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Sham charities inflate gift-in-kind numbers to deceive donors

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Charities rely on generous donations – cash and gifts-in-kind – to help people in your community, across the country, and around the world. Gifts-in-kind are non-cash donations – things like food, clothing, equipment and medical supplies.

Normally, charities give those gifts directly to people in need, or to other charities for redistribution. But a recent complaint against four sham charities by the FTC and law enforcement partners in every state and the District of Columbia shows that’s not always what happens. In this case, according to the complaint, the so-called charities said they got more than $223 million in gifts in kind and distributed them to international recipients – only they didn’t.

That’s bad enough. But, says the FTC, when these charities claimed to receive and distribute a huge amount of gifts, they made it seem like they were larger and more efficient with donors’ dollars than they actually were. Why does that matter? Well, charities have administrative and fundraising costs. When charities pass through big dollar amounts of donations – including difficult-to-track gifts in kind – high fundraising and administrative costs look like a much smaller percentage of overall expenses than they actually are.

Why should this matter to you? You probably want most of your donation to go to the cause you support, right? But if a charity uses gifts in kind to inflate its operations – and spends most of its cash to pay executives or cover operating expenses – you might consider donating elsewhere.

To learn more, check out Charitable Gifts-in-Kind FAQ .

Tagged with: charity, fraud, telemarketing
Blog Topics: 
Money & Credit

Comments

It would be very helpful if you could post a list of common charities and what percentage of the donations go to administrative costs and fundraising and also what percentage of the dollar or the money actually gets to the "Cause" that it was intended to go to. Consumer Reports magazine had listed this information, but it was many years ago. It would be very helpful if people would know how much money, or percentage of the money is actually effective and how much is actually wasted/used up with administrative fundraising costs. I believe that this information is extremely vital to weed people that donate to charities. Thank you in advance, MJSS

The FTC article Before Giving to a Charity has tips for checking out a charity. For example, find out if the charity or fundraiser must be registered in your state by contacting the National Association of State Charity Officials.  Check if the charity is trustworthy by contacting the Better Business Bureau’s (BBB) Wise Giving Alliance.

It costs money to run an organization. I would not call administrative costs a waste. People who work at charitable organizations deserve competitive salaries and proper supplies and equipment. The vast majority of charities are operating on extremely tight budgets and then one charity comes along and scams people and the rest of the charities get punished

omg i donated my son's organ in hope of giving a new start to someone else since there was nothing to do to get him back. he knows i fought for him till the end

I just had a person approach me in a parking lot to buy a backpack they would, in turn, donate to a large charity that I thought was reputable. They took cash donations too, but my one-time gift turned into a monthly recurring charge, and I feel pretty ripped off by the whole situation.

I'm not sure if they did anything illegal, but I'm thinking of making an FTC complaint after reading this.

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