Social Good Gone Bad – How To Protect Yourself From So-Called “Charities”

This week, Account Director Jillian Wilson-Martin and Assistant Account Executive Ivellisse Morales from our Social Impact team discuss how to protect your charitable dollars from so-called “charities” that claim to do good, but really pocket your donations as profits.

You’ve got to spend money to make money. It’s a basic business principle. But through the lens of a nonprofit, you’re expected to spend the minimum to raise the maximum, while also effortlessly delivering social impact.

Talk about high expectations.

In a recent Ted talk, fundraiser extraordinaire Dan Pallotta argued nonprofits should have the same flexibility to spend on overhead expenses as corporations in order to achieve world-changing scale in social impact. But how much is too much? The recent investigation of America’s 50 worst charities, discovered by the Tampa Bay Times and the Center for Investigative Reporting, shined a less-than-flattering light on a group of charities that spend less than four percent of donations raised on impact. A margin of four cents on every dollar may work for business, but it defies the very purpose of these nonprofits’ existence.

So what’s a reasonable way to evaluate a nonprofit the next time you decide to give? Whether you’re a corporation, foundation or a consumer, follow these five guidelines to avoid being “duped for good.”

1. Do a gut check. The first step is to evaluate how the nonprofit positions itself as well as its mission, programs and services. Make sure to thoroughly read the website and to check out its social media properties. Are you passionate about the organization’s mission? Do you agree with its approach? Are there other organizations that fight for the same cause, but better? Try to see through the smoke and mirrors and make sure the organization aligns with your personal values or brand.

2. Do a media scan. Exercise your Google search skills to check for any negative press involving the organization. Controversies of any sort should raise a red flag, but don’t be too quick to judge. Make sure to understand how and why the organization was involved in a negative story and how the controversy was handled and resolved. A media scan will also provide insight on any and all great press coverage the organization might have recently received through its PR efforts.

3. Check the digits. Confirm the organization is a registered 501(c)3. A nonprofit organization should not hesitate to share its IRS Form 990, which is required of tax-exempt organizations every year. Online resources such as Charity Navigator and GuideStar provide historical access to these forms; they also measure and rank charities based on their overhead versus programmatic expenses and fundraising effectiveness. You should also scan against watchdog lists like Charity Watch and Better Business Bureau’s Wise Giving Alliance for additional insights and information. Organizations like these do the hard work for you so you don’t have to!

4. Look at the numbers – but go beyond basic math. Numbers aren’t always everything, but they ARE something. According to Charity Navigator, an effective and financially sound nonprofit spends at least 65 to 75 percent of every dollar on programs and services that deliver on their missions. But a financially sound nonprofit also needs to “walk the talk” through quantifiable social impact that proves it’s actually making a difference towards its cause. How many people have benefited from its programs and services? How many success stories can it tell? How close is it to achieving its mission? A corporate investor would expect to see a return on investment – and donors should expect the same.   

5. Evaluate the organization’s donor base/fundraising sources. Most nonprofits pay homage to their top corporate and private donors on their websites. Is there diversity in the organization’s donor base, e.g., a variety in corporations, foundations and grant-makers? A smart and healthy nonprofit relies on more than one source to stay financially sustainable. It also wouldn’t hurt to check out who sits on the board of the organization as this will provide insight on how well-connected (and potentially funded) an organization is.

Do you have any other tips and tricks to avoid charity scams? Want to share a charitable giving horror story and your lessons learned? Please share them with us in the comments section or on Twitter by using #ConeCSR. And don’t hesitate to tweet Jillian (@yaddajillian) or Ivellisse (@ivi_mo)!


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