Nonprofits and charities: Change the world by giving to the right causesApr 04, 2022 02:09PM ● By Adam Cochran
Whenever there is a natural disaster or another catastrophic event in the world, humans come together to support those who have been affected. Unfortunately, bad guys also take advantage of the generosity of those seeking ways to help by setting up fake fundraising scams.
Additionally, many legitimate companies often use the name of worthy causes to attract sales of products by contributing a minuscule portion of sales to nonprofits that, in turn, relay a minuscule percentage of donations to the advertised purpose. This month, I will give you advice on how to identify scams, nonprofits and legitimate companies that are using the guise of a good cause to line their own pockets more than help those in need.
Avoiding charity scams is fairly straightforward. If you have a humanitarian charity, church or nonprofit you trust, donate everything you can directly through that entity.
If you don’t have a trusted entity to donate to, here are some tips for researching and identifying a sound charity or nonprofit. These may not seem like “tech” tips, but you will need to do a lot of research using Google and other digital resources.
First, know that nonprofits are businesses. They pay employees and they are allowed to make as much money as any big tech or oil company.
An important difference between nonprofit and for-profit businesses is what they are allowed to do with the extra money. For-profit businesses can keep as much money as they want and pay taxes on it. Nonprofits aren’t allowed to have extra money—everything must be used to support the nonprofit.
If a nonprofit has extra money, it is allowed to donate it to another nonprofit, which is why you may see one nonprofit (such as a hospital) donating generously to another nonprofit (such as a local children’s organization) toward the end of a fiscal year.
In other words, nonprofit and charity are not necessarily synonyms. This nerdy financial information is important because many fundraisers will attempt to appeal to their credibility by explaining that they are a nonprofit organization. Essentially, this just means that all money you donate will be used by that organization, not necessarily for the cause they are representing.
Charities, such as churches, homeless shelters and some humanitarian organizations typically give a much larger percentage of donations to the given cause, but there are still many loopholes in laws and regulations that allow money to be spent in ways the donor may not intend.
To further muddy the waters, consumer protection entities, such as the Better Business Bureau, are essentially lobbying organizations. They certainly go a long way in identifying valid organizations, but they are also dependent on funds from the same companies they certify. If that sounds like a conflict of interest, it certainly can be.
Before donating, it’s important to identify whether you are donating to the cause or to the organization that supports the cause. For example, donating to the Red Cross supports American Red Cross. Obviously, the organization does a lot of good in the world, but a $10 donation to its Ukraine efforts will probably not result in $10 worth of help or supplies for Ukrainian citizens in need.
Because charities and nonprofits are required to disclose salaries and expenses, it’s fairly easy to vet an organization with some online research. Often, the best places to donate are smaller humanitarian campaigns associated with churches, school groups and local charities. Donations through these entities are far more likely to be used for directly sending people, money or supplies to the given need.
Bad guys and deceptive organizations will take advantage of technology to mislead and misinform. But the flip side is that donors can use the same technology to ensure they are donating to a valid organization and verify how the money will be spent. Generous donors are more empowered than ever to change the world, provided they do a little research to ensure their money actually goes to the change they wish to see.
You might also want to read 4 ways to say “scram” to scammers