When Donating Money, Much of It Might Not Even Reach the Charity You're Choosing to Support
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When Donating Money, Much of It Might Not Even Reach the Charity You're Choosing to Support

Some charitable organizations use third-party fundraising companies to solicit donations that can take a large portion of what you give as compensation

November 6, 2019

When you are asked to give money to a charitable organization, presuming that it's legitimate and not a scam, do you think twice about donating? You should. There's a chance that not much of your donation makes it to the charity if it's being solicited by a fundraising company. So when someone is raising money for charity, know how much of the money you give is actually making it to the charity.

Always Use Caution

Whenever you give money, whether on the phone, online or by mail, you're running a risk that your money and sensitive information will find its way into the hands of someone who shouldn't have it. There's nothing to worry about most of the time. But sometimes you're solicited by a scammer or from someone who unscrupulously wants to take advantage of your generosity. Make sure you know for certain who is soliciting your donation.

Do Some research

It's always hard to know who is on the other end of the phone or who sent you a letter. But in order to donate with some confidence, you should do some research. An Internet search for the phone number that called you or the return address for the letter you received can give you a lot of insight into who is doing the solicitation, as well as if other people had problems.

If a fundraising company is soliciting for a charitable organization, don't be afraid to check with the North Carolina Attorney General's Office for any complaints or legal enforcement actions. A checkered past could be a good indication that you should do business elsewhere. But a clean history shouldn't mean you're safe. It could mean that the company is brand new.

Fundraisers usually get a cut

Don't be afraid to ask the fundraiser how much of your donation will be going to the charity and how much will be going to the fundraising company. If the response is that your entire donation will go to the charity, proceed with a lot of caution. Fundraising companies operate by taking a percentage of each donation as compensation for their time, effort and credit card processing fees. The more money the company is able to raise for the charity, the more money the company makes.

But sometimes the percentage distribution is skewed far too heavily towards the fundraising company, which can often happen with charitable organizations that are running in the red and need rapid infusions of cash or if the type of organization is one that doesn't typically generate a lot of public support. Those charities end up accepting proposals from fundraising companies that pay out only small percentages of the money raised, which can be as low as single digit percentages. Would you donate $100 if you knew that only $9 was going to the charity?

Ask Questions

If you get a phone call asking for a donation, don't be afraid to ask questions. Most solicitors will give you honest answers to the questions you ask. So inquire as to whether the caller works for a fundraising company or for the charity directly. If the caller claims to be from the charity but you have doubts, ask probing questions about the charity, especially if you know details already. If the caller is from a fundraising company, and most are, ask which percentage of your donation will go to support the charity and how much will go to the company. You'll usually get an honest answer and it will be up to you to decide whether it's worth proceeding.

Fundraisers sometimes lie

People lie. It's just a fact of lie. That means that the person who calls you to ask for money may be lying to you, even if a professional fundraising company is legitimately soliciting donations for a particular charity. How could that hurt you if the charity is still getting a donation? Well, it doesn't directly affect you. It could affect the charity. Some fundraising company employees lie about how much of the donation you make goes to the charity, with some saying that 100% goes to the charity when in fact only a small portion is passed along. Sometimes this is because employees are pressured to up their numbers in order to keep their jobs or to get larger commissions.

High pressure tactics

The people on the other end of the phone are often seasoned professionals who know how to get commitments, sales, and donations. They're good at what they do, and that's why they have their jobs. We understand that when talking to them. There's always a little pressure to make a purchase or to donate, but it usually isn't much and will usually stop when you say that you aren't interested.

The problem comes when the person on the other end of the phone is using aggressive or high pressure tactics to get you to donate. If you feel that you are being pressured a little too much to make a donation or are being pressured to make an immediate donation, be wary. Find a way to end the call, even if you have to say that you only send checks or if you just have to hang up. These high pressure tactics are signs that something might not be right, potentially even signaling a scammer.

Donate to the charity directly

The only way you can be sure that all of your donation will go to the charity is to give to the charity directly, and this is usually the best way to make your donation. You can contact the charity and ask for the best way to make a contribution. You can see if there's a way to donate online or send a check in the mail. Donating directly to the charity before you are asked can help relieve the pressure of being asked to give when the charity reaches out to you. Having a plan for your giving can also help you avoid last minute impulse donations that you really don't want to make.

Donating to local heroes

Fundraising for public servants, such as police officers, firefighters, teachers, often generates a lot in donations, but helping them directly can often do much better and is safer. There are many strict rules prohibiting government-funded agencies or employees from soliciting or accepting monetary donations, so these requests are usually for organizations that claim to work with or support public servants. But just because an organization claims it has local ties or works with local police or firefighters doesn't mean contributions will be used locally or for public safety. Simply having the words "police" or "firefighter" in an organization's name doesn't even mean they are members of the group, which are typically not endorsed or officially recognized.

You should be extremely careful if you get solicited for this kind of donation, especially if you are offered free stickers to place on your car to show your support for a donation of a certain dollar amount. Most solicitations for these organizations are made by paid professional fundraisers, who may lead you to believe you can receive special consideration for your donation and for stickers showing your support. This simply isn't true.

You can often do better and show your support by getting together with others in your community to bring supplies or food to these public servants. But before doing this, you should check with someone in charge to make sure there are no rules that prevent them from receiving these gifts. Money may seem like a good idea, but supplies are much better. Teachers often need countless supplies for their classrooms. Police officers and fire fighters typically don't need many supplies.

Donations may not be tax deductible

Many kinds of organizations are tax exempt, including fraternal organizations, labor unions, and trade associations, but donations to them may not be tax deductible. In order for an organization to be tax deductible, it needs to be a charitable organization. Only organizations that are recognized by the Internal Revenue Service as 501(c)(3) charitable organizations are tax deductible. You can visit the IRS Tax Exempt Organization Search page to search for a charity.

Keep in mind that donations to most police or firefighter groups are not be tax deductible.

impostor organizations

When deciding whether or not to make a donation to charity, keep in mind that the name you hear or see might not correspond to the organization you might think you're helping. Some organizations have names that are very similar to others. So you'll have to make sure that the organization you're helping is the one you want to help.

Unfortunately, dishonorable people will create a charitable organization with a name that closely resembles another popular charity in order to piggyback from that charity's success or to scoop up its donors who inadvertently visit the wrong website. And then, of course, there are the scammers who will create fake websites and fake mailings in order to steal your money. When donating, make sure you verify where your money is going.

GuideStar

GuideStar provides information on various charities and nonprofit organizations. You may even donate to the charity via the GuideStar website if the charity has enabled this option. If you donate through GuideStar, 95.25% of your donation goes directly to the charity and the charity pays nothing for the service!

Consider Helping Us out

The North Carolina Consumers Council is a charitable organization. If you're looking to do some good, as well as to get a tax deduction, consider donating. Public donations help us produce the content you read, as well as helps us get into the community and work directly with consumers on a variety of topics, including general consumer education and scam prevention.