Thudfactor mentioned in his blog yesterday that I got a call from one of our charming scam charities. I was going to comment on his post (which you should go read here, I’ll wait)... but it got to be so long that it needed a separate entry. Part of my job at a nonprofit used to be researching scam artists, in order that we might avoid doing business with them in mailing list exchanges. So, I have a lot to say on the subject, and let me tell you, I read a lot of things enough to make me ill.
The funniest thing about this particular call was that as I was hanging up, I heard the caller raise his voice angrily and say “WE AREN’T TELEMARKETERS!” Hmm… you called me up and asked for money… let’s both get out our dictionaries, shall we? Presumably he would have followed that up with a claim that he was an ex-officer, or family member, or something along those lines. Sadly, it probably works on a lot of people who are just in the midst of their impulse to hang up, or they wouldn’t do it. Me, though, I just hung up. It was that line that made me certain it was a scammer, and although I then was kind of morbidly curious about how he would play it out, it wasn’t enough for me to waste any more time with these idiots.
For the most part what charity scam artists are doing is not illegal. They can get in trouble if they run afoul of laws governing phone harassment or outright fraud – IF someone catches them AND can prove it AND bothers suing – but it’s not illegal simply to run an inefficient charity. And in the eyes of the IRS, that is all they are. They get repeatedly exposed and talked about on the news, and people seem to assume that they’re gone after that, but nothing really happens to them. They might start using a different name (scam organizations almost always use a large number of different names), or reshuffle their organization, or move to a different state… or not. And actually, those tricks can work even if they are successfully sued.
As long as they report everything correctly to the IRS, up to and including their abysmal fundraising-expense-to-program ratio, they are fine. Right now, the onus is on the prospective donor to look up the organization’s financial records.
What, you don’t think there ought to be more government regulation on this, do you, you Commie?
I kid, Pinko. You may be in luck. When I was attending seminars in the nonprofit field, I was repeatedly told to expect increased regulation from Congress in the next 5 or 10 years. People are sick enough of hearing about the abuses of nonprofit status that the demand for increased regulation has been growing.
In the meantime, for looking up records on charities, I like Give.org (the BBB’s nonprofit-watching arm). The American Institute of Philanthropy is another very good one, although you have to subscribe to get their detailed reports. It would be worth it if you had a lot of dough to dispense, though. Charity Navigator is ok, but be careful – unlike the BBB and AIP, which both use guidelines and analysis when evaluating charities, Charity Navigator only gives you the public information from the organization’s IRS 990 form, without any additional human interpretation. I did encounter a charity that manipulated their 990 to show one of their fundraising expenses – their staff salaries – as a program expense. Their argument was that they were employing people in need who would be unemployed otherwise, and therefore the salaries were a charitable program. I didn’t buy that argument, and neither did the AIP, who gave them an “F.” But the same organization looked great in Charity Navigator since they told the IRS their salaries were a program expense. And that’s only one way to cheat. Another one is to, for example, report donations of worthless goods.
Avoid GuideStar, which charges a hefty premium subscription fee to offer you what is primarily public information from the 990 along with mission statements and whatnot that the organization submits to the site themselves. If you can get their site to work, which I usually couldn’t.
So what are you looking for? Well, the BBB and AIP give you a rating based on their own established guidelines, if they have enough information. The BBB also publishes the charity’s response to the rating, if they send one, so you can decide for yourself whether or not they’re actually operating in good faith. If you’re looking at financials, a nonprofit really should be able to hit about 80% or more of their funds going to programs. You might be a little more forgiving of this if they are just getting established or suffered some kind of setback beyond their control, but that’s up to you. By contrast, I’ve seen some of the scams report program expenditures in the neighborhood of just 10-20%.
Finally, none of this applies to religious organizations since they are not required to report anything to anyone. Occasionally you see one get nailed for fraud, but for the most part they can do whatever they want and tell you whatever they want about what they’re doing. They can, however, voluntarily submit documentation to the watchdog groups. I would not even consider donating to a large operation that did not do this. Otherwise, it’s simply the safest scam around.