Avoid Charities that Don’t Disclose

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Just in time for the Holidays and Giving Season: New Advice from BBB Wise Giving Alliance

It’s not your imagination; there have been more charity scams in the news recently. BBB Wise Giving Alliance has drawn a line in the sand, calling charities that do not disclose requested information to BBB Wise Giving Alliance a “critical red flag” for donors.

In May, the Federal Trade Commission and all 50 State Attorneys General filed charges against four cancer charities, one of the largest charity fraud cases in the nation’s history. In July, the New York State Attorney General announced a court action to shutter a children’s leukemia charity for “touting non-existent and defunct programs.” One common element for four of the charities in these cases is that they did not disclose any of the information requested by BBB Wise Giving Alliance and the fifth disclosed but did not meet several BBB Standards for Charity Accountability. A BBB Wise Giving Alliance nondisclosure report is a warning sign for donors to be cautious about donating their hard-earned dollars to charities that might be engaged in bad practices.

“To verify trust, donors seek guidance from third-party expert evaluators at BBB Wise Giving Alliance,” notes Art Taylor, president and CEO of BBB Wise Giving Alliance. “To produce these reports, we ask charities to complete a detailed online questionnaire and provide copies of supporting documents. In our decades monitoring charities, this is the first time we are advising donors to avoid or be extremely cautious when contributing to nondisclosure charities.”

While not all nondisclosure charities are scamming donors, charities that choose not to participate in the review process could be hiding something. Give.org has reports on national charities, based on not only finances, but also how well the charity is run, its fundraising ethics and whether it assesses the effectiveness of its programs. BBB WGA also produces a free Wise Giving Guide that summarizes evaluations.“BBB Wise Giving Alliance has long recognized that true disclosure goes beyond simple overhead measures” explains Taylor. “While the IRS Form 990 filed annually by charities is available, it is not evaluative and can be cumbersome for the average donor. We require much more from charities than an IRS Form 990 to complete our reports.”

BBB Wise Giving Alliance urges donors to give thoughtfully and avoid those seeking to take advantage of the generosity of others.

Here are BBB WGA’s tips for trusted giving:

1.Thoughtful Giving: Take the time to check out the charity to avoid wasting your generosity by donating to a questionable or poorly managed effort. The first request for a donation may not be the best choice. Be proactive and find trusted charities that are providing assistance.

2.State Government Registration: About 40 of the 50 states 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. If the charity is not registered, that may be a significant red flag.

3.How Will Donations Be Used? Watch out for vague appeals that don’t identify the intended use of funds. See if the appeal identifies when the collected funds will be used.

4.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, make sure that 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

5.Advocacy Organizations: Donors can support these efforts but note that some of advocacy groups are not tax exempt as charities. Also, watch out for newly created advocacy groups that will be difficult to check out.

6.Online Cautions: Never click on links to charities on unfamiliar websites or in texts or emails. These may take you to a lookalike website where you will be asked to provide personal financial information or to click on something that downloads harmful malware into your computer. Don’t assume that charity recommendations on Facebook, blogs or other social media have already been vetted.

7.Financial Transparency: After funds are raised, 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 and not have to wait until the audited financial statements are available sometime in the future.

8.Newly Created or Established Organizations: This is a personal giving choice, but an established charity will more likely have the experience to quickly address the circumstances and 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.

Not all organizations collecting funds are tax exempt as charities under section 501(c)(3) of the Internal Revenue Code.

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