BBB Advice: Five Questions to Ask Before Donating to a Charity

Charities rely heavily on the goodwill of individual donors, especially during the holiday season, to fund their activities throughout the coming year. Last year, charitable contributions totaled $307.65 billion; 75% of all donations came from individuals, according to the Giving USA Foundation.

"[T]he number of charities seeking donations is growing," said Angie Barnett, president and CEO of the Better Business Bureau of Greater Maryland (BBB | Greater Maryland). "Before you pay it forward to the less fortunate, make sure you research the organization fully to ensure it is a rightful charity."

According to an FBI release, Nicholas Baccala, formerly of Towson, was sentenced to more than four years in prison for stealing charitable contributions. Amera Funding, his fraudulent fundraising business, diverted more than $2 million meant for the Fraternal Orders of Police in the Baltimore-Washington metropolitan area.

To avoid donating to a fraudulent charity, BBB | Greater Maryland provides five questions to consider, so you can give with confidence.

1. Is this a charity I can trust?

Look at the appeal carefully; some charities' names sound the same. Don't be fooled by names that look impressive or that closely resemble the name of a well-known organization. Check with the Charitable Organization Division of the Maryland Secretary of State to verify the charity is registered to solicit in your state.

Also, visit BBB's web site (www.bbb.org) to check out a charity and find out whether it meets your BBB's charity standards that address charity governance, finances, fundraising, donor privacy and other accountability issues.

2. How will the charity use my donation?

Ask questions about how your donation will be used. Beware of appeals that bring tears to your eyes but tell you little about what the charity is doing about the problem it describes so well. For example, if the charity says it's helping the homeless, does it explain how (shelter, food, medical care) and where this is taking place?

Watch out for statements such as "all proceeds will go to the charity." This can mean that only the money left after expenses, such as the cost of written materials and fundraising efforts, will go to the charity. These expenses can be high, so check carefully.

3. Is my donation tax deductible?

If you want to take a charitable deduction for federal income tax purposes, make sure the organization is tax exempt as a charity under Section 501(c)(3) of the Internal Revenue Code. A charity appeal will usually include a reference to this. To verify a charity's tax status, access the IRS database of organizations by viewing Publication 78 on the IRS web site at www.irs.gov.

4. Can the charity actually use what I'm donating?

All charities welcome the receipt of monetary donations, but some also solicit in-kind donations such as clothing, food and toys. If you're planning to donate items to a worthy cause, make sure you know the in-kind contributions your charity prefers. For example, a food bank may prefer food items that are not perishable such as canned goods, and a toy drive may be seeking new and not used toys.

5. Am I feeling pressured to give?

Don't succumb to pressure to give money on the spot, either immediately over the phone via credit card or by allowing a "runner" to pick up a contribution. Take the time to research the charity fully; the charity that needs your money today will welcome it just as much tomorrow.