BBB Wise Giving Alliance joins federal and state regulators for major charity fraud announcement

government actionBBB WGA Offers Tips to Avoid Donor Deception

BBB Wise Giving Alliance (BBB WGA) teamed up with the Federal Trade Commission, State Attorneys General and State Charity Regulators this week in an effort to help the donating public avoid questionable fundraising circumstances and find trustworthy charities to support.

The FTC announced a major action against Cancer Fund of America, Children’s Cancer Fund of America and Breast Cancer Society.

“It is heart-breaking news to learn that many Americans were deceived into contributing by charity bad actors,” said H. Art Taylor, president and CEO of the BBB Wise Giving Alliance (Give.org). “People want to help when they hear about a good cause, but donors need to be aware of potential deceptions, so their hard-earned money can go to charities they can trust.”

TIPS TO AVOID QUESTIONABLE CHARITY REQUESTS:

Be cautious when responding to phone appeals. Like all forms of fundraising, telephone appeals can be put to good use by a charity, or can be part of a deceptive campaign that can result in little money going to the claimed charitable effort. Never be pressured to make an immediate, on-the-spot contribution decision.

Seek out additional facts. If interested in the charity, ask the caller for the charity’s website address and/or search online on your own to obtain program, financial and other information to make a more informed giving decision.

Watch out for excessive fundraising expenses. While most charities have reasonable fundraising expenses (less than 35 percent of total contributions received in the past year,) if a telephone appeal campaign is not managed well, it can result in excessive fundraising expenses where the charity might receive less than 20 percent or 10 percent of collected funds.

Rely on expert opinion when it comes to evaluating a charity. The public can go to Give.org to research charitable organizations to verify their trustworthiness. Charities that meet the 20 “BBB Standards for Charity Accountability” are called BBB Accredited Charities. Additional local charity reviews are available at bbb.org.

RED FLAGS CHARITIES SHOULD CONSIDER:

Is the charity spending funds on the activities emphasized in appeals? If phone and/or written appeals emphasize a specific charity program, the charity’s financial statements and other materials should demonstrate that this is the organization’s largest program activity. If not, donors may feel deceived. To avoid this perception, charity appeals and materials should make it clear which programs receive the largest share of the charity’s expenses.

Do the charity financial statements show large amounts of in-kind donations? While many charities are involved with in-kind drives for food, clothing and other items, it is especially important for charities to clearly explain the nature and use of large volumes of in-kind gifts that appear in charity financial statements. Charities should not over-value their in-kind gifts and/or include them in audited financial statements under circumstances that do not follow accounting rules (Generally Accepted Accounting Principles.) In-kind donations should not be used as means to make charity program service expenses higher than they would be without them.

Is the charity’s board of directors providing adequate oversight? Good charity accountability starts with good governance. If a charity’s board of directors is not engaged in proper oversight of the charity executive staff in terms of reviewing performance, approving budgets, being aware of fund raising arrangements, and establishing appropriate accounting procedures, this can lead to larger potential problems for the organization.

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