The season of heartfelt giving is upon us, and with it comes an increase in consumer fraud. Americans are being urged to exercise caution when parting with hard-earned dollars and making charitable donations.
According to the American Institute of Philanthropy (AIP), tax-exempt organizations are the fastest-growing sector in the U.S. economy. There are nearly 1.9 million nonprofit organizations, more than 68,000 of which were created in 2006 and 2007. As a result, competition for donations is fierce, and the public is inundated with requests - many from military-related organizations.
Sifting through myriad nonprofits can be overwhelming and time-consuming. Charity watchdogs or evaluators can be unbiased, useful tools when investigating and selecting a nonprofit organization in any category.
Assessment and rating of legitimacy, efficiency, financial health and comparison of like charities are among the particulars that some watchdog groups provide free of charge to donors of all levels.
New Jersey-based Charity Navigator was founded in 2001, “striving to be a Consumer Reports for the average-level donor,” according to Sandra Miniutti, vice president for marketing and chief financial officer. Military and veterans charities are among those evaluated and “because of the war, military charities keep cropping up,” Ms. Miniutti says. She warns that because these organizations “really do tug at your heart strings, they can be subject to abuse, so think with your head, not with your heart, before donating.”
As for phone solicitations, Ms. Miniutti advises people to hang up when telemarketers solicit for charities - even the familiar ones. “You don’t know who is on the other end of the phone, so even if you are impressed by the pitch, hang up, do your research and donate directly to the charity.”
Based in Chicago, AIP was founded in 1992 by Daniel Borochoff. Its mission is “to maximize the effectiveness of every dollar contributed to charity by providing donors with the information they need to make more informed giving decisions.”
During a 2007 hearing on veterans charities by the House Committee on Oversight and Government Reform, Mr. Borochoff testified, “Americans, whether or not they favor our military’s involvement in Iraq, Afghanistan or other conflicts, care deeply about the plight of our nation’s wounded veterans. … So when a veterans charity calls or writes for a donation, we feel compelled to open our wallets wide without thinking fully about whether the charity is deserving of our support. We are giving with our hearts, and not our minds.”
He stresses that soliciting for this “highly popular cause is out of control.”
Conversely, Melissa S. Brown, associate director of research at Indiana University’s Center on Philanthropy, notes that the strategy is a repeatedly tested, successful one.
She says the gifts represent “an acquisition appeal.” Ms. Brown explains that an emotional attachment to an organization is formed when a gift is received, despite the fact that it is illegal for charities to demand payment for unordered merchandise. Also, the recipient is under no obligation to make a donation for unordered merchandise.
“It sets up a gift-exchange expectation,” she says. “Prime gift-giving behavior is initiated when a charitable organization initiates the giving. Recipients are more likely to reciprocate by giving back - donating. Mailing-list solicitation is a method of loyalty building resulting in a long-term relationship.”
The watchdogs differ in evaluation techniques and focus.
According to Ms. Miniutti, Charity Navigator uses the IRS 990 (nonprofit) list to evaluate charities that have existed for at least four to five years. “The IRS is giving 990 status like candy,” so potential donors have to be savvy and do their homework. There is no fee for a charity listing and, consequently, ratings are objective. “There is no opting out if a charity does not want to be rated” she adds.