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Look Before You Give

May 31, 2003

The Disabled Children's Charity claimed to supply braces and wheelchairs to needy youngsters. Instead, the Anaheim-based operation, recently shut down by the Federal Trade Commission, funneled donations into a sham nonprofit created to enrich its owner.

Even charities that are not scams often enrich their fund-raisers far more than their beneficiaries. The clear message for consumers? Look before you donate.

Californians gave $70 billion to charities in 2001, most of it through direct donations by check and credit card, the California attorney general's office says. Professional fund-raisers, using telemarketing and direct-mail campaigns, generated $281.9 million of that total. But only $107.2 million of that, or 38%, went to charities; the rest stayed in the pockets of the for-profit fund-raisers.

Increasingly popular donations of vehicles, which generate welcome tax deductions for donors, performed just as poorly, with 36.8% of overall revenue flowing to charities.

California's experience with professional fund-raisers isn't unique. New York charities in 2001 received just 31.9% of the $184.7 million telemarketers raised. The paltry return explains why that state's annual commercial fund-raising report is titled "Pennies for Charities."

Some professional fund-raisers meet or exceed a Better Business Bureau guideline calling for 65% of the revenue they bring in to be passed through to charities. Many others -- including the disabled-children scam operation, now prohibited from raising funds -- are in it strictly for themselves.

The states can chase the bad guys only after they've done wrong, so this makes it all the more important for informed donors to make wise choices about charities, which is the thinking behind Operation Phoney Philanthropy, a joint task force unveiled May 20 by the Federal Trade Commission and nearly three dozen states, including California.

The task force also signals a renewed emphasis on prosecution -- the Anaheim case was one of two dozen recent investigations around the country that ended in legal action.

With charitable giving in many areas depressed by the stalled economy, good groups shouldn't suffer because of scam artists and incompetent fund-raisers.

Consumers should resist pleas from fund-raisers they don't know, hang up on groups that won't provide written financial information and resist demands for cash donations. Charities can help their own cause by refusing to sign contracts with for-profit fund-raising firms that can't measure up to the BBB's charitable-giving yardstick.

Anything less does a disservice to donors and the growing number of Americans who depend on charity to get through another day.

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