Charity fraud can be a disaster

There are ways to protect yourself when giving

By MATTHEW L. MILLER

Bridgepointe Goodwill CEO Caren Marshall says her heart sinks when she hears stories like that of Todd Kelly Smith, a former Louisville disc jockey accused of theft from a charity he founded.

Public trust in charities is a fragile thing and high-profile examples of abuse only serve to further skepticism of prospective donors. Smith and his mother, Sybil Smith, face charges for theft of $75,000 to $150,000 from The Todd Kelly Foundation, a charity supposedly set up to fund ALS — or Lou Gehrig’s Disease — research and aid sufferers of the disease.

Even legitimate and well-established charities are not immune to criminal activities. A former financial controller for Goodwill Industries of North Central Wisconsin was convicted in 2003 of embezzling more than $500,000 to cover gambling debts. In 2005, USA Today reported tax-exempt groups were involved in half of the IRS’ 31 categories of tax-shelter scams.

Still, Marshall says Bridgepointe Goodwill, based in Clarksville, hasn’t suffered from skeptical attitudes from donors. Bridgepointe ranks fourth nationally in donations per capita and has succeeded in keeping its reputation intact despite any negative publicity involving charities, according to Marshall.

“We are very sensitive about our reputation and developing relationships,” Marshall said. “It’s important that local donors know their charities.”

Kate Merchant, the office manager of Clark County Red Cross agreed. Merchant said that the Clark County Red Cross is audited at least once a year and there is rigorous documentation on every penny given. Merchant said that negative publicity affects donations “a little bit” and prospective donors shouldn’t be afraid to ask questions about their charity.

“People can come to the chapter,” Merchant said. “We can assure them that we will be good stewards for their money.”

Donors should also understand the mission of their charity.

For example, many people know the Red Cross only for their blood drives, but their duties extend much further. The main focus for the Red Cross is disaster relief, which includes emergency assistance for affected families in the form of food, shelter and health services. It’s not always far away either.

“People might see a national disaster on the news, but not know about a fire across town,” Merchant said. “People locally need just as much.”

While scam artists can give legitimate charities a bad name, there are also other factors to be considered when choosing where to send your money.

Sandra Miniutti is the director of External Relations for Charity Navigator, an online source for ratings of the financial health of America’s charities. The creation of Charity Navigator stemmed from the lack of available information for consumers to evaluate charities.

“We felt there was a faulty perception that scams were the norm,” Miniutti said. “We believe the perception of misdoings in the charitable sector gives people an excuse not to support charities.”

Miniutti believes inefficient charities pose nearly as much of a problem as outright scams. In order to know exactly how their money is spent, potential donors should thoroughly investigate the fiscal health of their charities.

A typical charity should spend at least 75 percent of its budget on programs and services, while keeping its fundraising drives and overhead below 25 percent.

It is also important to contact the charity directly and to avoid middlemen. Telephone solicitations are often conducted by third-party fundraisers, meaning that many times only a small portion of donations actually make their way to the specified charity.

Donors should be careful when giving money for relief of natural disasters, particularly over the Internet. Before Hurricane Katrina even hit land, domain names were being bought up by scam artists and the FBI reported that more than 4,000 Katrina-related Web sites popped up in the aftermath of the disaster.

Bogus Web sites often use variations of the names of legitimate organizations such as the Red Cross or the Salvation Army, sometimes even cutting and pasting a charity’s official trademark to make the site more believable.

General tips for donors:

• Make sure a charity can communicate who they are and what they do. Reputable charities are more than willing to explain their mission and what they accomplish with your money.

• Be wary of e-mail solicitations, particularly those with attachments. Always use the authorized Web site of your charity.

• Make sure your charity is designated 501c3. This means your charity is registered with the IRS and your gift is tax-deductible.

• Be careful who you give your personal information to — credit card numbers, bank account information, social security number — both over the phone or the Internet. Donations should be given directly to your charity.

— www.charitynavigator.org



So you know

• Clark County Red Cross — www.redcross.org; 812-283-8416

• Bridgepointe Goodwill — www.bridgepointe.org; 812-283-7908

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