How to Avoid Charity Scams

I got a phone call asking for money from a group that says it’s helping the victims of the floods in South Carolina. How can I check out whether this charity is legitimate?

Don’t pledge money to an unknown charity over the phone or click on a link in an e-mail. The IRS recently issued a consumer alert about possible scams relating to the South Carolina floods. Scam artists have been making phone calls, sending e-mails and creating fake Web sites posing as charities that are collecting money to help victims of the floods. Some of these crooks won’t stop at stealing your money; if they get your credit card, bank information or Social Security number, they could also steal your identity.

Several Web sites make it easy to check whether the charities are legitimate and to find reputable ones that are doing similar work. Most of these sites also analyze the charities’ financial situations and rate their effectiveness.

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CharityNavigator gives star ratings to more than 8,000 charities based on the charities’ financial health, accountability and transparency. The site highlights key information from each charity’s income statement and calculates the percentage of total expenses spent on programs and services, the growth of revenue and expenses, and other factors. You’ll also find tips for donors and lists of top-rated charities based on timely issues, such as the South Carolina flooding and the Syrian crisis.

The Better Business Bureau’s Wise Giving Alliance analyzes charities based on 20 standards, in categories such as governance and oversight, effectiveness, finances, solicitations and informational materials, privacy and complaints.

CharityWatch.org analyzes charities’ financial statements, tax forms, annual reports, state filings and other documents and grades charities based on the percentage of total expenses the charity spends on its program and the cost to raise $100. You can also find detailed reports on its top-rated charities.

GiveWell assesses charities based on the evidence that their programs produce results. It was created by former hedge-fund analysts. See How to Measure the Impact of Your Charitable Donations for more information.

Guidestar.org has the most detailed information about charities of all these organizations. It includes a searchable database of each charity’s Form 990, where it must report its financial information to the IRS. You can access basic information free, get more detailed information through its subscription service, or buy a detailed report about the charity. (You may be able to access the subscription service through a donor-advised fund.)