The Worst Charities in America

NEW YORK (MainStreet) — As the holidays and the end of the year approach, most of us take a bit of time to assess and appreciate our good fortune. It's a time when we feel most charitable, as our material blessings magnify our compassion for those currently suffering hard times, whether here at home or around the world.

But in a world fraught with fraud and misinformation, charitable contributions require careful consideration – and a bit of research.

One of the best ways to perform due diligence on a charity is to take a hard look at its annually filed IRS Form 990, according to Doug White, an expert in non-profits and philanthropy, as well as an adjunct professor in the Master's program for fundraising management at Columbia.

"The best place for accurate financial information is the organization's 990, which, if it's not available through its website, can be accessed on Guidestar," says White. "But keep in mind, the 990 information is old -- at least a year, almost always closer to two years old, and it is subjectively compiled."

But take double care: some non-profits use a little wiggle room in these reports.

"Some charities game the system to make it look as if less is being spent on overhead and fundraising than is actually the case," White tells MainStreet. "For overall information, the person should visit the organization's webpage, and call or visit the people who work there. Be sure to get a sense of their openness; anyone who doesn't answer a person's questions -- directly and fully, no matter who's asking, is suspect of a lack of transparency."

FindTheData.org offers a list of "America's Worst Charities," compiled with data from the U.S. Internal Revenue Service by the Tampa Bay Times and the Center for Investigative Reporting. The website says that many charities on the list use third-party fundraising companies to gain the vast majority of their donations, handing over at least two-thirds of the proceeds to these paid solicitors. Experts say that good charities should spend no more than 35 cents to raise a dollar.

Collectively, the 50 worst charities on the list raised more than $1.3 billion over the past ten years and paid nearly $1 billion of that directly to the companies that hustled their donations.

Is a list of this sort useful to those of us that want to give wisely? White thinks so.

"One, we are all able to see those organizations that did poorly based on a certain algorithm," White said. "And two, it reinforces the idea that charities are open, and appropriately so, to public inspection. People should not think they can hide behind the beneficence of the word 'charity' when they are not serving the public."

But White believes the "Worst Charities" list does have one weakness. It is based on a single algorithm.

"The problem is that there are many lists that could be developed and so far none is a perfect indicator of a charity's effectiveness or even financial strength," he says. "But I like that not only does the ranking show how much was kept by the solicitors and how much was given to charity, but also, of the amount given to charity, how much of that amount was actually spent in the promotion of their mission."

The top five "worst charities" on the list are: the Kids Wish Network based in Holiday, Fla.; the Cancer Fund of America in Knoxville; the American Breast Cancer Foundation in Baltimore; the Firefighters Charitable Foundation of Farmingdale, N.Y.; and the International Union of Police Associations, AFL-CIO in Sarasota, Fla.

"As far as I'm concerned none of the 'Worst 50' should be in business," White says flatly. "They are a disgrace to the ideals of the nonprofit sector and act contrary to the wishes of donors. I'm serious -- I'd go as far to say that the worst 10,000 on this scale shouldn't be in business."

White says donors need to know more about the organizations they are supporting. He offers this advice:

  • Never give money over the phone to someone who claims to represent an organization that you've never hear of -- no matter the perceived validity of the cause. (This is how all that money was raised on the 50 Worst Charities list, according to White.)Hucksters know how to pull on our heart strings, but while many causes are worthwhile, that has nothing to do with whether or not the person on the other end of the phone is a swindler.
  • Go to the charity's website and check to be sure the address is correct; some swindlers have gone so far as to put up mock websites that look like the real deal but aren't.
  • Don't rely solely on Charity Navigator (an online charity evaluator) or the Better Business Bureau's Wise Giving Alliance. While White says these resources provide assistance, they fall "well short" of helping a person decide if a charity is worthy of support.

--Written by Hal M. Bundrick for MainStreet

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