There are a lot of generous hearted folks who have used their FaceBook birthday celebration to offer you the opportunity for you to give to a charity of their choosing. Their motives seem pure, altruistic and very sweet. From conversations with several folks who do this it seems apparent that they mostly wanted to turn their birthday into something larger than themselves and wanted to “give back” to a community of deserving and needy folks. This is a laudable perspective and a fresh reversal of a “me first” perspective touted in common culture.
Yet, there are reasons you might hesitate to support a charity with which you may be unfamiliar. Firstly, you may not have a lot of funds to toss around and are struggling to be frugal. Secondly, you may already have favorite charities to which you give money (or goods) every year. Thirdly, it is possible that the charity is not a good steward of the funds received, and indeed, may run very close to being a fraudulent charity.
This essay will look at the third possibility and try to answer the questions about how to verify a charity, and determine its efficiency. Three organizations that have been involved with verifying, rating, and documenting charities are:
Charity Navigator,
CharityWatch, and
GuideStar. This list is not meant to be comprehensive, and I’m not going to rate these organizations. I’ve used one of these organizations for around 20 years.
One of the easiest ways to use these organizations to your advantage is to search on a charity that has caught your interest. If the charity has been in business for a while and been filing F990’s for years then perhaps that charity has been rated. For example, Charity Navigator will only rate a charity that has filed 7 years of F990 forms. For charities that have not been posting the
F990 (required of tax exempt organizations) for years and years, then taking a peek at the F990 that did get filed can give you a window into how the charity is organized structurally and how they spend their money.
In this example of a less than exemplary charity I’m looking at a Native American charity. Before proceeding further I want to say there are some good charities doing excellent work for the Native American communities scattered around the country and I contribute to one of those. However, there are others that are rotten the core.
What criteria should be use to judge a charity? Well, each charity watch organization details the criteria they use and it is worth your time checking that out on their web page. One of the criteria mentioned by folks examining charities is monetary efficiency. That’s just my term for how much of the money taken in actually gets used for the intended recipients. Some writers have suggested that at least 75% of the money go to the recipients with the remaining 25% being allocated to marketing, salaries, infrastructure upkeep and the like. Some very efficient charities actually allocate over 90% of their funds directly to the people in need.
The Native American charity that I’m examining is not going to be named. However, the figures (rounded off) from its most recent F990 will be used.
This charity took $1,200,00 in charitable donations during the year 2016. Approximately half of that, $620,000 went for marketing expenses paid to an LLC that is essentially one guy (named in other research) who lives and works from his home. An amount near $180,000 was spent on computer expenses and that money was sent to a condo in another state. There was one paid director who received a salary of about $60,000, and an additional $150,000 was spent for salaries and other related expenses.
If you are now wondering how much money is left over for the Native American recipients of the program money, you are not alone. Over one million dollars has been used for “expenses” all to provide just under $200,000 to the programs for the Native American recipients. This is not an efficient charity. Not only that, some might call it a fraudulent charity since it seems designed to provide two people with three fourths of the total funds for the charity.
For this reason I don’t ever contribute to a Charity that I’ve not researched. I recommend that if you are curious about your charity that you do a little detective work first. That kind of work can be quite interesting and a little fun.
