This holiday season, beware of naughty charities

For many Americans, the end of the year is a great opportunity to donate to charities and use our finances to do a little good in the world. However, a recent report reveals only 19 percent of people highly trust charities. Unfortunately, there’s good reason to justify this.

Look no further than the Armed Forces Foundation, whose executive director was convicted last month of committing fraud and tax evasion. She was caught using charitable donations for her personal expenses, while donors thought that money was helping veterans.

Naturally, people want to give to good and effective charities so their donation can actually make more of an impact. A good charity is more difficult to find than many people would expect. Part of the problem is so many charities are poorly run and lack any serious accountability—a “black hole” of accountability, according to some experts.

One example is the Disabled Veterans National Foundation, which was the subject of a CNN exposé revealing the organization raised $55.9 million over several years, yet virtually none of that money was given to veterans. Instead, donations were bizarrely spent on candy, hand sanitizer, and further fundraising. In fact, scammers often target people who want to help veterans due to the emotional appeal of helping wounded service members.

Similarly, animal charities wielding pictures of homeless pets are not always what they may appear to be at face value.

The Humane Society of the United States (HSUS) plasters its ads with photos featuring needy cats and dogs, yet it only gives one percent of donations to local pet shelters. Despite sharing a similar name with local humane societies, HSUS actually does not run a single pet shelter. Meanwhile, People for the Ethical Treatment of Animals (PETA) claims to promote animal rights, but actually kills the vast majority of cats and dogs it takes into its animal shelter—in some years, PETA’s kill rate has been 97%, according to public records.

Health charities are full of bad apples, too. According to one charity evaluator, Autism Speaks spends as much as 44 percent of its budget on overhead. And it can be difficult to discern similarly named groups. The Breast Cancer Research Foundation spends a high percentage of its budget on programs, yet the Breast Cancer Research and Support Fund does not.

The range of bad charities shows that no sector is immune and so an informed choice is essential.

What should you do? First, be sure to check out a nonprofit with a thorough evaluator. CharityWatch, a nonprofit watchdog, is considered one of the best. Its most recent guide rates 51 veterans charities, 55% of which get “D” or “F” grades. But it also lists a number of “A” organizations that will use your donation efficiently.

More fundamentally, consider giving locally. National charities of all stripes run into the same issues: Non-transparency, bloat, corporatism, donations spent on consultants and executives, etc.

In contrast, it’s highly unlikely that your local food bank or animal shelter is wasting money on massive telemarketing campaigns. (To make sure, you can ask for their publicly available tax return, which lists salaries of key employees.) Moreover, you can see your donations being used in your own community.

With the new changes to the tax code, experts expect fewer people will be taking a charitable deduction. So while the end of the year is when charities bombard us with fundraising appeals, remember to take your time and be careful. You, and those who are helped by your benevolence, will be thankful for it.

•••

Will Coggin, Research Directory for Center for Consumer Freedom