When you’re ready to donate to a good cause, you want to make sure your money is being used wisely. Unfortunately, not all charities are created equal. Some organizations spend far more on overhead costs, executive salaries, and marketing than on the actual cause they claim to support. Others may be outright scams or lack transparency about where their funds go. So, how do you know which charities to avoid?
Here’s a guide to identifying the worst types of charities to donate to, along with red flags to watch for and tips on making sure your donation makes a real impact.
Common Signs of a Bad Charity
Before we dive into specific examples, it’s important to understand what makes a charity less effective or even harmful. Here are some signs that a charity might not be using your donations wisely:
- High Overhead Costs
- Definition: Overhead includes administrative expenses, fundraising efforts, and other non-program-related costs.
- Why It’s a Problem: When too much money goes to overhead, less goes to the people or causes the charity claims to help. A well-run charity will typically spend at least 75% of its revenue on its programs and services.
- Excessive Executive Salaries
- Definition: Some charities pay their top executives extremely high salaries, often out of line with the organization’s size and impact.
- Why It’s a Problem: While leaders should be compensated for their work, disproportionately high salaries can suggest that the charity prioritizes executive wealth over its mission.
- Lack of Transparency
- Definition: Legitimate charities will have their financial reports, spending breakdowns, and performance metrics available to the public. If a charity isn’t transparent, that’s a red flag.
- Why It’s a Problem: If you can’t find clear information on how funds are spent or the results of the charity’s efforts, it’s harder to trust that they’re making good use of your donation.
- Aggressive or Frequent Fundraising
- Definition: Some charities spend a disproportionate amount of money on expensive fundraising campaigns and tactics, like cold calling or mailing out excessive marketing materials.
- Why It’s a Problem: This means that a large portion of your donation may go toward soliciting more donations rather than supporting the cause itself.
- Low Charity Ratings
- Definition: Organizations like Charity Navigator, CharityWatch, and GuideStar assess charities based on financial health, accountability, and transparency.
- Why It’s a Problem: Charities with low ratings are often ineffective at using funds for their intended purposes or may have questionable practices.
Examples of the Worst Charities to Donate To
While we won’t list every problematic charity, here are a few categories and examples of organizations that have faced criticism for poor practices, as well as what to avoid.
1. Organizations with Excessive Overhead
- Some charities dedicate so much to overhead costs that little is left for actual programming. One notable example from the past was The Kids Wish Network, a children’s charity that, according to reports, spent less than 3% of its donations on granting wishes, with the rest going to executive salaries and fundraising costs.
2. Aggressive Fundraisers
- Cancer Fund of America and its affiliates, like the Breast Cancer Relief Foundation, have been cited as some of the worst offenders when it comes to spending more on fundraising efforts than on cancer patients. The Federal Trade Commission (FTC) sued these organizations for deceptive practices, and they were shut down in 2015, but it’s a cautionary tale about how some charities operate.
3. Low-Impact Charities
- Some charities do little to further their cause despite raising significant funds. American Veterans Foundation was criticized for spending only a small percentage of its donations on veterans’ programs while using the bulk for fundraising and administrative expenses. When you donate to a charity, you expect your money to make a difference, but low-impact charities may not deliver the results you hope for.
4. High Executive Compensation
- The Wounded Warrior Project came under fire for misusing funds and paying executives excessively while spending lavishly on staff retreats. Though the charity has made some reforms, it’s an example of an organization that lost trust due to its financial mismanagement.
5. Charities That Scam
- Beware of fake or deceptive charities. For example, following natural disasters, scams often pop up to prey on people’s generosity. Scammers may set up fake charities, using names similar to legitimate organizations, or they may claim to represent real charities while pocketing the donations.
How to Avoid Donating to Bad Charities
1. Do Your Research
- Use sites like Charity Navigator, GuideStar, and CharityWatch to look up ratings and financial information about charities before donating. These resources can show you how much of each dollar goes to the actual cause versus overhead.
2. Ask for Transparency
- A legitimate charity will be open about how they spend their funds. If a charity can’t provide clear answers or avoids giving specifics about where your money goes, that’s a major red flag.
3. Avoid Emotional Appeals without Data
- Some charities rely on emotional advertising or aggressive marketing to solicit donations, without giving clear evidence of how your money will be used. If you see ads that are all heart and no facts, dig deeper before donating.
4. Check the Charity’s Mission and Results
- Look at the charity’s impact. Are they making a real difference? Are there concrete results, like reports of how many people they’ve helped, how much progress they’ve made, or how their work has improved a community or situation? A good charity will show its outcomes.
5. Beware of High-Pressure Tactics
- If a charity is using high-pressure tactics—such as urgent phone calls, excessive mailers, or emotional manipulation to get you to donate—proceed with caution. This could indicate that they spend too much on fundraising efforts rather than the actual cause.
Top Tips for Smart Giving
- Look for Low Overhead: Aim to donate to charities that spend at least 75% of their budget on programs rather than overhead.
- Focus on Impact: Look for charities that demonstrate clear, measurable results in their work.
- Check for Accountability: Make sure the charity has good governance practices, such as independent board members and detailed financial reporting.
- Donate Directly: If you want to support disaster relief or other causes, donate directly to reputable organizations rather than giving to middlemen or lesser-known groups.
Final Thoughts
Choosing the right charity to support is an important decision, and not all organizations are equally effective. By doing a little homework before you give, you can avoid donating to charities with poor practices, high overhead, or even outright scams. Instead, you’ll know your money is going to a reputable organization that will use it to truly make a difference in the lives of those they serve.