While a love of giving back unites many Americans, they don’t necessarily trust the philanthropic institutions and nonprofits that facilitate those efforts.
A 2023 Independent Sector Trust in Civil Society report found that only 52% of Americans trust nonprofits to do what is right, down considerably from the previous year.
Shows like Netflix's Apple Cider Vinegar paint a vivid picture as to why. It’s based on the true story of an Australian wellness influencer, Belle Gibson, who claimed to cure herself of cancer using alternative medicine and whole foods. She released a book and app based on the claims and falsely pledged to donate profits to charities.
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Unfortunately, these larger-than-life stories persist. In 2024, the FBI Internet Crime Complaint Center reported that consumers had lost $96 million to fraudulent charities, crowdfunding accounts and disaster relief campaigns.
Donors of all sizes must therefore stay alert and aware of their fiscal responsibilities. Whether performing due diligence on a small local fundraiser, or sizable and ongoing contributions to larger nonprofits, evaluating the reputation of an organization — and its leaders — for their impact and viability is vital.
While I often speak about the importance of the three Cs — compassion in the organization, competence in how it operates and (fiscal) conservatism to ensure it manages a lean business — there are other critical points to consider before donating to a charity.
Review the budgets and check the balance sheet
Nonprofits are notorious for struggling with their budgets. Whether it's competing priorities, a lack of funding, cash flow issues or meeting unrealistic expectations of donors, there never seems to be enough money.
So, future donors are right to wonder whether these organizations will spend their capital wisely or reliably. Whatever questions run through your mind before donating should be voiced before signing a check.
Organizations that focus on a lean expense structure are key as they are better at persistently reducing costs. It is essential to have a budget rooted in reality and have procedures in place to monitor changes as they arise.
When asking for more information, take stock of how agreeable they are to giving you a peek behind the scenes.
Research other supporters
As you would with a social circle, ensure you keep good company with your fellow donors. Review previous and current benefactors to understand their experience with the organization and how their money has benefited the cause.
Find ways to connect with them in person or online to gauge if the organization has been a good steward of its money, before giving it yours. Take a closer look at what you uncover.
Does this organization have long-standing, devoted donors or a rotating cast of one-time contributors? Let the anecdotal evidence and data be your guide.
Beware the lone wolves
Finally, as Apple Cider Vinegar demonstrates, just one rotten apple can ruin the bunch. While countless heroes and heroines dedicate their lives to supporting communities and causes, perform the same due diligence before donating to them as you would a larger organization.
Social media provides countless glossy and highly marketable ways to attract attention and dollars. In fact, the global influencer marketing industry has tripled since 2020 and is on track to reach $33 billion this year.
While spending $20 here and there may be negligible, ensure you genuinely trust these individual benefactors before you are roped into charitable endeavors.
Be an empowered and engaged giver
While charitable fraud is sure to leave a bad taste in your mouth, it should not stop you from giving to the causes and communities that desperately need your support.
Rather than shy away from potential risks, promote yourself as an empowered and engaged giver. Ask lots of questions, poke friendly holes and develop relationships with the individuals running these organizations. You’ll likely find that you strengthen your relationships and commitment along the way.
ALINE Wealth is a group of investment professionals registered with Hightower Securities, LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities, LLC; advisory services are offered through Hightower Advisors, LLC.
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