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Look before leaping to give, experts say
FireDonations.com was just a month old when terrorists attacked Sept. 11.
The fledgling online charity had raised less than $5,000 before the attack. Since then, the tiny non-profit based in Tacoma, Wash., has collected $6 million--money that poured in from thousands of donors, many of whom knew nothing of the organization's short history.
In fact, FireDonations.com is so new it has not yet been granted tax-exempt status, which would allow donors to deduct their contributions from their income taxes. Officials at the charity and the Internal Revenue Service say they are confident the issue will be resolved and that deductions will be allowed retroactively.
But the situation illustrates potential pitfalls as Americans open their hearts and pocketbooks.
Millions have responded to the suffering and destruction they saw on television in a monetary leap of faith, often taken with limited information but a desire to act quickly. By midweek, Americans had donated an estimated $757 million to the relief effort, according to the Chronicle of Philanthropy.
Most of the money has gone to large, established charities with long track records. But those who watch the non-profit industry warn that there are no guarantees when making a donation, even with New York authorities saying they will closely monitor contributions.
Experts say it is often difficult to predict exactly who will receive the money after a tragedy. And along the way, charities vary widely in the portions they divert for the costs of fundraising, salaries and overhead.
"It's like a black box. You put your money in and out comes benefits--you hope," said Janet Greenlee, associate professor of accounting at the University of Dayton.
In the aftermath of the Sept. 11 attacks, an estimated 140 agencies have raised money for relief efforts, including established charities and new non-profits that sprang up overnight.
New groups lack records
In most cases financial records for charitable organizations are filed with state or federal authorities once a year, so donors must rely on information that is months old. The newest organizations have no records for potential contributors to check, tax filings with the government or reports by watchdog groups
The Better Business Bureau's Wise Giving Alliance, a national organization that follows non-profit agencies, lists 30 major organizations collecting money for Sept. 11 relief.
Of those, only 14 have been evaluated by the alliance, and most of them are well known: American Red Cross Disaster Relief Fund, America's Second Harvest Development, AmeriCares Foundation, Catholic Charities Public Affairs and Development, City Harvest, Federation of Protestant Welfare Agencies, Goodwill Industries, New York Blood Center, NYC Police Foundation Inc., Safe Horizon, Salvation Army of Greater New York, Salvation Army, Save the Children and United Way of New York City.
Others are either too new or too obscure for the alliance to rate. Some, such as the Cantor Fitzgerald Relief Fund and the Carr Futures World Trade Center Memorial Fund, were created after the tragedy last month.
Some donors have been doing their homework. Officials at guidestar.org, an online database with tax returns for more than 850,000 U.S. non-profits, said the Web site's average number of hits more than doubled the day after the attacks. Other consumer Web sites, such as the Wise Giving Alliance's give.org, also experienced increases.
The American Institute of Philanthropy, a charity watchdog group, has given many of the largest organizations collecting money for relief efforts--including the American Red Cross, Catholic Relief Services and the Salvation Army--A ratings, meaning they spend a high proportion of their money on program services.
Records show that in fiscal year 2000, the Red Cross and the United Way of New York City, which is helping administer the September 11th Fund, each spent about 83 percent of their income on programs and services, and the Salvation Army, 76 percent--numbers considered solid by watchdog groups.
AmeriCares Foundation Inc., which in fiscal year 2000 spent 94 percent of money raised on services, is one of several agencies vowing to give away 100 percent of what it raises for Sept. 11 relief efforts. To date, AmeriCares has raised $4 million.
Other organizations, like FireDonations.com, also say victims will get the vast majority of money raised, but because they have no history, their success is more difficult to predict.
"We're new," said Trever Shaw of FireDonations.com. "We're not sure how it's going to be distributed, but we know it will go to the families."
Confusion over FireDonations.com's tax-exempt status began in the days after the Sept. 11 attacks. The agency was established by Shaw's brother last summer as a way to help firefighting organizations raise money with minimal administrative costs. The agency filed paperwork as a non-profit corporation but did not file for tax-exempt status.
Donations trickled in at first, but after the attacks organizers e-mailed operators of the Web portal Yahoo!, saying FireDonations.com would accept donations for fallen firefighters. Yahoo! put a link to the non-profit on its front page. Within hours, FireDonations.com received so much traffic the Web site crashed.
Days later, officials at the Washington secretary of state's office saw the Web site was advertising itself as tax deductible and instructed principals to remove the claim.
"It was our misunderstanding of the process," said Steve Careaga, FireDonations.com's executive director. "Everything's squared away now."
Shaw said the $6 million either will be given to the International Association of Fire Fighters for distribution or will be taken directly to New York, where directors from FireDonations.com will cut checks to fallen firefighters' families. He expects administrative costs to equal less than 10 percent of the total.
Giving the money to the International Association of Fire Fighters would not necessarily clarify the picture. The IAFF does have an established fund, but it never has handled money like the $5 million it raised in the two weeks after Sept. 11. In fiscal 2000 the IAFF Disaster Relief Fund raised $32,780, according to tax records, spending $7,000 "to aid the recovery of 14 firefighters who suffered during large natural disasters."
Even the largest and best regarded non-profits have drawn criticism for their handling of major disasters. After the San Francisco earthquake of 1990 and again after the Red River Valley floods of 1997, the Red Cross was criticized for holding on to money raised for those disasters. In both cases the agency reversed its decision and sought out more victims, spending the whole amount raised.
This time around, Red Cross officials have committed to spending all of the money they have received since Sept. 11--$277 million through Wednesday--on efforts specifically related to the terrorist attacks.
Daniel Borochoff, president of the American Institute of Philanthropy in Bethesda, Md., said donors should avoid contributing to phone solicitors, e-mailed requests and street corner collectors, and be wary of organizations without much history. Borochoff said donors should ask to see records and budgets for how the money will be spent.
"There is a history of money not always getting used for the purpose intended," he said. Although it appears donations are, on the whole, making it through to victims, Borochoff said donors should get as much information as they can.