Office of the Attorney General OREGON WISE GIVING GUIDE. Know your charity before giving money

Transcription

1 Office of the Attorney General OREGON WISE GIVING GUIDE Know your charity before giving money

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3 OREGON WISE GIVING GUIDE Briefly Speaking Nationwide, there are over 600,000 charitable organizations. Most are looking for donors and many will be asking you for money. Determine who is more worthy of your support by being cautious and asking for written information. Sort out the phoney organizations from the legitimate charities. DO NOT GIVE CASH! Legitimate charities will be pleased to receive a contribution by check. Say no to pressure. Legitimate groups won t pressure you for an immediate response. Don t send contributions with a runner, by wire or with an overnight parcel pick-up service. Don t give to unregistered charities. Before donating, call the Attorney General s office and check the group s registration. If you don t remember a pledge, you probably didn t make one. Many fraudulent charities thank you for your previous support in order to get you to send them money. Promises of guaranteed sweepstakes winnings in exchange for a contribution should raise a red flag. Reputable charities don t use such devices to lure you into giving. A claim that a donation is tax deductible generally requires that the charity has obtained 501(c)(3) tax exempt status from the IRS. A representation that the organization has obtained a tax I.D. number is not the same thing and may be a smokescreen for the lack of tax exempt status. Be an informed donor. Read this brochure for more questions to ask and where and when to ask them. When in doubt, always check it out. 1

4 OREGON WISE GIVING GUIDE Charities play an invaluable role in American society. These institutions are the vehicles which support and carry out much of the educational, religious, artistic, health and welfare activities in our country. Nationally, nonprofit organizations deliver nearly $400 billion in services each year. Most of the support from charities comes from individual citizens. This support is critical to our quality of life. One of the characteristics of charities is that they lessen the burdens of government. Much of our society, including our social and economic safety net, is dependent upon the continued generosity of charitable contributors. You are encouraged to give as much as you are able. The Giving in Oregon Council encourages Oregonians to set a long term goal of giving 5% of income to charitable organizations. Despite the efforts of countless worthwhile charities, there is always more need. While it is important for contributors to give as much as possible, it is critical that the value of the contributor s charitable dollars is maximized. Much more could be accomplished if all charitable contributions were delivered to well managed, efficient organizations which regularly accomplish important charitable program activities. Unfortunately, in some cases charitable contributions find their way to organizations with no real charitable mission, that are deplorably inefficient or are forprofit businesses masquerading as charities. The task of separating the many worthwhile charities from the impostors grows more difficult with the increasing number of charitable appeals. Nationwide, there are now over 600,000 charitable organizations in existaance which have been granted charitable tax-exempt status by the Internal Revenue Service. Realistically, there is no simple test to separate the legitimate charities from the undeserving. Many appeals are conducted by organizations with similar sounding names. But we can offer you a number of tips which will help you determine which organizations are worthy of your support. By exercising a small amount of diligence and caution, there is no reason why you shouldn t be a confident and valuable donor to worthwhile charitable causes. 2

5 Avoiding Fraud These tips are designed to help you recognize scam artists or charities created by those with questionable motives. Do Not Give Cash Legitimate charities will be pleased to receive a contribution by check. When cash is delivered to unscrupulous charities or professional fundraisers, it regularly disappears before it can be deposited in the charity s bank aaccount. Always make the check payable to the organization, not the individual collecting the donation. Do Not Succumb to Pressure Don t let yourself be pressured into giving. No legitimate organization will insist that you contribute immediately. Avoid appeals where the solicitor wants to send a runner or an overnight parcel pick-up service to collect your donation. Such collection methods are costly; they indicate that the organization is more concerned that you will discover adverse information about the organization than with keeping fundraising costs to a minimum. Do Not Give to Unregistered Charities With few exceptions, charities soliciting in Oregon are required to be registered with the Oregon Attorney General s office. If you are solicited by an unfamiliar charity, you should contact the Charitable Activities Section of the Attorney General s office before donating. Remember, registration does not mean that the organization is automatically worthy of your support, but you should avoid unregistered charities that have not complied with Oregon law. 3

6 Be Careful of Pledges You Don t Remember Beware of solicitors who begin by thanking you for your previous support if you do not recognize the name of the organization. If you have any doubt, check your records before agreeing to contribute. Also, some unscrupulous organizations will send an invoice claiming that you made a recent pledge when you did not. They hope you will be confused or intimidated and pay the amount of the invoice. Do not make contributions you have not agreed to make. Authentic charities might send you a polite reminder, but they won t dun you or report you to a credit rating agency. Be Leery of Sweepstakes For Charity Legitimate charities may conduct raffles as fundraising events. In contrast, questionable charities may try to entice you to contribute by implying that you are a guaranteed winner in a sweepstakes. In some cases, the guaranteed prize may be as little as 10 cents. In other cases, the solicitor represents that you are the grand prize winner if only you will make a substantial contribution. The value of such prizes are exaggerated and the required contribution means that the sweepstakes is likely to be an illegal lottery. Reputable charities do not need to employ such devices to gain contributions. Remember, the reason to give to a charity is to further the organization s program activities, not to seek personal gain. 4

7 Recognize Nebulous Claims of Tax- Deductibility Because government recognizes the value of charities, most contributions to recognized charities are tax-deductible. In general, for contributions to be tax-deductible, a charity must obtain a certain type of tax-exempt status (referred to as Section 501(c)(3) status) from the Internal Revenue Service. Authentic charities will state that contributions are tax deductible and often cite that status. The charity has a letter of determination from the IRS confirming its status. Noncharities will use other meaningless terms in an attempt to confuse donors. They will refer to a tax ID number which all nonprofit or forprofit organizations obtain, or they will state on the invoice, keep this receipt for your tax records. Remember that these references are no substitute for true charitable tax-exempt status. 5

8 Be An Informed Donor Even among legitimate charities there are substantial differences. Charities have radically different missions, records of accomplishment rand rates of efficiency. You should direct your giving to those organizations that meet your own program interest and standards of performance. Invest some effort in identifying worthwhile causes. Your contributions are too important; don t let your pattern of giving be determined solely by which organizations contact you. Likewise, don t let the slickest solicitation pitches with their mostly emotional sob stories dictate your giving habits. The following are questions you should be able to answer before you give, so ask questions until you are satisfied. Should I care if I m only making a small contribution? Yes. Most legitimate charities rely on modest contributions from a substantial number of contributors. The bogus charities are no different. In fact, many would prefer not to call attention to their operations by surviving entirely on small to moderate contributions. Is the organization really a charity? Some organizations will use nonprofit sounding names or causes when they are really forprofit businesses. The most common example involves organizations claiming to produce publications on such topics as drug abuse prevention. These organizations sometimes suggest they are working in partnership with local schools or law enforcement organizations. Check them out before you contribute. Remember, too, that some 6

9 of these organizations deliberately pick names that resemble the names of bona fide charities. Why does the charity soliciting me deserve my support? At a minimum, you should ask yourself the following questions before deciding whether, and how much, to contribute. Why should I contribute to this charity versus countless other alternatives? Am I impressed with this charity s mission? Is it something which is particularly important to me? Is the charity intending to accomplish something which no other charity is attempting to accomplish? If there are others devoted to the same mission, is this one more efficient, more effective, or concentrating more of its activities in a geographical area of interest to me? How will the organization use your contribution? Suppose an organization represents that its mission is cancer-related. It may be organized to (1) improve education for prevention and detection of cancer, (2) aid research (traditional or nontraditional) or (3) to aid cancer victims. You may be interested in aiding one of these causes more than another. Likewise, suppose you are solicited by a law enforcement association. Most of these organizations are labor associations, but some also donate money to local charitable causes. Will your donation support the local little league, help injured law enforcement officers and their 7

10 families or support traditional union activities such as collective bargaining with local governments? You should understand how your contribution will be used before you contribute. Where will the organization use your contribution? Charities have local, regional, national or, even, international missions. It may be significant to you to know where your dollars will be used. Some national organizations conduct programs in your local area, others do not. If a local presence is important to you, you need to find out what kind of local office or program the organization maintains. Who does the solicitor work for? Telephone or door-to-door solicitors are either volunteers, paid employees of the charity or they are paid professional solicitors who work for separate professional fundraising firms. Paid professionals are required to disclose their status to potential contributors. If the solicitor says that he or she works for the name of an organization other than the charity (e.g., ABC Company) the solicitor is working for a professional fundraising firm. If you make a pledge to a commercial fundraiser to purchase goods or services (e.g., tickets to the circus), Oregon law also requires that you receive, within 10-days of the pledge, information describing how much of the gross proceeds will be turned over to the charity by the commercial fundraising firm. You would be wise to ask for that information at the time you receive the solicitation. Some commercial 8

11 fundraising contracts provide that the charity will receive 10 percent or less of the proceeds. By law, the State cannot require that a certain percentage be retained by the chairty. You need to decide for yourself what is an appropriate percentage. Should I support a charity by paying for a product or attending an event? Charities, professional fundraisers and merchants all, from time-to-time, offer to sell goods, services or tickets to events on behalf of a charitable cause. You are offered a chance to purchase something of value while, at the same, you are making a contribution to a charity. In some instances, you would be inclined to purchase the product anyway for the price offered and the fact that any of the proceeds (e.g., 5 percent) go to charity is a bonus. In other instances, the product is of no interest or the price is grossly inflated and spending a dollar to donate as little as five cents makes little sense. You should also recognize that when you purchase something of value, your contribution will be tax-deductible only to the extent that the amount paid exceeds the fair market value of the item purchased. In any event, you should evaluate these offers on a case-bycase basis. Also, beware of vague statements that all proceeds will go to charity. This statement typically referrs to the proceeds after all expenses are paid, which can mean that little or nothing is left for the organization s charitable program activities. 9

12 How to identify efficient/effective charities? This is the most difficult task you face. There is no easy answer. But there are some important tools. It will require you to obtain a copy of a charity s financial report. Any organization receiving more than $25,000 is required to file an annual financial report (IRS Form 990) with the IRS and the Attorney General s office. Reports on file at the Attorney General s office are public records and are available for public inspection during normal business hours. The organization also will maintain a copy on file at its main office and it is usually available for public inspection. Some organizations will provide a copy of the report, at nominal cost, to interested contributors. The organization is required to characterize all of its expenses as either (1) charitable program, (2) management or (3) fundraising. This breakdown is itemized in Part II and is summarized in Part I of the report. This provides a ratio of charitable program expenses to total expenses. It is a tool for comparing relative efficiency. However, it should not be the only test. There are other considerations: Allocation of Joint Costs. Some expenses are allocated between two categories of expenses. In particular, generally accepted accounting principles allow certain fundraising expenses to be partially allocated to the charitable program category when solicitation materials are of educational value. In some cases, this 10

13 allocation to program is very small. In other cases, it represents almost the entire level of the organization s program expenses. At the end of Part II of the IRS Form 990, the organization is required to identify the extent to which its program activities contain this type of allocated expense. In some cases, you will find that, although the organization emphasizes a mission such as medical research or financial aid to the needy, almost all of the charity s program activities are allocated education/ solicitation expenses. Efficiency is interesting, but the bottom line is the organization s effectiveness. The organization is given the opportunity to describe its program accomplishments in Part III of the IRS Form 990. Look closely at this summary of program activities. Although it always describes past performance, it is a way to determine if the organization is worthy of your future support. Donor acquisition can be expensive. For established charities, fundraising costs may be lower since they have regular donors and have to spend less money on the acquisition of new donors ( prospecting ) which is more expensive. Despite higher fundraising costs, a new organization may be worthy of your support, but you should consider whether its mission and accomplishments to date are more important than the work of more efficient established charities. 11

14 Where to get more help. If you want to find out if a charity is registered in Oregon, call or write: Oregon Department of Justice Charitable Activities Section 1515 SW Fifth Avenue, Suite 410 Portland, OR Phone: (503) If you want to file a complaint regarding charitable solicitation practives, contact the above office or call Oregon Attorney General s Consumer Hotline at or (Portland only) or write: Financial Fraud 1162 Court Street NE Salem, OR Other sources of information: Three organizations publish reports on charities conducting nation wide solicitations. The organizations can be contacted at: Council of Better Business Bureaus Philanthropic Advisory Service 4200 Wilson Blvd. Arlington, VA Phone: (707) National Charities Information Bureau 19 Union Square West, 6th Floor New York, NY Phone (212) American Institute of Philanthropy 4579 Laclede Avenue, Suite 136 St. Louis, MO (314) Reports on local µcharities are available from the Portland Better Business Bureau at: 333 SW 5th, Suite 300 Portland, OR Phone:

15 STATEMENT OF NONDISCIMINATIONS AND COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT (ADA) The Americans with Disabilities Act of 1990 (ADA) requires all programs, services and activities of state and local governmental agencies to be accessible to persons with disabilities. The Oregon Department of Justice does not discriminate in providing access to its programs, services and activities on the basis of race, color, religion, ancestry, national origin, political affiliation, sex, age, marital status, sexual orientation, physical or mental disability, or any other inappropriate reason prohibited by law or policy of the state or federal government. For additional information regarding (a) the department s ADA compliance, (2) its policy of nondiscrimination, (3) availability of the information on this pamphlet in a different format or (4) procedures for resolving a complaint that the department has discriminated in providing access to the department s programs, services and activities - please contact the department s ADA coordinator: Personnel Manager 1162 Court Street, NE (southwest corner at 12th Street) Salem, Oregon Telephone: , ext Voice TTY Fax: /10M

16 Hardy Myers Attorney General Oregon Department of Justice CHARITABLE ACTIVITIES 1515 SW 5th, Suite 410 Portland, Oregon 97201