Charity Scams and Frauds
"Charity"... even the word sound noble. The very
mention of the word brings out the best in us, softens the heart
and makes us consider our own condition in light of that of others
who are less fortunate. Yet there can be a dark side to some
charities and supposed charities - charity
Many people, including seniors
care deeply about other people and want to help in any way they
can. Where seniors are concerned, this often means that they
cannot participate with the charity in any physical way and yet
they have the ability to donate to charitable organizations to
help others who can do the work. Criminals often use these altruistic feelings to
line their own pockets while other people skim large amounts off
The charity opener
The mail and phone calls are often used in many scams seeking donations for everything from
cancer, to helping disabled veterans, to aiding injured animals, to feeding orphans in Africa, to lobbying Congress about Social Security. A
typical tactic is to take a current news event such as a natural disaster
or the 9/11 terrorist attacks and claim to be collecting to help
people that were affected.
The charity presentation
The mailer or caller describes the charity
giving examples of who they help and describing their condition or
problem in extensive and hear-rendering detail. This
in an attempt to soften you up and open your heart. In
many cases, the caller represents something awful that they are desperately
trying to prevent and making it sound like it is all up to you.
Where to charity funds go?
Most charities use the money they
receive in some portion, to provide the services that they
state. The questions you must ask are where does the money go,
in what amount, and what charity does it perform?
It may surprise you that some
charities are legal charitable organizations, yet as much as
100% of the funds they get are used for administrative
purposes. These organizations often hide this fact as they
know that the charitable donations they receive would come to an
abrupt halt if the facts were known.
To avoid being spotted, these
charities will talk about some fund that they have that has used a
few dollars in the past, but they don't tell you when or how
much. Their literature will talk extensively about something
they did in the past, perhaps drop big names of previous
commercial contributors, but leave out any reference to what,
when, or how much they do. They often create separate funds
with grandiose descriptions, but little money goes in or out of
When cornered with the facts,
these charities already have their justification for absorbing,
rather than disseminating these funds. One such common
tactic is to present itself as a body that provides "public
awareness". Another is that the organization
itself must hire outside companies to call and solicit
contributions. Some police benevolent funds operate this way
and as much as 90% of the contributions go to this outside
Non-profit, tax exempt charities
must typically file and then post their tax statements for public
inspection if the charity receives over $25,000 per year.
These tax filings must include information about their income and
where it went as well as how much their officers are
To find this information out, go
and you can download tax forms for most tax exempt charities that
operate in the United States, with the exception of
churches. You will have to sign up, but doing so is free. Check out your charities to see what they do and
where your money goes. If they don't have a tax form on file
and are not listed, you might consider whether or not the charity is
How to Avoid It
The best thing you can do before you give to any charity is to find out how much of the money you give goes to the charitable purpose, and how much goes to the cost of
fundraising and/or administration.
Look extensively at the tax forms
to make sure that you are giving to what you think you are giving
and to see if it is substantially beneficial.
Also look at the amount held in
cash or liquid assets at the end of the year. Some charities
receive a great deal of money but keep it tied up. There are
sometimes legitimate reasons for doing this such as for buying
property or to create a buffer if their income drops. This
is reasonable. But consider how much money goes out of the
organization and if this is not substantial, then those cash
reserves are likely being held to protect the jobs of those who
run the charity.
Some charity minded people develop their own annual charity-giving plan. They select charities after investigating them thoroughly. As part of the plan, they decide how much and to whom they will give each year and then say no thank you when other charities call or write during the balance of the year. This strategy allows the givers to know where their money is going and to avoid being drawn in by a phony emotional appeal.
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