Charitable Contributions – Avoid being Ripped Off

by Darwin on July 19, 2010

While people mean well by donating money to seemingly noble causes, often times that money ends up being eaten up by administrative costs, waste, or outright fraud.  The other day, I came home from work and my wife was at the door with a teenage kid holding a clipboard talking about clean water and pollution in our state.  My wife, being the trusting do-gooder she is had already signed a petition the guy had and was mulling over writing him a check when I intervened and asked him to leave.  For all I know, his charity was legit, but look, we donate all kinds of money and wares to legitimate organizations like the Red Cross, American Cancer Society, Humane Society, Purple Heart Veterans and others, and with thousands upon thousands of organizations out there looking for your dime, we can’t be forking over money to every foot soldier showing up on your doorstep.

I asked my wife if she had ever even heard of this organization and if she knew what she was signing.  She had no idea.  And for all I know, even if it were a legit organization, often times, most of the money goes to a select few people and waste, as opposed to dealing with the issue they purport to be experts in.  Often times, people associate with term “non-profit” with a nice little charity where people are doing things like volunteering and saving the world.  Well, a non-profit just means they can’t distribute a profit to shareholders – but they CAN pay officers exorbitant sums of money for doing essentially nothing.  Because they are tax exempt and can draw huge sums of money, they can often be ground zero for waste and fraud.  As the NY Times points out, they tallied up a fraud and embezzlement tally of $40 Billion per year or 13% of all giving!

How to Avoid Charitable Giving Scams and Waste

As a sad commentary on greed and human nature, we can surely recall the various scams and riches achieved in the process by plying on your sentiments for every disaster from Katrina and 9/11 to the tsunami and Haiti’s earthquake.  With every catastrophe comes the scam artists.  Well, here are a few tools to help you combat both outright fraud as well as leakage for some legally legit outfits that are just not good with money:

Between these two sources, you can search out everything from complaints and resolution to just how efficient thousands of charitable organizations are.  Does it bother you when your pastor lives like a king?  Would it bother you if a medium-sized charity were paying its directors $250,000 per year?  Well, I guess it depends on what they’re doing for the charity and how you view the fairness of such compensation.  But if efficiency and frugality are your priorities, it’s definitely worth investigating before you give.

Do you even wonder by Bill Gates, Warren Buffet and now, Steve Ballmer have announced they over the next several years, they will donate the substantial portions of their wealth to charitable organizations they either approve of or oversee?  Because they know if they pass it on to their kin it may be squandered, the remaining estate taxes collected will be squandered by the government and because they have confidence in the efficiency and expertise of the organizations they are affiliated with.  Small pop-up outfits are often frauds and the government has proven over and over again to be a horrible steward of money.

You're Not Following Darwin's RSS? Check out Why You Have to Subscribe to Darwin's Finance!

If you enjoyed this post, you can get free updates through RSS Feed or via Email whenever a new post is published. Rest assured that you can unsubscribe at any time via the automated system and your information will not be sold, archived or utilized for any other "nefarious" purposes.

{ 1 trackback }

7 Things I Think I Think (and Personal Finance Links)
July 25, 2010 at 9:36 pm


1 Budgeting in the Fun Stuff July 20, 2010 at 4:04 pm

I just started using Charity Navigator this year and it’s really useful! I was glad to see that HSPCA isn’t one of the most inefficient, but I’m still surprised about how much executives get paid. I wonder what their actual jobs entail…

2 Financial bondage July 30, 2010 at 9:04 am

I agree, do your homework on the organization before you give. Make sure that most of the money goes to help the people that need it, and not to overhead.

I like feed the children. 92% of donated money is used for helping those that need help.

I use to give to the United Way years ago until they were caught mismanaging funds. Never again will they get my money.

Comments on this entry are closed.