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How to help disaster victims

Don’t be taken in by phony emergency funding appeals

Consumer Reports Money Adviser: May 2013

Disasters like Superstorm Sandy are often followed by fraudulent charity appeals.

When a hurricane or other emergency strikes, many people are eager to help by donating to charities or perhaps directly to victims. There’s no shortage of opportunities when coverage of earthquakes, floods, mass shootings, and other calamities in traditional and social-media channels is accompanied by appeals for money.

But not every request is legit. For example, a woman in the Bronx, N.Y., was arrested by federal authorities for allegedly engaging in a fundraising scheme following the shootings at the Sandy Hook Elementary School in Connecticut last December. Authorities said she used her Facebook account, telephone calls, and text messages to claim that she was a relative of a shooting victim, raising money to pay for funeral expenses.

It can be especially difficult checking out fundraising appeals that often appear overnight. With crowd-funding websites such as GoFundMe.com, people can set up fundraisers for all kinds of causes and spread the word through social-media sites like Facebook and Twitter. But there’s no guarantee that the money raised will go to the advertised cause.

And even if an appeal is legitimate, you can’t be sure that your donation will be used effectively or that a large part of it won’t be taken in fees. Here’s how to ensure that your gift will do the most good.

  • Beware of unsolicited appeals. Fund- raising e-mail, phone calls, texts, and letters might be fraudulent. Even if they’re from groups you trust, it’s best to contact the charities directly. Scammers sometimes use fake e-mail messages to lure people to phony websites that seem authentic.
  • Be cautious giving to individuals. It might be tempting to give to a fund set up to provide shelter for a family whose house was destroyed. But it’s difficult determining whether those victims are the most needy or whether the money will actually be used for the stated purpose. Also remember that aid to individuals isn’t tax deductible. If you’re intent on responding to such an appeal, make sure the fund is being administered by a third party, such as a bank, lawyer, or certified public accountant, advises Bennett Weiner, chief operating officer of the Better Business Bureau Wise Giving Alliance.
  • Give to established charities. Before you give, make sure that the group does what you expect, Weiner says. The Red Cross might be a wise pick if you want your donation to be used for immediate relief. But if you want to support long-term home reconstruction, a group like Habitat for Humanity might be a better choice. Some charities may not be in a position to help at all, depending on the type of emergency and where it occurred. Before giving, go to a group’s website, which might provide details on how it is helping in the current emergency.
  • Check the watchdogs. National charities are evaluated by three major groups: the BBB Wise Giving Alliance; CharityWatch; and Charity Navigator. They use different criteria in their assessments, so check them all.
  • Investigate local groups. You won’t find watchdog reports about many small community groups, although local Better Business Bureaus evaluate some. In that case, one option is to give through a fund-raising federation, such as the United Way. If you want to do your own research, ask a group to send you its annual report and federal tax form 990. The tax forms are also available from Guidestar.org with free registration.

The cost of fundraising

When your donation goes through a third party—such as a fundraising firm or federation, or a crowd-funding website—not all of it will go to the cause you’d like to support.


Professional fundraisers siphon off an average of 39 cents to 51 cents of every dollar raised, according to three recent state fundraising reports we checked. (The BBB Wise Giving Alliance says fundraising costs should average no more than 35 cents of every dollar raised.) Local United Ways on average retain 13.8 cents of every dollar to cover fundraising and administrative costs. And we’ve seen fees as high as 12 percent at crowd-funding sites.


Third-party fees are not necessarily bad. There are many costs associated with raising money, such as credit-card fees and the expense of maintaining websites. Without some of the third- party resources, it could cost charities even more to raise money.


When asked to give through a third party, find out how much of your contribution will go to the group you want to support. You may be able to limit how much third parties take. By default, DonorChoose.org, a nonprofit that helps teachers raise money for education-related projects, takes 15 percent of your donation for its own charitable operations before passing the rest to the educational project. But it gives donors the option of changing that amount, reducing it to as little as 0 percent.


   

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