Key questions to ask charities

Are nonprofit fundraising appeals regulated?

CharityWatch Executive Director Laurie Styron and other leaders of charity watchdogs caution that nonprofits’ excessive spending on fundraising has become a national problem, but they say government regulators can do little about it.

Fundraising appeals are considered a form of communication involving the dissemination of ideas and advocacy of causes. Although they are subject to some regulation, the Supreme Court has said the rules cannot impinge on free speech.

Do any government agencies regulate nonprofits?

Public charities have no government watchdog or oversight by the Securities and Exchange Commission. Loose IRS reporting rules leave much room for financial manipulation, Styron said.

States’ attorneys general and the Federal Trade Commission monitor the fundraising sector for fraud.

What private-sector organizations rate nonprofits?

Charity trackers include organizations such as the Better Business Bureau’s Wise Giving Alliance, GuideStar (now Candid) and Charity Navigator.

Charity Navigator is a nonprofit funded through donations. Other organizations that rate nonprofits, including Wise Giving Alliance and Candid, are funded by the industry itself, Styron said.

Some fund evaluations by charging the charities they rate annual fees to publicize their ratings, an inherent conflict of interest. Others offer only “robo-ratings” using unaudited charity tax form data that is republished without an analysis of its accuracy or completeness. The data can do more harm than good by giving donors a false sense of security that a charity has been vetted for financial efficiency or impact, when in reality, some charities are simply very good at manipulating their financial reporting, according to CharityWatch.