funeral costs, counseling, and other tragedy-related needs).
- Advocacy Organizations: Tragedies that involve violent acts with firearms can also generate requests from a variety of advocacy organizations that address gun use. Donors can support these efforts as well, but note that some of these advocacy groups are not tax exempt as charities. Also, watch out for newly-created advocacy groups that will be difficult to check out.
- Tax Deductibility: Not all organizations collecting funds in the U.S. to assist after a tragedy are tax exempt as charities under section 501(c)(3) of the Internal Revenue Code. Donors can support these other entities, but keep this in mind if they want to take a deduction for federal income tax purposes. In addition, contributions that are donor-restricted to help a specific individual or family are generally not deductible in the U.S. as charitable donations, even if the recipient organization is a charity. You can check a U.S. organization’s tax status with the IRS. In Canada, only specific types of registered charities are able to provide tax receipts. If you are not sure whether your donation would be eligible for a tax credit, contact the Charities Directorate at 1-800-267-2384. You can also search for information on which organizations can issue official donation receipts.