There is no question that America has a culture of charitable giving. According to the Lilly Family School of Philanthropy at Indiana University, 81% of U.S. households gave to charitable organizations in 2012 at a mean annual contribution of just over $900 per household. That translates to $228 billion for fiscal year 2012, far exceeding foundations, bequests and corporate donations combined.
When choosing an HIV/AIDS charity to support, it's important to always follow your heart. But at the same time, it's vital you don't let less-than-scrupulous organizations take advantage of that goodwill. And, unfortunately, it does happen—more often than one might think.
In 2012, the Federal Trade Commission (FTC) reported receiving 1,071,977 fraud complaints through their Consumer Sentinel System, of which 86,495 were imposter and charitable scams.
Ultimately, you want to feel good about where you're donating your hard-earned cash, and be assured that the money is going where it is meant to be going. In order to do this, you need to know as much about the charity as possible.(See About.com's Top 20 HIV/AIDS Charities.)
Here are just a few tips on how to best accomplish this:
1. Make sure they are who they say they are.
If you aren't familiar with the charity, be sure to confirm the organization's 501(c) tax exemption status. You can do so by either performing an online search at the Internal Revenue Services' Exempt Organizations Select Check finder, or by calling the IRS toll-free at 1-877-829-5500. If you choose to donate to a non-exempt charity, it's generally difficult to confirm how your donation dollar being spent (and, more importantly, your donation will not be tax deductible).
2. Follow the numbers.
Failing to ensure financial transparency is simply a deal-breaker. The gold standard practice for any charitable organization today should be to post their 990 tax returns on their website. Although an annual report is perfectly fine, they are ultimately tinged with a certain self-promotion. For our part, we'd rather to check the numbers ourselves, plain and simple.
3. Do the math.
If the 990 tax return is available, take a quick look at Part VII - Compensation of Officers, Directors and Trustees, but give particular attention to the Part IX - Statement of Functional Expenses. Here, it's important to compare column B (Program Services Expenses) with columns C and D (Management and General Expenses and Fundraising Expenses). This will provide you better insight as to what percentage of your money is being spent on actual programs, and allow you to ask questions if the figures seem in any way "off." (Here is a good example of a charity's 990 tax return.)
4. Be wary of any charity that spends less than 50% of its cash budget on programs.
For our part, we tend to aim for charities that spend greater than 70%. Some might argue that this approach is far too simplistic, particularly since some charities need to spend more on fundraising than others. That said, if fundraising fails to exponentially increase program spending, then it's only fair to scrutinize the fiscal management of the charity.
5. Don't judge by numbers alone.
A smaller community-based organization, which is often more effective at a grassroots levels, can't necessarily be held the same financial standards as a national organization with annual donations in excess of $10 million. Set your fiscal bottom line, but base your judgment on what you know and/or personally experience with that organization. This will better ensure your long-term support, benefiting both you and the charity. If in doubt, you can always designate how your donation is to be spent—whether it be used for specific programs (e.g. youth, HIV prevention, support/counseling), scholarships, capital campaigns, etc.
6. Use online watchdogs.
While they shouldn't necessarily be the end-all resource when deciding which charity to choose, online watchdogs like CharityNavigator, CharityWatch, and GiveWell do provide telling insights that can help guide your decision (while offering fascinatingly different viewpoints on what constitutes a worthy charity).
7. Be wary of any organization that claims greater than 95% of donations go to programs.
Sometimes these claims are simply fundraising "spins" that are, in no way, meant to mislead. After all, 99% sounds far more impressive than 79%, right? But, oftentimes, these calculations are askew and include such non-budgetary items as cash held in reserve for future utilization. To our mind, 79% spent on programs sounds pretty good, and only two HIV charities that we know of have ever even approached the platinum standard of 95%.
8. Don't get star struck.
While star participation is often vital in drawing attention to and raising funds for a charity, you shouldn't let endorsements be the start and end point of your decision making. For every star-driven charity that does exemplary work—like the Elton John Foundation or Sharon Stone with amfAR (pictured)—there are nearly as many that have either underperformed or closed their doors in controversy (including charities founded by baseball star Alex Rodriguez and recording artist Wyclef Jean). Don't let star power prevent you from asking the tough questions.
9. Don't allow yourself to be rushed.
Always be wary if a charity approaches you during a much-hyped news event or claims to be nearing the end of fundraising drive. There is no time of the year when a charity won't accept your money, so there's no need to rush. Legitimate charities never pressure potential donors (although their fundraisers sometimes do). In the event you are being aggressively pushed for a donation by a telemarketer, consider blocking the calls at the National Do Not Call Registry.
10. Never give cash.
Always demand a receipt. And never, ever reply to an online solicitation.
Lilly Family School of Philanthropy. "Giving USA: Charitable Donations Grew in 2012, but Slowly, Like the Economy." Indiana University; Indianapolis, Indiana; published June 18, 2012.
U.S. Federal Trade Commission (FTC). "Consumer Sentinel Network Data Book for January-December 2012." Washington, D.C.; released February 2013.
Goldberg, E. "A-Rod Family Foundation Gave Only 1% Of Donations To Charity: Report." Huffington Post; February 27, 2013.
Adams, G. "Wyclef Jean faces criminal probe over Haiti charity." The Independent; October 13, 2012.