Charity fraud is a devious crime that victimizes both donors and the people and organizations who rely on donations to get by. Such fraud is more common than many people may know, and the people perpetrating the fraud may surprise prospective donors as well.
In 2015, the Federal Trade Commission and attorneys general in all 50 states and the District of Columbia filed a lawsuit against four cancer charities they accused of scamming consumers out of more than $187 million. The lawsuit alleged the groups used sophisticated, deceptive accounting schemes to defraud donors and make their charities appear larger and more efficient than they actually were. So while it's easy to assume all perpetrators of charity fraud are shady criminals acting alone on the other end of the telephone, donors should know that charity fraud can be perpetrated by sophisticated businessmen as well.
Donors concerned about charity fraud can protect themselves and the money they have earmarked for charitable donations in various ways.
- Request written information. Sophisticated fraud operations are successful because they make concerted efforts to appear as legitimate as possible. So a willingness to provide written information and brochures does not necessarily mean a charity is lawful. However, an organization's unwillingness or inability to produce such information is a telltale sign of a fraudulent operation or one that may be unorganized and unable to meet its mission. Steer clear of such organizations.
- Request and/or order tax returns. In the United States, copies of certain returns filed with the Internal Revenue Service by charities and nonprofits are available for purchase from the IRS. Many reputable organizations may share their tax returns with prospective donors, but donors who want to exercise due diligence can order the documents themselves.
- Check a charity's rating. Since 2001, Charity Navigator has examined tens of thousands of nonprofit financial documents in an effort to develop an unbiased, objective and numbers-based rating system for charitable organizations. Prospective Donors can access these ratings free of charge as they look to make more informed and intelligent giving decisions and avoid being victimized by fraudulent or dishonest organizations.
- Never feel pressured to donate. Solicitors or fundraisers of reputable organizations are discouraged from pressuring prospective donors for donations. Telephone or in-person solicitors who employ pressure tactics when seeking donations are very likely affiliated with fraudulent or incompetent organizations.
Charity fraud victimizes donors and the people and organizations they seek to assist. Prospective donors should take time to properly vet charities before making their donations.
