Avoiding fraud when donating to charities
On Jan. 14, the Federal Trade Commission issued a warning to consumers donating to the tragedy in Haiti. The FTC cautions to choose carefully when considering urgent appeals for aid in the news, online, at social networking sites and through third parties such as a cell phone carrier. They state that the best way to provide immediate help is to donate money directly to established national relief organizations that have the experience and means to deliver aid.
In the days after Hurricane Katrina, thousands of people contributed millions of dollars to agencies collecting donations for the victims. As the devastation along the Gulf Coast was played out through the media, many people wanted help. Many well-known national organizations quickly set up means to collect donations. Unfortunately, some Americans found themselves prey to con artists who took advantage of the emotions of the moment to solicit funds for fraudulent charities that did not exist.
The National Institute of Justice issued a report on Hurricane Katrina fraud in September of 2007 and found that 41 U.S. attorneys responded to more than 14,000 fraud-related tips and complaints (http://www.justice.gov/katrina/Katrina_Fraud/docs/09-04-07AG2ndyrprogrpt.pdf).
Utahns are well known for their compassion and generous offerings. Unfortunately, Utahns are also well known for their high bankruptcy rate, high debt-to-income ratio and for their susceptibility to scammers. In fact, Utah ranks eighth in the nation in generosity according to the Catalogue for Philanthropy Generosity Index as reported by the Utah Foundation Research Report (2004). This ranking compares each state's income levels to its donation levels. Utah ranks 31st in income, or "having," and is second in donations, or "giving." The difference between these rankings creates a generosity index.
The following tips from the FTC will help generous consumers avoid fraud when making charitable contributions.
*Be wary of appeals that tug at your heartstrings, especially pleas involving patriotism and current events.
*Most legitimate charitable organizations have Web sites that show where, when and how the donations are spent. Check out these organizations so you can track progress.
*Ask what percentage of the donation is used to support the causes described in the solicitation and what percentage is used for administrative costs. This information can be obtained by going to the Better Business Bureau's Wise Giving Alliance at www.give.org.
*Discuss the donation with a trusted family member or friend before committing any funds.
*Don't provide credit card or bank account information until you have reviewed all information from the charity and made the decision to donate.
*Ask for a receipt showing the amount of the contribution and stating that it is tax deductible.
*Understand that contributions made to a tax-exempt organization are not necessarily tax deductible.
*Avoid cash gifts. They can be lost or stolen. For security and tax record purposes, it is best to pay by a check made payable to the beneficiary, not the solicitor.
*Be wary of groups selling merchandise claiming that all profits will benefit victims. Some may be legitimate while others may have no association with the organization they claim to represent and may be using a charity's name without approval.
*Remember that the need for contributions will be ongoing, and in the months ahead, you will have many opportunities to provide support.Take time to choose the recipients of your charitable giving to make sure your dollars reach helping hands.
For more information, contact the FTC at http://www.ftc.gov or the Utah Division of Consumer Protection at http://www.commerce.utah.gov/dcp/ or 801-530-6601.
The National Crime Prevention Council has a brochure on charity fraud at http://www.ncpc.org/resources/files/pdf/fraud/Charitable%20Giving%20Done%20Wisely.pdf