Protecting Against Financial Fraud in Charitable Giving
Posted on Mar 26, 2014 4:35pm PDT
Americans are very generous when it comes to charitable giving. In addition,
lower earners give more proportionately than higher earners. Perhaps this
is because lower earners understand how easily a family can slip into
financial crisis through the loss of a job or medical expenses. The thought
of "that could be me" makes people very sympathetic to helping
others in need, and many cheerfully give their hard-earned money to try
to help people. People of faith tend to be generous and faithful givers,
and Americans, in general, are quick to help whenever tragedy or devastation
strikes anywhere in the world.
Unfortunately, we have to be very careful about how we make charitable
contributions in order to protect our hearts and our dollars from financial fraud.
The Key Takeaways
- Americans are very generous when it comes to charitable giving.
- We have to be careful in order to protect our contributions from financial fraud.
Recognize and Avoid Fraud
The elderly are especially susceptible to fraud, and their finances often
need to be monitored to protect them. But many of us are taken advantage
of simply because we don't take the time to investigate where we donate money.
Before you give to a charity, find out how much of your money will actually
go to the people you want to help. All too often, a high percentage of
contributions goes to fundraising or "program costs" which are
loosely defined. Larger charities often have high overhead. Even reputable
ones often have trouble getting food, goods and services to those who
need them, as funds are often misused by leaders and administrators who
line their own pockets. Celebrity fundraisers and websites that raise
huge amounts of money are often plagued with high expenses and rarely
end up providing much relief to those for whom the money was raised.
Whenever a tragedy occurs, like the typhoon in the Philippines, scam websites
pop up. Many of these will have a web address that is very similar to
a legitimate one, and it is easy to be deceived.
Most of us are familiar now with the "Nigerian prince" emails,
but many people lost a lot of money to them before they became widely
recognized. There are many variations, with scam artists sometimes looking
for donations, but more often offering large sums of money; what they
are really seeking is your bank account and/or social security number.
If you don't recognize the sender, don't open an attachment; it
may contain a virus that will infect your computer and allow access to
your information.
Most of these scam emails are easy to spot because the English is stilted
and they often have a foreign origin. Variations include the English woman
with cancer who has no one to leave her husband's vast fortune to;
the missionary who needs funds sent by wire transfer; even an American
soldier who needs to transfer his funds to someone while he is serving
abroad. Scam artists have also been known to hack email accounts of personal
friends, claiming the friend is in dire need of immediate funds.
Actions to Consider
- Skip the telephone and door-to-door solicitations. Telemarketers often
take up to 90% of donations and it's next to impossible to verify
who is at your door and what their real motive is.
- Don't give to a homeless person. Many of these are outright scams.
Others use the money to buy drugs or alcohol, so you simply become an
enabler. Give instead to local groups that help them.
- Give directly to local charitable organizations that help your community.
- Give to groups that you can monitor and observe the results.
- Participate with your local charities. Get to know the people who run them
so you will know if they are honest and can be trusted with your donations.
- When disasters strike, many churches ask their members for donations, which
are then sent to churches located in the affected areas. These local churches
are often able to help those in need more quickly and more directly than
larger organizations. Church members are often invited to go to the affected
area to physically help with the distributions and work on recovery efforts.
-
Research charities online. One such site is
www.charitynavigators.org. Their mission is to "vet" charities and analyze how much of
the donations are spent on fundraising and overhead and how much actually
goes to the cause. It isn't perfect because it relies on information
provided to them by the charities and not every charity is listed, but
it is a start.
- If values-based giving is important to you and you want to give large amounts,
work with a trust attorney to structure a charitable trust with a layer
of protection against fraud and financial risk.
- If you are concerned that an elderly relative might be taken advantage
of, you can require that every check above a certain amount have two signatures
or approval from a trustee or relative.