Economics

Be Wary of Charity Scams

The professional telemarketers never stop calling. The television ads are endless in their efforts to solicit money from the general public. A dollar a day; 19 cents a day to help abandoned animals, children with a cleft lip or cleft palate, people living in squalor, the soldier struggling to make his or her bills after a losing a leg or an arm.

All seem on the face of it to be good causes worthy of your support. Now some charities are worthy of your support and some charities are not as many deliver pennies to the cause they claim to represent.

Many call themselves by or use names we think we recognize. Kids Wish Network, Cancer Fund of America, Children’s Cancer Fund of America, and the Committee for Missing Children to name just a few are meant to mimic well-known charity names that fool donors. Collectively the 50 worse charities in the United States raised more than $1.3 billion dollars over a decade and paid nearly $1 billion of that directly to the companies that raise their donations. The nation’s worst charities are large and small. Some are one person outfits operating from run-down apartments. Others claim hundreds of employees and a half dozen locations around the country. One lists a UPS mail box as it headquarters address.

Federal law is vague about how much untaxed organizations can pay employees. Regulations say pay should be reasonable meaning an amount that would ordinarily be paid for like services by like enterprises under like circumstances. The IRS rarely imposes penalties for excessive pay at charities.

Sites like Charity Navigator are very helpful in showing you what percentage of your gift goes to support the mission of the non-profit as opposed to administrative expenses. To be considered a charity that spends its money well, at least 66.6% of all donations should go directly toward programs that support the charity’s mission.

A recent CBS news investigation into a charity for wounded veterans, the Wounded Warrior Project, looked into how the charity spent its donation money. Disabled American Veterans spends about 96% of its budget on vets. Fisher House devotes 91%. But according to public records reported by Charity Navigator, the Wounded Warrior Project spends only 60% on vets.

It disturbs me that these organizations prey upon honest hard working Americans who want to help what appears to be people or animals with a legitimate need. Whether the charity ever delivers its promised support to the mission it purports to help, seems immaterial to the charity founders. It seems as if as long as their salaries and expenses are paid out of the administrative costs, the founders of the charity are happy. They enjoy a good life spending nothing or almost nothing to help the causes they claim to represent.


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About the author

Donald Wittmer

DONALD WITTMER is a retired business executive who held key roles in the automotive and banking sectors. For a time, he also served as a Fiscal Agency Manager for the Detroit branch of the Federal Reserve Bank of Chicago. He received his undergraduate degree from Cincinnati's Xavier University, an M.A. in business management from Central Michigan University, and earned certification in bank operations from the School of Banking at the University of Wisconsin-Madison. A husband, father, and grandfather, he teaches part-time at the Kent Place School for Girls in Summit, New Jersey.

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