Business Bulletin: How can you best give to charities?

Business Bulletin: How can you best give to charities?

November 8th, 2018 by Jim Winsett in Business Around the Region

Q. My conception of a charity mission is often wrong; when donating how do I make sure the funds go to the cause?

A. Great question and I feel many of us fall in that dilemma. Public misconceptions make donors vulnerable and can lead to faulty giving decisions. Most people say trust is important before donating to charity, but fewer than one in five adult Americans say they "highly trust" charities, according to new research from BBB's Give.org. The recently released Give.org Donor Trust Report: An In-depth Look into the State of Trust in the Charitable Sector. The report, a survey of 2,100 adults in the United States, explores donor beliefs, feelings, and behavioral intentions related to charity trust and giving.

Jim Winsett of the BBB.

Jim Winsett of the BBB. ...

Photo by Contributed Photo /Times Free Press.

While the majority of respondents (73 percent) say it is very important to trust a charity before giving, only a small portion of respondents (19 percent) say they highly trust charities and an even smaller portion (10 percent) are optimistic about the sector becoming more trustworthy over time. The research was first reported in The Chronicle of Philanthropy. We rely on charities to solve some of society's most challenging problems and it is startling to learn only a small percentage of Americans highly trust charities. This report shows the need to strengthen public trust in the charitable sector, and reminds us that the ability of charitable organizations to thrive in the future is closely tied to their ability to understand how rising – and more diverse – generations think about trust, engagement and generosity."

As example, after a terrible and very public tragedy such as the Pittsburgh mass shooting this week, people want to help in any way possible, and that often means contributing to fundraisers to help the survivors and the families of the victims. Sadly, scammers often take advantage of these moments of vulnerability to deceive donors. In addition, there are often campaigns set up by well-meaning individuals who may or may not be directly connected to the tragedy.

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. Visit Give.org to verify if a charity meets the BBB Standards for Charitable Accountability.

2. 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, and it is often difficult for donors to verify the trustworthiness of crowdfunding requests for support. Go to Give.org for tips on crowdfunding.

3. Respect for victims and their families: Organizations raising funds should get permission from the families to use either the names of the victims and/or any photographs of them. Some charities raising funds for the victims of previous shootings did not do this and were the subject of criticism from victims' families.

4. 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. If the charity is not registered, that may be a significant red flag. If an organization is claiming to be a charity and they aren't registered correctly, that's a red flag.

5. 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 tragedy will be spent just as quickly. See if the appeal identifies when the collected funds will be used

6. 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).

7. 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.

8. 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.

9. 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.

10. Newly-created vs. 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.

11. 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 not deductible as charitable donations, even if the recipient organization is a charity. You can check a U.S. organization's tax status at www.irs.gov.

Jim Winsett is president of the Better Business Bureau in Chattanooga.


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