Financial Abuse and Charities– It’s Not Just Your Elderly Mother Who is a Target

You want your money to work hard for you when you invest it.  Helping my clients make the best decisions about investments is part of what I do in my financial planning practice. Shouldn’t you also want the money you donate to charities to work hard doing good things for your chosen cause?  Unfortunately, too many people are drawn to give to a charity by a guilt-tripping phone solicitation and sympathetic sounding name. The Center for Investigative Reporting found in a recent in depth investigation that:

“The 50 worst charities in America devote less than 4 percent of donations raised to direct cash aid. Some charities give even less. Over a decade, one diabetes charity raised nearly $14 million and gave about $10,000 to patients. Six spent nothing at all on direct cash aid.”

In-house fundraising is typically not the problem. Lucrative contracts with outsourced fundraisers, who run the boiler room and direct mail operations, are.  Sometimes the charity is the victim as well when their costs to fundraise exceed the funds being raised, forcing the charity into bankruptcy.  In Part I of a CIR’s series, “Dirty Secrets of the Worst Charities”, Gina Brown found that her mother had given as much as $15K over three years.  Gina discovered the problem shortly after her mother was admitted to an Alzheimer’s facility.  Elders are a prime target for these predatory “charities.”

Typically the charities have names similar to a respectable charity. Some of the worse offenders were established, it seems, primarily to generate income for the charity’s founders, or their relatives, who run the fundraising firm. The exploitation is obvious when all the facts are laid out, but it’s obvious not in a telephone solicitation. I suggest that these groups are practicing blatant financial abuse.

How can your protect yourself?  What should you do to investigate a charity?

  • Plan your giving – don’t react to a phone solicitation – skip the middle man
  • Confirm it is a 501(c) (3) organization
  • Watch out for sound-alike names.
  • Consider how important it is to give locally to organizations you know.

If making a significant contribution

  • Get the group’s financial records.
  • Review the executive’s compensation.

Want a resource?  Do some research online.  There are some great sites that make available their extensive research:

So give; give generously, but do you homework.  After all, don’t you want your donations to work as hard as your own investment dollars?  And if you would like independent information and advice about your savings, investments and donations, see an independent Financial Planner.