Charity Fraud is on the rise
Many people would like to give more to charity; giving to a worthy cause or a person in need is among the noblest of deeds. However, rampant charity fraud and corruption among non-profit organizations make it difficult to know who or what organization is worth giving to.
Americans are charitable people
According to MSNBC, around $291 billion was donated to charity in 2010. Though it was 6 percent less than charitable donations in 2007, it was still a 4 percent rise over 2009. The bulk of it, $211.1 billion, was by individuals.
13 percent of charity revenue goes to charity fraud
Fraud and embezzlement scandals have emerged among charities and nonprofits. Fraud, according to the New York Times, was estimated in a 2008 study to have cost U.S. charities about $40 billion in 2006. The study, by the Association of Certified Fraud Examiners, also estimated roughly 13 percent of all charities’ revenues are lost to fraud per year.
Backhanded balance sheets
The study also found that 95 percent of the fraud was “loss of cash” and most of it was due to invoice fraud. Charity fraud most often involves a bill being over-inflated and once it’s paid, the perpetrator pockets the proceeds. Most of the time, the fraud is internal. In essence, a charity is most likely to be defrauded by its own accounting staff.
However, the 2010 version of that same survey, according to The Chronicle of Philanthropy, estimated losses due to fraud at 9.6 percent, so the number of incidents may be declining.
Do a background check before you give
In another type of charity fraud, a group of scam artists pose as a charitable organization precisely because they know people will give money. Natural disaster relief, cancer scams, police and firefighter causes and “Supporting the Troops” are popular targets.
According to the Huffington Post, the American Institute of Philanthropy found in its annual survey this year that about half of the 39 charitable organizations devoted to veterans causes spent more on “operating expenses” than on anything related to helping veterans.
Natural disasters create the need for money for disaster relief. Scam artists then swoop like vultures on fresh roadkill. In March, according to WKYC, an NBC affiliate in Cleveland, Ohio, the FBI issued warning of Japan earthquake relief scams. The FBI and the Better Business Bureau also noticed a growing number of Mississippi flood relief scams in May, according to Daily Finance.
Check out all soliciting companies
According to the Federal Trade Commission, always ask for more information from and check out any charitable organization asking for a donation. Be wary of charities related to firefighters, police or military personnel that aren’t well known and seem very new. The same goes with disaster charities.