Making Your Gift Count

Each year, Americans give contributions in excess of $190 billion to charity. That amount roughly equates to 2.1% of our entire Gross Domestic Product. Since there are more than one-half million federally recognized charities competing for a lucrative bite of that pie, you can see the enticement for unscrupulous individuals to set up shop in the business of being a "charity." Prospective donors, when they let their guard down, can tend to fall prey to misleading charities or fraudulent solicitations.

Five precautions

The Better Business Bureau's Philanthropic Advisory Service offers five, basic precautions for prospective donors to take before making a charitable donation.

1. Watch out for cases of mistaken identity. More than 700,000 organizations qualify for the 501(c)(3) tax-exempt status as a charity and that number increases by 30,000 annually. Make sure the solicitor's charity is one of these. Contributions may be tax-deductible.

2. Watch out for appeals that make you cry instead of think. If they try to get you to give without considering who they are or how they'll use your money, don't succumb. Ask more questions.

3. Look out for vague program descriptions. The soliciting charity should clearly state how it is working for its cause. The description should be clear and up front.

4. Watch out for excessive pressure. Charities that want you to give will be happy to wait until next week to take your money.

5. Don't assume that all organizations soliciting for support are charities. Lobbying groups and other non-charitable, not-for-profit organizations may also be soliciting your money. Ask about the organization's 501(c)(3) status.

In addition, arm yourself with knowledge from these resources for researching charities the National Charities Information Bureau and the Federal Trade Commission. Review the charity's financial statements (such as the organization's IRS Form 990, available upon request) to make sure your donation is going primarily toward the intended purpose and not to overhead.

FTC tips for donating to charities

The Federal Trade Commission has compiled its top 10 tips for donating to charities.

1. Ask for written information. A legitimate charity will give you information outlining its mission, how your donation will be distributed and proof that your contribution is tax-deductible.

2. Ask for identification. Many states require paid fund-raisers to identify themselves as such and to name the charity for which they are soliciting.

3. Watch out for similar-sounding names. Some phony charities use names that sound or look like those of respected, legitimate organizations.

4. Call the charity. Find out whether the organization is aware of the solicitation and has authorized the use of its name. If not, you may be dealing with a scam.

5. Be skeptical if someone thanks you for a pledge you don't remember making. Check your records if you have doubts about a pledge you supposedly made.

6. Refuse high-pressure appeals. Legitimate charities won't push you to give on the spot.

7. Avoid charities that send a courier for donations.

8. Consider the costs. When buying merchandise or receiving free goods for giving, remember that these items are paid for out of your contribution. That means less of your donation may go to the charity.

9. Be wary of guaranteed sweepstakes winnings in exchange for your contribution. You never have to donate to be eligible to win.

10. Don't send cash. For security and tax-record purposes, pay by check.

Use these precautions to verify the authenticity of the charity first, then make your contribution confidently.

-Anthony Vergopia is a Financial Hotline Educator for http://www.TheMoneyExpert.com.

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