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Beware Of Charity Fraud

Charity Word CloudBefore making your next donation to your favorite charity you might want to do some research. Do you really know to whom you’re donating? Do you know the charity’s stated mission? How much of your donation goes toward achieving the charity’s mission? How much of your donation goes toward “overhead” (officer compensation – other than toward the charity’s mission)?

The following press release, published online by the Federal Trade Commission (“FTC”), highlights the importance of getting answers to these questions and learning how to avoid becoming a victim of charity fraud:

The Federal Trade Commission, All 50 States And D.C. Charged Four Cancer Charities With Bilking Over $187 Million From Consumers.

The Complaint Alleges Defendants Falsely Claimed Donations Would Help Pay For Pain Medication, Hospice Care & Other Services; But Spent Donations on Cars, Trips, Sports Tickets, & Professional Fundraisers.

The defendants told donors their money would help cancer patients, including children and women suffering from breast cancer, but the overwhelming majority of donations benefitted only the perpetrators, their families and friends, and fundraisers. This is one of the largest actions brought to date by enforcers against charity fraud.

According to the complaint, the defendants used telemarketing calls, direct mail, websites, and materials distributed by the Combined Federal Campaign, which raises money from federal employees for non-profit organizations, to portray themselves as legitimate charities with substantial programs. In fact, the complaint alleges that these claims were deceptive and that the charities “operated as personal fiefdoms characterized by rampant nepotism, flagrant conflicts of interest, and excessive insider compensation, with none of the financial and governance controls that any bona fide charity would have adopted.

How could this have been avoided? Kiplinger provides the following tips that if followed can help avoid falling prey to scams similar to the cancer charities case previously noted.

Hang up on telemarketers. The cancer charities charged with fraud by the FTC used telemarketing calls – as well as direct mail and Web sites – to solicit donations. You should decline any requests to give over the phone, says Leonie Giles, a senior program analyst for Charity Navigator, which evaluates and rates charities. 

Don’t wait for charities to come to you. Browse charities that have been evaluated by Charity Navigator by category – such as education or human services – to identify groups you want to support.

Research before you give. The FTC charges against the four cancer charities shows that just because an organization claims to do good doesn’t mean it actually does. Begin your research with third-party evaluations and ratings at sites such as the Better Business Bureau’s Wise Giving Alliance, Charity Navigator and Charity Watch, which examine charities’ finances, governance and effectiveness.

Never send cash. The FTC recommends making donations by check or credit card for security and tax purposes.

In conclusion, what this blog is saying is BE CAREFUL and ASK lots of questions. Unfortunately, there are dastardly people out there who make a living off those with a kind and giving heart.

Do you have the support you need to manage your small business bookkeeping? Schedule a 30-minute appointment to speak with a local small business adviser.

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