The best defense against unscrupulous charitable organizations is to contribute only after checking with major charity watchdog groups such as the National Charities Information Bureau or the Philanthropic Advisory Service of the Council of Better Business Bureaus.
Both try to rate charities according to a variety of standards, including fund-raising practices, governing habits, public accountability, a description of program activities, a list of solicitation materials and use of funds.
The NCIB can be reached at 19 Union Square West, 6th floor, New York, N.Y. 10003-3395, or by telephone at (212) 929-6300.
The CBBB is located at 1515 Wilson Blvd., Arlington, Va. 22209, and can be reached at 276-0100.
One problem in assessing the worth or honesty of a charity or its solicitor is the absence of strict accounting standards, according to the watchdog agencies.
The Supreme Court has ruled that high fund-raising costs cannot automatically be considered a measure of fraud. Nonetheless, the percentage of contributions that go to fund raising is one of the measures most watchdog agencies use to evaluate a charity.
Because of that, charities have an incentive to present their financial statements in the most attractive light, according to Larry Campbell, California's registrar of charitable trusts.
"I even have former comptrollers and financial officers with some of these charities admitting how the pressure is put on them to reduce the fund-raising cost allocations and increase the program allocations," he said. "We have 'creative accounting' that's not illegal, but it renders the financial reports meaningless."
The Financial Accounting Standards Board, which sets accounting standards for the profession, concluded that it could not develop an accounting formula that would work for all charities in all situations, said Ronald Bossio, the board's project manager.
The American Institute of Certified Public Accountants, an industry trade group, is trying to develop a workable rule. "It would not be a legal standard, but independent accountants could be called upon to justify departure from it," said Fred Gill, a technical manager at the institute.