Charity fraud is the act of using deception to get money from people who believe they are making donations to charities. Often a person or a group of people will make material representations that they are a charity or part of a charity and ask prospective donors for contributions to the non-existent charity. Charity fraud not only includes fictitious charities but also deceitful business acts. Deceitful business acts include businesses accepting donations and not using the money for its intended purposes.
- On April 20, 1918, The New York Times published an article about a charity fraud committed by the Secretary of the Cripples’ Welfare Society, George W. Ryder. Ryder pleaded guilty to using mail fraud to use the donations for his personal gain.
- On November 13, 1992, The New York Times released an article about fraudulent solicitations supporting a cause. Often, beside the cash register in stores, a collection is taken for a charity or for people in need. Although there have been many store owners that legitimately donate the spare change to the specified charity, there are a few who act fraudulently. In this specific case, the small-change donations were being kept by the vendors. The article states that the vendors paid a $2 per month fee to use the charity's name.
Prevention in the United States of America
There are controls and laws governing charities and businesses that accept donations. The Internal Revenue Service (IRS) with the Better Business Bureau (BBB) has regulations that can be found on their websites.
The United States Federal Bureau of Investigation (FBI) provides online information about avoiding charity fraud, such as fraudulent schemes that emerge in the wake of natural disasters, claiming to be providing disaster relief. The Internet Crime Complaint Center maintains a list of guidelines to avoid charity fraud when making a donation.
It is advised that people should follow certain guidelines when they donate and that they should consult a list such as the one on the BBB's website. This list includes the participants in the BBB Wise Giving Alliance's National Charity Seal Program. Participants have met standards for charity accountability and may, for a fee, display the seal logo on their websites as well as any other printed documents.
Contrast with badge charity
Charity fraud is distinguished from badge charity in which the charity does exist, but an inordinate percentage the funds donated are absorbed by professional fundraisers and operating expenses of the charity rather than the causes described in solicitations.
- "Charity Fraud Pleads Guilty." The New York Times. 20 April 1918. Web. 3 March 2010.
- McFadden, Robert. "Small-Change Donations Going to Vendors, Not Charities, Abrams Charges." The New York Times. 12 11 1992. Web. 13 February 2010
- "Home". www.bbb.org.
- "Internet Crime Complaint Center (IC3) - Tips On Avoiding Fraudulent Charitable Contribution Schemes". www.ic3.gov.
- National Charity Seal Program Archived March 5, 2010, at the Wayback Machine
- US: U.S.(FTC.gov) information regarding charity fraud
- US: Charity Navigator's giving tips including the Top 10 Best Practices of Savvy Donors
- US: The American Institute of Philanthropy and the Better Business Bureau's Wise Giving Alliance can also be consulted.
- UK: use the Charity Commission to find out if the organisation you want to support is formally registered.
- Its Inquiry Reports list and give details on its latest investigations
- UK: Intelligent Giving gives an independent analysis of a charity's transparency for prospective donors(UK)
- Rumours about fraud and related activity are discussed in its Watchdog section
- Charity On Trial: What You Need To Know Before You Give by Doug White 1
- US: Life Cycle of an Exempt Organization
- US: Standards for Charity Accountability
- US: Haitian Earthquake Relief Fraud Alert
- US: National Charity Seal Program