Your money: Love the celebrity? Double-check the charity

Thu Nov 15, 2012 11:51am EST

Lance Armstrong talks to the media at a news conference to kick off the Livestrong global cancer campaign in Australia at the Royal Adelaide Hospital January 19, 2009 before the Tour Down Under cycling event. REUTERS/Brandon Malone

Lance Armstrong talks to the media at a news conference to kick off the Livestrong global cancer campaign in Australia at the Royal Adelaide Hospital January 19, 2009 before the Tour Down Under cycling event.

Credit: Reuters/Brandon Malone

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(Reuters) - You don't have to spend much time listening to Angelina Jolie or Bono to know that celebrities can help raise awareness for charities. Just about anyone with the name recognition to make it into "People" magazine has used that power to promote a cause or two.

But the recent fall from grace of cyclist Lance Armstrong, who established the cancer-fighting Livestrong charity, highlights the risks of that approach. The charity that lives by fame can be hurt by it too. Armstrong recently cut all ties to the organization after he was stripped of his Tour de France titles amidst charges that he cheated.

Perhaps even more illustrative of just how risky celebrity tie-ins can be is the recent collapse of musician Wyclef Jean's Yele Haiti Foundation, which collected more than $16 million to aid victims of the 2010 earthquake that crushed the capital city of Port-Au-Prince and left hundreds of thousands homeless. Yele closed its doors in September in the face of questions about how it deployed some of its money.

"We typically warn donors that ... (a celebrity connection) ... is a good way to learn about organizations, but it isn't a seal of approval," says Sandra Miniutti, vice president of Charity Navigator, a service which evaluates nonprofits.

Not all charities with celebrity tie-ins have problems, and not all troubled charities have those famous figureheads. Livestrong is likely to live up to its name, even without Armstrong. The charity has reported that donations are up, not down, since the scandal broke, and that fewer than a dozen donors have asked for refunds.

Here are a few pointers for those who want to follow the lead of their favorite stars when they contribute:

-- You've got plenty of choices. The website LookToTheStars.org lists over 3,000 celebrities linked to over 1,880 charities, with everything from Rihanna's own Believe Foundation, which helps terminally ill children, to Daniel Craig's public donations to the Royal National Lifeboat Institution.

-- Dig deeper. Before making a donation, look up the charity of your choice on at least one of these sites: CharityNavigator.org; Guidestar.org, the Better Business Bureau's Wise Giving Alliance (bbb.org/us/charity); the American Institute of Philanthropy (Charitywatchdog.org) and GreatNonprofits.org.

A key item to consider in an organization's financials: How much money goes to the actual cause versus administrative overhead? Charity Navigator says at least 75 percent of a charity's funding should be spent on the do-good programs themselves.

-- Look beyond the finances. Not every organization that is involved in a specific cause will have the same focus. A cancer-related organization might target education or patient care or research, for example. "It's critical that donors really take the time to learn what the charity does so they don't get burned on the back end," Miniutti says. "Don't assume."

It's also worth noting what role celebrities play in the charity. When a famous person attaches her name to a well-known and regarded nonprofit, that's one thing. When the rock star establishes his own nonprofit, then you have to vet it with extra care as you would any new charity that doesn't already have a track record.

-- Ignore your phone. It is routine for charitable calls to come from professional telemarketing companies that could take a large percentage of the donation. "People still haven't gotten the message that they should just hang up," Miniutti says. "They should not donate over the phone." Phone solicitations also don't allow you the time to evaluate the organization, and make it more likely you end up giving to a group with a name that sounds familiar but isn't the one you had in mind.

-- Look for expertise. Even well-intentioned boosters can hurt a cause if they don't know how to run a charity, and a legitimate group may simply be ineffective if its leaders don't know how to run it. Check out the boards and executives who serve the charity you're considering and make sure they have experience in the nuts and bolts of philanthropy.

-- Avoid tricky approaches. The Better Business Bureau warns would-be donors to steer clear of charities that send pitches that look like invoices, or that exaggerate the financial need of their organization or its cause. Beware, too, of groups that substitute an emotional appeal from a star for the more detailed explanation of how they operate.

-- Give more to fewer causes. You can make your charitable giving more effective if you focus it. When you make larger donations to fewer groups, you cut down on the number of groups that will spend money continuing to market to you. And if you give larger amounts to smaller or local charities, you may have more influence on how they are deployed. Finally, you'll have fewer groups to research and more money to support those causes that mean the most to you - and to Justin Bieber.

(Corrects spelling in second paragraph to Livestrong)

(Follow us @ReutersMoney or here; editing by Linda Stern and Prudence Crowther)

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