Having lived below the poverty line my entire life (the first 18-20 years by circumstance of birth, the last decade+ as a result of life choices) and having been homeless more then half my adult life (as a result of personal life choices) charity and charities have always been of interest to me. I the last couple of years non-profits have finally discovered the internet.
Unfortunately, (in most cases) a large number of for-profit companies have sprung up whose stated goal is to make it easier for internet surfers to donate to these non-profits. I say unfortunately because the majority of these companies seem to be more interested in business (aka profit) then charity and are merely following a business model (created by thehungersite.com) that has proven successful at generating large revenue streams.
If I sound anti-charity (or even anti-charity website), I must assure you that I am not. If I sound highly concerned over the integrity and business practices of charity sites, it’s because I am.
What To Look For:
Before giving money or supporting a charity site there are three things you’ll want to determine: profit/donation ratio, what charities are supported, and what those charities actually do with their funding. The harder it is to find this information, the more wary you should be.
If more than 10% of the funds generated by a site stay with (or go to) a for-profit company then you’d be better off donating directly to the charity itself. I’m including costs for materials, server maintenance, employees, and advertising in that 10%. Remember, the charity has overhead as well that will further dilute your donation.
Be aware of phrases like “50% of all profits are donated to charity”. This does not mean that half the money you send goes to charity, it means that the company covers all of its expenses (which could include such things as company cars, employees housing and holiday bonuses) and then donate half of what is left to charity. This could be as little as 5% (or less) of the revenue generated by the site. Given the current state of ecommerce in general, it’s even possible that a site generating tens of thousands of dollars each month may still have no profit to be shared with the charities.
I recommend you stick with sites that donate either a given dollar amount per donation or, at minimum, a large percentage of total revenue (as opposed to profit).
What Charities Are Supported
Sites that do not name specific charities they support, but use only vague phrases like “end world hunger” or “help the children” should be viewed with suspicion. When specific charities are named, they should be listed as section 501 non-profit corporations and donations should be tax deductible. If this information is not available on the site (or you are unsure of the status of any organization) you may check IRS Publication 78 online at http://www.irs.gov/search/eosearch.html
How Charities Use Funds
I’m not suggesting you personally audit the books of each and every charity you consider (though if you have the time and resources to do so I’d love to see a summary report ;), but rather that you understand their goals, projects and stated purpose. This information should be gathered from the charity itself (its website or offline documentation) rather then the for-profit collection site. For example, one site (freedonation.com – see my epinion at http://www.epinions.com/content_6649122436 ) claims to have provided over 131,494 doses of (an unnamed) vaccine and more than 200,000 hours of shelter to the homeless while in actuality none of the charities supported provide vaccinations or operate shelters.
Please do not interpret this information as a call to refrain from donating to charities. A lot of good people and organizations need your help in making the world a better place. Just as you should invest wisely, you should also donate wisely. Spend the time to do a little research and every dollar you donate will provide that much more help.