Charities and small businesses go hand-and-hand when it comes to helping their communities prosper. So it seems like a no brainer that they might team up in hopes of spreading some generosity. In fact, about 75 percent of small business owners make charitable donations each year. These partnerships are common and provide great benefits to both parties. Charities get a space to advocate their cause while increasing contributions; and small businesses stir up some good publicity and receive a favorable tax deduction for their charitable gift giving. It’s a win-win situation, right? Unfortunately, small businesses owners and consumers should be aware that not all charities live up to even their own expectations. Many charities are flat-out scams, banking on the good nature of others and crossing their fingers that no one will dig through their paper trail anytime soon.
Recently, the Tampa Bay Times in conjunction with the Center for Investigative Journalism released a yearlong report on America’s Worst Charities. The study lists the top 50 charities that spent the most donations on business expenses instead of direct aid. The findings were shocking. Together, the 50 worst charities devoted less than 4 percent of the $1.3 billion generated in funds to direct cash aid. Many gave even less — some gave absolutely none.
Charities claiming to help children, cancer patients and emergency personnel flood the list, including the Children’s Cancer Fund of America, the American Association of the Deaf-Blind and the Disabled Police Officers of America Inc. So what charity was deemed the worst of the worst? That dubious honor went to Kids Wish Network, an organization that claims to help terminally ill children and their families. Despite raising nearly $110 million over the past decade, less than 3 cents on the dollar has actually been used to help kids.
Many charities hit up small businesses for resources—such as food or toiletries—so they don’t have to bear any direct costs, while still managing to keep up appearances. Across-the-board, charities are funneling donations to one thing — fundraising. Of the $1.3 billion collectively raised, $1 billion was used to pay the fundraising companies that solicit on behalf of these charities. These companies use telemarketing and robocalling tactics to relentlessly call good Samaritans hoping to use emotionally-charged sales pitches to get their hands on people’s hard-earned cash. Fundraising companies are often viewed as a double-edged sword. While they generate significantly more donations than charities would on their own, they take a considerable cut of the funds, which dramatically lowers the percentage of donations that actually goes to the cause.
Associated Community Services is one of the largest charity telemarketing firms in the nation. They were used by many of the 50 worst charities and their shady tactics eventually caught the attention of Iowa state officials. One of their most abusive methods was to put past donors on a “hot list” and contact them dozens of times a year with no regard to age or financial situation. The top donor was a man in his 80s who made 38 donations totaling $1,375 to 13 of Associated Community Services’ charity partners within a year. What’s more concerning is that these charity executives now see fundraising companies as a major business opportunity. Many executives or their family members are opening fundraising companies to siphon additional revenue away from the charity in the form of their hefty salary and funds from their for-profit fundraising organizations.
When these charities do try to help, the difference they make is slight, if not insulting. The CEO of the Youth Development Fund (#13), Rick Bowen, commissioned his own private production company to produce two underwater videos for a local television segment called Rick Bowen’s Deep Sea Diving using $200,000 of the charity’s funds. Carol Smith sought help from the Cancer Fund of America (#2) when her husband was diagnosed with lung cancer six years ago. They sent Smith a box filled with paper plates, cups, napkins and kids toys. The couple was floored. The Defeat Diabetes Foundation (#29) has received $8.3 million in donations over the past decade. Only $10,605 has gone to direct cash aid.
How can organizations get away with this? Because of the relaxed charity regulations in place, these charities can seemingly run rampant. Audits and regulations are for the most part established on a state-by-state basis. Without a uniform code many charities can slip through the cracks. It’s vital that small business do their research before partnering with a charitable organization.
What should you do?
The most important thing you can do is independently research any prospective charities. Never donate without doing your homework first. Take your time and research an organization on your own using Charity Navigator, Guide Star, or Give.org.
You will also want to scan the list of America’s Worst Charities to make sure you don’t give to a charity on that list. Don’t skip this crucial step just because a telemarketer or in-person representative is using high-pressure sales tactics to get you to donate, partner or sponsor their efforts. Reputable charities will never pressure you into acting right away or over the phone. If you feel uncomfortable, hang up immediately.
The views and opinions expressed in this article are those of EZShield Inc. alone and do not necessarily reflect the opinions of any other person or entity, including specifically any person or entity affiliated with the distribution or display of this content.