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'Tis The Season To Avoid Charity Scams


I'm Michel Martin, and this is TELL ME MORE, from NPR News. Later in the program, you might think of apprenticeships as something out of the era of blacksmithing and barrel-making, but our next guest says it's time for this type of employment to make a comeback.

But first, to matters of personal finance. It's the season of giving, and not just of presents. A lot of people take this time to make last-minute charitable contributions, and if you do, chances are you'd like to make sure that donation is going for whatever purpose you actually intend, as opposed to, say, paying for somebody's offshore swimming pool.

So how do you go about figuring out which charity should be on your naughty list and which should be on your nice list? Here's where Ken Berger comes in. He is president and CEO of Charity Navigator. That's a nonprofit that rates U.S. charities, and he's with us now.

Welcome. Thanks so much for joining us, and Happy Holidays.

KEN BERGER: Thank you, and Happy Holidays to you.

MARTIN: You're already telling us that people will have noticed that there's a big increase in fundraising appeals this time of year. Why is that?

BERGER: Well, because for some charities, as much as half or more of their funding occurs during this time of year. So there's a tremendous spike in charitable giving, and so many charities are trying to get access to that kind of funding.

MARTIN: Why is that?

BERGER: It's the holiday season, and it is a traditional time for people to give. It is the end of the year, and 10 to 20 percent of all charitable gifts occur during the last 48 hours of the year.

MARTIN: So people are doing their last minute tax-planning, and charities know that. And so this is an obvious time to sort of take advantage of the mindset that people are in, anyway. Are there obvious red flags that people should look for at this time of year when they're getting all these fundraising appeals?

BERGER: When there are billions of dollars involved, there is the good, the bad and the ugly. So some of the things that people need to watch out for are charities with sound-alike names that really may not be charities at all, or have very poor management. Telemarketers - so getting phone calls at this time of year. There's been a real uptick in awareness and investigations of abuse of phone solicitations. In some cases, 100 percent of the donation is going to telemarketers.

MARTIN: But what about a charity that you might have an existing relationship with? Do they not engage in this kind of fundraising, as well, or...

BERGER: Well, you know, that's part of the problem. There are some great charities out there that may use this practice, but the problem is it's such a Wild West out there. There's so much abuse that's going on, and unless you really know about the organization personally, the risk is very high. It could be that your donation doesn't go where you want it to. So that's the risk.

You know, if you personally know the charity, that's a different matter. But even then, you might want to inquire with them, hey, how much of this money is actually getting to you and how much is the markup of the telemarketers? They can charge a tremendous amount, even for a charity that you like.

We evaluate 6,000 charities. They get roughly half of all individual contributions made in the United States. Even though there's a million-plus charities, there's the 1 percent of charities in the United States that get about 86 percent of all the donations.

So, if you look up the charity on our website and it's not rated, it means it's either in the queue to be rated, or it doesn't meet our criteria, or it might not be a 501(c)(3). There are 24 different kinds of nonprofits. We have a tool on our website that says here's how you can evaluate the charity in a similar way to the way that we do if we don't currently rate it. We're also going to be asking people to let us know which charities they want us to rate next, because we're expanding to 10,000 in the next couple years.

MARTIN: Are there some core principles that you think people should try to employ when they're figuring out to whom to give?

BERGER: Yes. We have three pillars that we think that people need to look at to be a wise charitable giver or, better still, a social investor. First is the finances of the organization, something that Charity Navigator has looked at from the beginning of our 10-year history. Because if you don't have an organization that's well-managed financially, that's sustainable and that puts the money where it's supposed to go, you're going to have problems.

Second is what we call accountability and transparency, and it really revolves around the governance and the ethics - ethical practices of the organization. It's critically important to have those things in place. We see a lot of abuse where the CEO's buddies are on the board. There's a couple of people. They don't have the skills, the independence that are required.

And then the third, what we sometimes call the Holy Grail, which is about the results of the work. It's been called outcomes, impact. And that is, unfortunately, one of the most challenging things to find, but it's, of course, critical, because that's why the charities exist. And where it stands today on that one, you probably have to call the charity, because it may not even be on their website to try to discern that. And it's more than counting heads. So a simple case, an employment program, you don't want to just know how many people went through the employment program. You want meaningful change to be evident. So that means the results of how many of them are gainfully employed a year out, and happily so, without being dependent on entitlements. Those would be the kind of measures you'd want to look for to know that the results are meaningful.

MARTIN: Well, but isn't there a lot of point of view, though, in the measures that you're using there?


MARTIN: I mean, for you to sort of say, well, here out, you shouldn't be using any entitlement program. I mean, who says?

BERGER: Yeah. Absolutely. And I think that part of this, the way it stands today, is dependent upon the expectations of the donor, of what they're looking for and what the program's specific mission is. You're absolutely right, that there can be cases where a person is doing very well relative from where they began, and that they may still need certain support. So I'm just giving a simple example. You're absolutely correct. It varies, and there is complexity to it.

But I think that basic common sense and what the organization indicates that it's planning to do, evidence that it's doing that more than storytelling is what we're talking about. You know, storytelling is very powerful and relevant, but without data that shows that that kind of story is happening every day on a scale is where you lose things, because a lot of charities, unfortunately, do not yet take the next step.

MARTIN: You know, you mentioned that this is a time of year when a lot of people are motivated to give because of their own kind of spiritual practice or feeling, and there have also been a number of tragic situations that are probably prompting people to give. I'm thinking about, like, Hurricane Sandy, for example, which is still - recovering from that is still a problem for many people.

Oftentimes, you are at the grocery store, for example, and you'll see something right at the checkout saying just, you know, throw some change into this jar or - and you think to yourself, oh, yeah. It's just the change in my hand. So what's the big deal? Do you have thoughts about that? I mean, do you think that that kind of impromptu giving, sort of throwing into the jar, what's your thought about that?

BERGER: Unfortunately, it's basically a crapshoot. Again, it gets back to this whole issue of heart and head, and the heart leads most charitable giving in the United States, which is appropriate, but the problem is that the head and looking for objective information doesn't often follow. There's an assumption that all charities are created equal, or at least mine are. And so it's really important, we think, to not just give impulsively, but to do a little research to minimize the risk that the donation is not going to be used as effectively as you hope.

So we would recommend against just throwing that money into the bucket, but rather taking a little bit of time to do a little investigating to make sure that, indeed, it's really meeting the mission and the purpose that you want.

MARTIN: Ken Berger is president and CEO of Charity Navigator. That's a nonprofit that evaluates charities to see whether they are efficient, ethical and effective. He was kind enough to join us from NPR's bureau in New York.

Ken Berger, thanks for joining us.

BERGER: Thank you. Transcript provided by NPR, Copyright NPR.

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