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Giving to charity? Research your nonprofits before you donate

The Salvation Army is among the most visible charities at work this month, with bell-ringers collecting money that is the lifeblood of the organization.
The Salvation Army is among the most visible charities at work this month, with bell-ringers collecting money that is the lifeblood of the organization.Andrew D. Brosig/The Daily Sentinel via Associated Press

DAYTON, Ohio — Americans are a generous lot. They give billions to charities every year, with nearly one-fifth of all donations being made in the month of December.

But generous givers can be vulnerable to scams, especially in the last month of the year when they often are inundated by nonprofits of all sizes.

“The average donor doesn’t realize how vast the nonprofit sector is,” said Sandra Miniutti of Charity Navigator, which monitors and ranks the largest charities. “There are actually 1 million public charities, the largest philanthropic presence in the history of the world.

“Just because an organization is a charity doesn’t mean it’s a good place for your investment. There’s not a lot of oversight by the federal government or the states, so it’s up to the donor to do their due diligence before they give.”

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Charity Navigator has placed 174 charities on its “donor advisory” list, which means they have been investigated for illegal or unethical activities.

Charity Navigator says a sure red flag is when a nonprofit spends too much on fund-raising expenses and salaries. Its data show that seven out of 10 charities it has evaluated spend at least 75 percent of their budgets on programs and services — a benchmark for a diligent nonprofit.

“There’s loads of information out there,” said Ted Vander Roest, executive director of the Springfield Foundation. “Do a little research.”

Fund-raising this month got off to a strong start on Giving Tuesday, a global day of giving that is in its third year. Online donations on Giving Tuesday (the day after Cyber Monday) increased by 36 percent over last year. Blackbaud, which sells and services software for the nonprofit sector, processed $26.1 million in online donations, said Steve MacLaughlin, director of product management at Blackbaud.

“Things like Giving Tuesday start [the charitable season] off much earlier and are helpful,” MacLaughlin said. “It avoids procrastination, and there’s no evidence that it takes away from other charitable giving.”

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The economic power of nonprofits is enormous. They accounted for 9.2 percent of all wages and salaries in the United States in 2010, according to The Nonprofit Almanac. Their share of the gross domestic product was 5.5 percent.

“They provide vital services that our government can’t or won’t provide,” Miniutti said.

Most of the revenue taken in by nonprofits is generated by services they provide. A whopping 73 percent of revenue comes from sources that include government fees and contracts, according to the National Center for Charitable Statistics.

But fund-raising at the local level is crucial. The Salvation Army is among the most visible charities at work this month, with bell-ringers collecting money that is the lifeblood of the organization.

The coins and dollars collected by the Salvation Army represent a tiny fraction of charitable donations nationwide. Giving has increased every year since 2009 after dipping during the Great Recession. An estimated $335 billion was donated by all sources in 2013 — a 41 percent increase from what was raised by nonprofits 10 years earlier.

One of the most recognizable nonprofits is the American Red Cross — with $3.3 billion in annual expenses. But even a brand name does not guarantee transparency and good stewardship of donations.

Pro Publica last week debunked a Red Cross claim that 91 cents of every dollar it receives goes toward services. The investigative website found that the organization’s fund-raising expenses alone have been as high as 26 percent in recent years. That does not include money spent on management and other expenses.

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The Red Cross is one of more than 1.4 million tax-exempt organizations in the United States, according to the National Center for Charitable Statistics. Public charities account for 966,599 of nonprofits.

Those charities reported $1.65 trillion in total revenues in 2012, with 21 percent of the revenue coming from contributions, gifts, and grants.

Charitable giving is expected to rise for the fifth straight year in 2014, said Blackbaud’s MacLaughlin, who said about 18 percent of all contributions are made in December. The second-largest donation month is June, which marks the end of the fiscal year for many nonprofits.

Nonprofits and charities benefit from a spirit of giving that accompanies the holiday season, but they also see a spike in donations because of tax laws. To qualify for a tax deduction, contributions must be made by Dec. 31.

MacLaughlin said the last day of the year is easily the biggest day for online giving. The good news is many procrastinators do their homework on the best charities, as evidenced by the Web traffic on Charity Navigator’s site.

‘‘We actually see a huge spike in traffic on our website in the last few hours of the year,’’ Charity Navigator’s Miniutti said. ‘‘People are definitely waiting until the last moment.’’

Here are some tips for donating, from the Ohio Attorney General’s Office:

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■ ■  Verify the organization’s tax-exempt status with the IRS. The IRS’s Exempt Organizations Select Check can be used to verify whether an organization has a valid 501(c)(3) or other tax-exempt designation.

■ ■  View the organization’s IRS Form 990 through GuideStar, www.guidestar.org.

Donors should be skeptical of:

■ ■ ■  Organizations that sound similar to other better-known organizations.

■ ■  Refusal to provide written information.

■ ■  Requests for checks made payable to a person instead of a charity.