Dear Consumer Ed:
I recently learned of a newly established association that claims to be a worldwide non-profit organization. How can I make sure they are a legitimate non-profit?
Consumer Ed says:
With so many new groups and causes to contribute to these days, it can be tough to recognize whether or not a newly established association is a legitimate non-profit organization. Luckily, there are a number of options available that can help you determine if the charity is genuine and worthy of your donation. Through the efforts of consumer protection agencies and professional organizations that monitor charitable groups, you can find out most details about any nonprofit organization, whether it be local or international.
As a rule of thumb, online or offline, you should never give to a non-profit organization that you know very little about, or about which there’s little information available. For instance, be suspicious of charities that appear too quickly in response to current events and natural disasters. Scammers often post sham websites and run deceitful donation campaigns immediately after a disaster. Even if one of these charities is legitimate, it may not have the infrastructure to get the donations to the affected area or people. A safer bet may be to see whether there are other, more established charities that are involved in relief efforts relating to the same cause.
One way to learn about a charity is to ask it directly for information. Charities have an obligation to provide detailed information to interested donors. So if you decide to contact an organization in-person, by phone, or email, request access to a mission statement, a clear description of program accomplishments, a list of the board of directors, and the most recent available audited financial statements. If an organization balks at providing this information, you may want to reconsider giving to it. Legitimate charities typically encourage your interest and respond to your questions.
And if a donation request comes from an organization claiming to help your local community (for example, a school or firefighters), call the local group directly and ask if they are currently soliciting donations and whether they have authorized the organization in question to handle the fundraising.
In addition to making your own contacts, you can use any of several online vetting tools that have been developed to make certain you are informed before you donate. By using these research tools, you can ensure that your donations go to those organizations that are trustworthy and best-suited to address a particular cause. Some of these are:
- GuideStar - The website has a search tool that finds charities by name and discloses their mission statements, impacts, and background information. It has access to information for 1.8 million IRS-recognized tax-exempt organizations and thousands of faith-based nonprofits not required to register with the IRS. The website also gives nonprofits an overall rating based on a range of analytical data.
- Charity Navigator – This website rates charities according to their financial efficiency, transparency, and accountability. The site also contains large sections dedicated to tips, studies, and articles about donating to non-profit organizations.
- Charity Watch – Run by the American Institute of Philanthropy, this website serves as a nonprofit charity watchdog and information service, where you can read about how it rates organizations, browse articles on charity, get tips on giving to non-profit organizations, and see its list of top-rated organizations.
- Better Business Bureau’s Wise Giving Alliance – This site provides information about charities, publishes a quarterly guide to wise giving, issues scam alerts, and gives a national charity seal to vetted charities for display on their websites and in their fundraising materials. The Better Business Bureau also provides a way for you to complain about a charity should you feel you've been misled.
Also, visit the Internal Revenue Service (IRS) website to find out which organizations are actually eligible to receive tax deductible contributions. You may also verify an organization's tax-exempt status and eligibility to receive tax-deductible charitable contributions by asking to see an organization's IRS letter recognizing it as tax-exempt. Or, you may call the IRS (toll-free) at 1-877-829-5500. However, it’s important to note that not all charitable causes are registered as charitable organizations with the IRS. If you give to a local cause that does not enjoy tax-exempt status, just make sure that you know something about the people who are asking for your money.
Finally, the Federal Trade Commission (FTC) provides an online Charity Checklist with useful advice designed to help you determine whether the charity in question is a legitimate one. If you think that you've been solicited by an organization that is illegally claiming to be a nonprofit, you can file a complaint with the FTC by visiting its website (www.ftc.gov) , or call toll-free, 1-877-FTC-HELP (1-877-382-4357). If the suspicious entity is based in Georgia, you may report it to the Secretary of State, using the form provided on its website.