Americans who were moved to fight for racial justice after George Floyd’s killing by police donated millions of dollars to the wrong Black Lives Matter foundation — a cautionary tale for anyone who gives money to charity.
Donors tried to send an estimated $4.35 million to a California-based nonprofit called the Black Lives Matter Foundation, BuzzFeed News reported, but it has no connection with the Black Lives Matter social justice movement. Most of the money didn’t end up at the Black Lives Matter Foundation, because officials at companies involved in raising the cash realized the mistake and froze the funding.
The incident shines a light on the growing role that third-party companies play in collecting and distributing the roughly $300 billion that individual Americans give to charity every year. It’s also a reminder that it pays to do your own research about any organization you want to give money to, especially if you’re donating through online fundraising platforms or employee-matching programs.
“This unfortunate scenario demonstrates the importance of donor diligence,” said Yael Fuchs, president of the National Association of State Charity Officials. She added, “Many online platforms only require that entities raising money prove that they have 501(c)(3) tax exempt status, but having (c)(3) status does not mean that the organization is legitimate or well run.”
Before you click on that donate button, here’s how to avoid sending your money to the wrong group.
What happened: How money got donated to the wrong Black Lives Matter group
Donors sent money to the Black Lives Matter Foundation through employee-matching donation programs at their jobs and through third-party fundraising platforms including GoFundMe and the PayPal Giving Fund. This happened because the foundation showed up when users searched those platforms for “Black Lives Matter.”
But as its founder explained to BuzzFeed, despite the similar names, the Black Lives Matter Foundation has no affiliation with the Black Lives Matter social justice movement founded in 2013 by three community organizers. (The movement is not a tax-exempt nonprofit, so it accepts donations through a fiscal sponsor called Thousand Currents.)
Employees at Apple AAPL, +0.37%, Google GOOG, +0.51%, Microsoft MSFT, -0.11% and Dropbox DBX, -0.43% tried to send donations to the Black Lives Matter Foundation through gift-matching programs run by Benevity, a company that manages employee giving and other social responsibility functions for companies, including MarketWatch’s parent company, News Corp NWSA, +1.93%.
None of the money those employees donated to the Black Lives Matter Foundation actually ended up with the foundation, according to Apple, Google, and Microsoft. (Dropbox did not respond to a request for comment.) All told, employees at about 200 of Benevity’s 650 client companies donated to the Black Lives Matter Foundation through its platform, said Benevity founder and executive chair, Bryan de Lottinville.
“ ‘This unfortunate scenario demonstrates the importance of donor diligence.’ ”
After discovering that donors were sending money to a group that wasn’t affiliated with the Black Lives Matter movement, and after further investigation revealed that the foundation was not in good standing with state authorities in California, where it is based, Benevity did not release any of the donations to the foundation, de Lottinville told MarketWatch. (Benevity has since “deactivated” the foundation on its platform and added a note to its profile explaining that the foundation is not related to the movement.)
Other donations to the Black Lives Matter Foundation were made by individuals who gave money to fundraisers on GoFundMe. Users launched 180 campaigns that raised some $350,000 for the Black Lives Matter Foundation, a GoFundMe spokesman said. GoFundMe listed the foundation on its platform because it was in a database operated by its partner, the PayPal PYPL, -0.18% Giving Fund. GoFundMe and PayPal are working to redirect the donations, spokespeople for the companies said.
Watch out for sound-alike names
There have been attempts to trademark the phrase “Black Lives Matter,” but no one owns it, which means it can end up in the hands of people who aren’t affiliated with the official group, a decentralized global movement with 22 chapters across the country.
The Black Lives Matter Foundation doesn’t appear to have been intentionally deceiving anyone. The foundation was established as a legitimate nonprofit by a Black man who told BuzzFeed his wife’s ex-husband was allegedly killed by the police. The founder also noted that his goals differ from the movement’s goals. His group’s mission is to unify the police and the community, while the movement advocates for defunding the police. (The foundation’s founder could not be reached for comment.)
“ ‘We understand the desire to run a movement in an innovative, non-hierarchical way, but this does leave the door open for fraudsters or other opportunists to claim popular names.’ ”
In the corporate world, one company wouldn’t be able to incorporate using another’s name, de Lottinville noted. But social movements — like MeToo, for example — often have no defined ownership.
“Many social justice organizations choose not to incorporate or otherwise adopt more traditional leadership structures,” said Fuchs, who is also co-chief of the New York State Office of the Attorney General’s charities bureau enforcement section. “We understand the desire to run a movement in an innovative, non-hierarchical way, but this does leave the door open for fraudsters or other opportunists to claim popular names and may limit protections that are available to the legitimate entity.”
Scammers often use sound-alike names to get donors to open their wallets. Dozens of fake charities were busted in 2018 after using names similar to legitimate groups helping military veterans. Similar frauds have happened with cancer charities.
One tip for steering clear of name confusion: Find out a charity’s EIN (employer identification number) before you donate. No two charities have the same one, and donors can use the number to verify whether a charity is legit.
Is the charity is in good standing with the IRS and state authorities?
If you want your donation to be tax deductible, the group you’re giving to has to be a registered 501(c)(3) nonprofit with the IRS. You can check the IRS website to make sure a nonprofit is in good standing. But donors should also check with authorities in the state where the charity is based. Most state attorneys general have easily searchable databases where donors can check a charity’s status. If you don’t know who your state charity regulator is, you can find it on the National Association of State Charity Officials site.
If donors to the Black Lives Matter Foundation had typed its name into the California Attorney General’s charity verification tool, they would have seen that state authorities had issued a cease and desist letter to the foundation because it had not registered with the attorney general’s office, yet was soliciting donations, said Tania Ibanez, senior assistant attorney general in charge of the charitable trust section of the California Attorney General’s Office.
There is pending legislation in the California State Assembly that would require third-party platforms like GoFundMe, PayPal, and Benevity to vet the status of charities in California before listing them on their platforms, Ibanez noted.
Look at the charity’s own website before you donate
When donors come across a charity on a third-party fundraising platform or on a friend’s social media feed, where it’s common for people to ask for donations in lieu of birthday presents, it’s easy to quickly click donate, especially when it’s a cause that’s been in the news lately.
Third-party fundraising platforms like Benevity, GoFundMe or PayPal Giving Fund typically have blurbs describing the charities that are listed on their sites. But before deciding whether to donate, donors should hit pause and visit the charity’s own website. (The Black Lives Matter Foundation, for example, doesn’t have its own website.)
“My general counsel would be to slow down and take time to look at a website — and the mission statement in particular — and, if possible, check the list of donors on the website,” said Phil Buchanan, president of the Center for Effective Philanthropy and author of “Giving Done Right: Effective Philanthropy and Making Every Dollar Count.” A charity’s website should clearly explain its mission and accomplishments. You can also look to see who is on the group’s board of directors. “Make sure it all makes sense,” Buchanan said.
Check a charity’s ratings
After you check out a charity’s website yourself, also check its rating on sites such as BBB Wise Giving Alliance, Candid (formerly Guidestar), CharityNavigator, CharityWatch, Givewell, or GreatNonprofits.
“ ‘Slow down and take time to look at a website — and the mission statement in particular — and if possible check the list of donors on the website.’ ”
However, even rating sites don’t always give a complete picture. The Black Lives Matter Foundation was listed on CharityNavigator, for example. because it was a registered 501(c)(3) organization, but the foundation had no rating, a CharityNavigator spokesman noted. CharityNavigator has now updated the entry with a “moderate concern” advisory.
There’s no national database of complaints against charities. But donors can do a little digging by Googling the group’s name with words like “fraud,” “lawsuits,” or “complaints” to see if any news stories come up. Don’t forget to click past the first page of results.
Ask the organization what it will do with your money
A nonprofit should be able to say what it does with donations. If it can’t, that’s a red flag.
“The nonprofit should also provide visibility into how the nonprofit operates,” said Kevin Scally, spokesman for Charity Navigator. “Are they an advocacy organization? Do they provide direct services? Do donations fund research? Legitimate organizations should make the answer to these questions very clear.”
Donors can see details of how an organization spends money — including salaries for executive directors — on Form 990s, which all nonprofits are required to file. Legitimate 501(c)(3) charities should file a Form 990 with the Internal Revenue Service annually, Scally noted. “If they have not done so, for example, if the organization was something recently formed and you are having difficulty finding information on it, err on the side of caution,” he said.
You don’t have direct control over your money
Third-party platforms make donating to charities easier than ever. They function as online directories where people can quickly look up causes they’re interested in supporting. They’re fast and convenient, and help get exposure for charities that may not have big marketing budgets.
But because third-party platforms are essentially middlemen between donors and their money, there are caveats. Some of these platforms charge nonprofits fees to appear on their sites. Platforms have been known to go out of business, leaving donations undistributed to charities. Sometimes there’s a delay between when a donor makes a donation and the nonprofit receives that money.
Generally when donors give money to a charity through these platforms, their donation doesn’t go directly to the charity. Typically it first goes to a 501(c)(3) nonprofit that’s run by the platform, which then gives the money to the charity.
That loss of control comes with pros and cons. The buffer between donor and charity worked well in this case, said Benevity’s de Lottinville, because it prevented money from ending up with the wrong group. Benevity only lists charities that are in good standing with the IRS, and before it distributes funds to charities, it does another round of vetting.
During that round, Benevity discovered the California cease and desist letter, de Lottinville said, and also realized that the Black Lives Matter Foundation wasn’t affiliated with the movement. “It’s unfortunate, but this is exactly what we’re set up to do, is help protect our corporate client and our donors,” he told MarketWatch.
Likewise, GoFundMe donors are protected by a guarantee that their money will go to the intended recipients and allows for refunds in some cases. Donors to the PayPal Giving Fund are advised that if their donation can’t be sent to their chosen charity, PayPal will “reassign” the funds and “whenever possible will consult with you on the reassignment.”
He said he doesn’t know exactly how much money Benevity has helped raise for racial-justice groups in the past month, but estimated that it’s “probably in the $100 million range.”
The roughly $4 million that donors tried to send to the Black Lives Matter Foundation through Benevity “sounds like a big number,” de Lottinville said, “but in the context of the total giving through the platform to these issues, it was actually relatively small.”