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Ask the Experts: How to Maximize the Impact of Your Charitable Donations

How To Maximize Your Charitable Giving

Despite the recent economic turmoil, Americans have continued to display an altruistic streak, donating billions of hard-earned dollars to noble causes each year.  For instance, in 2011 – the most recent year for which data is available – roughly 88% of consumers bequeathed a combined $298.3 billion to charity, according to a Giving USA report.  And while the cynics among us will chalk that up to the accompanying tax benefits, it doesn’t really matter as long as the money is being put to good use.

But that’s the crux of the issue:  How can we make sure our charitable donations actually get to those who truly need the money, rather than executives’ pockets or, worse, fraudsters?

Charitable Giving in the Era of the Great Recession & Social Media

There has been no shortage of charitable impropriety in recent years, ranging from allegations of misdoing by celebrities like Wyclef Jean and Lamar Odom to scams tied to natural disasters like the recent tornadoes in Oklahoma and even terrorist attacks like the Boston Marathon bombings.  In short, it seems that the modern, social media-driven charity landscape has created something of a double-edged sword for the benevolent among us – enabling people to respond quickly and en masse when needed, yet leaving us perhaps more susceptible to shady folks who want to make a quick buck off our good intentions.

The resulting importance of carefully targeted giving becomes even more apparent when you further consider just how many truly worthwhile causes there are out there as well as how little most of us can spare in the wake of the Great Recession.  Not only does unemployment continue to hover around 7.6%, but the average household also has more than $6,500 in credit card debt and we’re on pace to add $46.7 billion to our overall tab in 2013, according to CardHub data.  That would bring the total amount of new credit card debt incurred since 2011 to roughly $130 billion by year’s end.

We therefore turned to experts on charitable giving, fraud, and the economy for tips on how to maximize the impact of our giving in this day and age.  You can check out what they had to say below.

Expert Opinions:  Getting the Most Bang for Your Charitable Bucks

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Charlene Davis

Associate Professor of Business Administration at Trinity University

How can people make sure their charitable donations are actually used for charity?

In one sense it’s like any other ‘purchase’ or spending a consumer might make . . . pay attention to the news for positive or negative coverage. More specifically however, consumers can use independent evaluator organizations such as Charity Navigator. This organization provides detailed information on a charity’s mission, scope, source of funding, administrative overhead (a key metric), financial solvency, and transparency. A high mark from this group is a good indication that money is primarily spent on the purpose for which it’s intended.

How big of a concern is fraud in the era of social giving?

In an age of ‘instant’ message spread, reporting of fraud is more proximal to one’s giving and clearly inhibits giving patterns even when the charity that one is dealing with is established and has a good reputation. What constitutes fraud is important to keep in mind here as well. To donors it might include any range of activities, but if you are looking at instances where money is collected with one stated purpose and used for another or where a small amount of what is collected actually goes to the actual cause and benefits those recipients. Although a majority of fraud seems to be restricted to charities that are less established (for example some that are created to help in a specific set of circumstances and for a shorter time span — such as disaster relief) the public nature of giving and championing a cause can be chilled by the fear of backing a cause that turns out to be bogus or doesn’t pass public scrutiny.
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Karen Winterich

Assistant Professor of Marketing at the Pennsylvania State University

How can people make sure their charitable donations are actually used for charity?

Generally, people tend to donate to organizations with which they feel closest or those they can identify with. In doing so, donors tend to be more familiar with what the organization does and what funds are used for, allowing them to gain a general sense of legitimacy of the organization.

However, when this personal assessment is not possible or more specific statistics are desired, particularly for larger organizations, donors can check one of several charity evaluations such as Charity Navigator or the Better Business Bureau Wise Giving Alliance. As with many consumer decisions, ‘go with your gut.’ If something seems suspicious or you’ve been solicited for a donation unexpectedly, check into the organization before making a donation.

How big of a concern is fraud in the era of social giving?

It’s definitely there and some regulations should be put into place, but for the average donor, fraud shouldn’t be a large enough concern to deter giving. Donors just need to be smart about their giving. Just a few minutes digging should usually help consumers identify whether an organization is legitimate or fraudulent. If you’re not familiar with a cause, check it out before donating. If you can’t verify it, give your money to a similar, but more reputable cause.
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Sandra Miniutti

Vice President of Marketing for Charity Navigator

How can people make sure their charitable donations are actually used for charity?

Be proactive and vet charities before you make a donation. Check out their Financial Health, Accountability & Transparency and their Results Reporting. Don’t assume that just because it is a charity that it is efficient, ethical or effective.

How big of a concern is fraud in the era of social giving?

Donors need to be skeptical of online appeals that are sent via social media or email. We always encourage donors to go to the charity’s legitimate website to make a donation and not to click through on any links.

Also of more recent concern is the development of crowdfunding sites. Although those services provide donors instant gratification, they generally lack any accountability & transparency. Donors have no assurances that the fund is legitimate or that their money will be used as the appeal describes. This is a very risky form of giving.
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Kenneth Stern

Author of “With Charity For All: Why Charities are Failing and a Better Way to Give” & former CEO of National Public Radio

How can people make sure their charitable donations are actually used for charity?

It is not easy to find the best charities. The usual measures of charities such as administrative ratios and the like are not reliable indicators of charitable effectiveness. They will tell you where they spend their money but not whether their spending has an impact. Best to research the individual charity, see whether they set appropriate and meaningful goals, and whether they report out to the public how well they are doing against these goals.

How big of a concern is fraud in the era of social giving?

Fraud is a real problem for American charities, for a number of reasons. First, there is a lot of market confusion. There are more than 59,000 charities with the word “veteran” in the title, for instance, so it becomes easy for a con artist to confuse donors. Second, there is little organized regulation of the field. There are less than 100 full time state regulators of charities, in comparison to the 1.1 million charities in this country. Donors need to be careful, especially when giving over the phone or over a social platform. Fraud and theft from charities is also a problem. Charities frequently under invest in financial systems, often making them easy prey for thieves. It’s a multi-billion dollar issue.
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Elizabeth Grant

President of the National Association of State Charities Officials

How can people make sure their charitable donations are actually used for charity?

Charities with revenues over $200,000 a year are required to file public financial reports (IRS Form 990), which are available on the Internet through organizations like Guidestar and also are generally available through state offices responsible for charitable regulation. The reports include disclosures about how much the charity pays in compensation, fundraising, etc. The leading charity “watchdog” groups may be a helpful resource for are also good resources for donors. They include Charitywatch.org, Charity Navigator, and the BBB’s Wise Giving Alliance.

Takeaways

From the expert insights provided above, we can glean a few “best practices” when it comes to charitable giving in the modern landscape:

  • Before giving to a particular organization or cause, it’s important to do a bit of background research in order to evaluate legitimacy and determine how donations will be used.
  • There are a number of useful resources available to charitable givers, including organization-specific rankings and background information from Charity Watch, Charity Navigator, and the Better Business Bureau’s Wise Giving Alliance.
  • Large, established charitable organizations tend to be the safest bets because there is a multitude of publicly available information about them and examples of impropriety will be easy to find.
  • Pop-up charities, particularly those tied to current events, should be viewed with the most skepticism.
  • People can significantly decrease the odds of falling victim to a charity scam by simply not making donations over the phone, online, or in response to unprovoked requests.

 
Image:  Alexander Raths/Shutterstock

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