Tips and Advice Before Giving Money to Tsunami Effort

Jan. 6, 2004 — -- There has been an outpouring of relief funds for victims of the Dec. 26 tsunami. In fact, according to the United Nations, countries from around the globe have already pledged $3 billion to $4 billion in aid -- equating to about $400 per person for more than 5 million affected by the disaster.

Here in the United States, individuals have given hundreds of millions of dollars to charitable relief organizations with the number continuing to rise. Here are some important tips to follow before you make a contribution:

Go to www.usafreedomcorps.gov on the Internet.

The Web is an excellent resource to find an organization right for you. However, be warned that a Web address is not a guarantee of legitimacy. In fact, immediately after the tsunami disaster, a Canadian college student posted the domain tsunamirelief.org on eBay with a starting bid of $50,000. As a means to provide a safe and straightforward way to find legitimate organizations on the Web, the federal government, specifically the U.S. Agency for International Development and the U.S. Department of Health, set up this site with links to agencies dedicated to the relief efforts. There are 77 charities listed on the site.

With literally thousands of relief organizations worldwide, searching for one that meets your specific criteria can be daunting. You should seek out charities that spend at least 65 percent of their total expenses on program activities with the remainder going toward fund-raising and administrative expenses. That said, here are some good choices:

The American Red Cross: This organization has been around since 1881, and with 36,000 employees and 1 million volunteers, no agency is better equipped to handle disasters of massive scale. According to Charity Navigator, a nonprofit organization that provides information on charities, the American Red Cross spends 91 percent of its donations on programs. As of date, the American Red Cross has received more than $92 million in tsunami donations.

United States Fund for the United Nations Children's Fund (UNICEF): UNICEF is strictly devoted to helping children in need and crisis. It has more than 7,000 people in 157 countries working for this cause. UNICEF gives specific details of what your donation will mean for victims of the tsunami disaster. For example, a donation of $5 can provide an emergency health kit for one person for three months; $87 can provide a basic family water kit for 10 households, with detergent, soap, wash basin, towels, bucket and water purification tablets; and $188 would provide enough money for education supplies for 80 children. According to Charity Navigator, the U.S. Fund for UNICEF allocates 88 percent of its revenues toward programs.

Oxfam America: Founded in 1970, Oxfam America employs more than 170 individuals and seeks to create lasting solutions to poverty, hunger and social injustice. According to Charity Navigator, 76.9 percent of this organization's overall expenses go toward program expenses.

Save the Children: Founded in 1962, Save the Children employs more than 3,300 people and aims to create real and lasting change in the lives of children in need. According to Charity Navigator, 90.9 percent of this organization's overall expenses go toward program expenses.

A Word of Caution

Some legitimate organizations have raised sufficient funds for their given efforts and are no longer earmarking donations for tsunami victims. For example, Doctors Without Borders has requested that people stop sending money for the South Asian tsunami victims. As an alternative, they are requesting that donors give to its general Emergency Relief Fund, which enables the organization's humanitarian work in more than 70 countries worldwide. This is the first time the organization has issued such a request.

More Tips

Pay with a check.

To make sure you get the biggest bang for your buck, consider writing a check directly to the organization instead of paying with a credit card. When you make a contribution with plastic, banks receive a transaction fee from the organization, which averages from 3 percent to 5 percent of the total contribution. Some British banks and credit card companies have agreed to waive charges on donations to charities raising money for the Asian tsunami disaster. Whether or not those in the United States will do the same remains to be seen.

Get the deduction.

A donation to a tsunami relief fund may entitle you to a tax deduction if you itemize your income taxes. The contributions for victims of the tragedy are tax deductible if they are qualified as tax-exempt under Section 501(c)(3) of the U.S. Internal Revenue Code. Only in cases where you donate directly to a foreign-based charity would you be unable to take a deduction.

Under previous rules, taxpayers were required to wait until next year's filing season (2005) to claim a tax deduction for tsunami-related gifts made after Dec. 31, 2004. However, Congress approved a tax break for donations to charities supporting Asian tsunami relief efforts, allowing taxpayers to claim contributions made through January against last year's taxes. The new bill would roll back the date for all cash donations made for tsunami disaster relief until Jan. 31, 2005, and would allow you to claim the deductions on your 2004 tax return. The bill easily passed both the U.S. House of Representatives and Senate and goes to President Bush for his signature.

Get a match.

Many companies will match an individual employee's charitable contributions. Most organizations vary on the amount they will match, so it is important you contact someone in your human resources department to determine if you have a matching program and the value of your respective match.

Auction an item.

AuctionDrop, an eBay auction store, is offering a promotion for people interested in auctioning goods and using the proceeds to benefit victims of the tsunami. If you bring in an item to be auctioned (such as consumer electronics, jewelry or video game consoles) to a United Parcel Service outlet, it will ship the item for free to AuctionDrop, which will then sell it on eBay and donate 100 percent of the net proceeds to CARE's disaster relief fund. This is an excellent way to get rid of an unwanted Christmas present, help others and get a deduction (for the value of the good sold) at the same time. According to AuctionDrop, all items that remain unsold will be donated to the Salvation Army to be sold in its thrift stores and used to help needy people in the United States.

Goods are no good.

All the major charitable organizations are asking for monetary donations instead of goods. Getting goods like blankets, old clothes and food to relief workers is a difficult task. Your gift of money does not require a pickup or shipment.

Beware of possible scams.

When disaster strikes, many individuals want to help those in need by giving donations to aid organizations. Unfortunately, scam artists recognize this altruism as an opportunity to make money by approaching unsuspecting people. As such, it is critically important to research the organization to which you are giving money as well as be wary of some red flags. Here are some simple steps to take to avoid being scammed:

Ignore solicitations: First and foremost, like legitimate solicitations for aid, unseemly requests can come in the form of e-mail, telephone or door-to-door contact. Therefore, be sure to request written material from the soliciting organization before agreeing to give money. Never reply back to an e-mail soliciting your help for tsunami victims if it asks you to send your bank information or Social Security number.

Take your time. Steer clear of any solicitor or organization that pressures you to make a quick decision about giving.

Confirm tax-deductible status. If you want your contribution to be tax-deductible, be sure to confirm the tax status of the aid organization, which is available on the Internal Revenue Service Web site, www.irs.gov. To claim the deduction, the organization must be classified as tax exempt under section 501(c)(3) of the Internal Revenue Code.

Provide a secure contribution: If you decide to give online via credit card, exercise caution and make sure you are giving through a secure site. Alternatively, consider making donations via check or money order payable to a specific organization. Do not give cash.

Ask for a report and receipt. After you make a contribution, you are entitled to a report from the agency detailing how your money was spent. Ask for this. It is a record for your taxes and a report card to determine if you would contribute in the future. Additionally, you need to obtain a receipt for any contribution over $250 for your tax records.

Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is "Good Morning America's" personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributed to this report.