Fundraising fraud: How to make sure your money supports the right cause
With the rise of COVID-19 relief efforts and fundraising to support Black Lives Matter initiatives, consumer donations to nonprofits and fundraising initiatives are at an all time high.
But when you hear stories of major companies like Apple, Google, and Microsoft inadvertently committing millions of dollars to the Black Lives Matter Foundation, which is not actually affiliated with the Black Lives Matter movement, it’s understandable that consumers may also make donations to suspicious, or even, nefarious organizations.
With so many consumers willing to donate their money, people are even more susceptible to fraudulent charities or fake fundraing scams. As part of our series, Trust in the Age of Scamming we’re providing practical advice for verifying the legitimacy of a nonprofit or fundraiser, and how to avoid sending well-meaning funds to dishonest organizations.
Donate to registered nonprofits when possible and check their website for detailed information
When you’re exploring the legitimacy of a nonprofit organization, using watchdog or official government websites, such as the UK’s Charity Commission or Guidestar for US charities, is one of the best ways to verify that the nonprofit organization you are supporting is legitimate.
In most countries, nonprofits are required to register with the local tax authority as well, and sometimes the tax authorities will publish lists of these registered organizations.
Registered charities will often have their own websites that give more information. Some potential questions you should be able to find answers to on a nonprofit's website to help you verify legitimacy are:
- What is their mission? The organization should have a clear mission that specifically identifies the problems it is looking to solve. If the mission is extremely vague or nonexistent, this is suspicious.
- Does it give information about the initiatives they support? The website should contain detailed information about what causes they support and what projects or initiatives they are funding.
- How do they spend their money? Most organizations will publish detailed financial reports that accounts for all of their spending. If financial reporting isn’t available, look for success metrics around their initiatives such as how many projects they’ve completed or how many people they've helped. A website with no quantitative information should be approached with caution.
- Is your donation tax-deductible? If you live in a country that allows you to make tax-deductible donations, do additional research into how much of the donation is tax-deductible and verify this with your local tax authority.
Be extra cautious when using crowdfunding sites
Oftentimes there are very worthy causes looking to fundraise outside of the protection of a formal organization. These causes can range from natural disaster relief, to community improvement projects to family funeral expenses.
However, there have been bad actors that take advantage of consumer generosity. In order to avoid these fake fundraisers, ask yourself these questions before donating:
- Do I personally know anyone affiliated with this fundraiser? If so, reach out to the person for more information about the fundraising plans. If not, try to find some additional sources to verify the legitimacy of the fundraiser such as social media pages or local news stories.
- Has the organizer specified exactly how the funds will be used? Any crowdsourced fundraiser should specify what they money is needed for. For example, if a community is fundraising for the unexpected loss of a family member, the fundraising page should specify that it's helping cover funeral expenses, childcare, education, etc. The more detail, the better.
- Does the fundraising goal make sense? If someone is raising money to send a children's group on a field trip, they probably don’t need $100,000. Conversely, $500 is a meager amount for a large scale fundraising effort for disaster relief. If the fundraising goal looks suspicious, it’s worth investigating further.
- Is the money being donated to a larger or formal organization? If so, consider whether it makes more sense to donate directly to that organization.
Use secure payment methods
Most charities and nonprofits will have a secure way for you to donate funds directly on their website using either a credit card or authorized payments system such as PayPal. There is security in using these payment methods because you may have recourse if the nonprofit turns out to be fraudulent in some way.
Generally, consumers should avoid cash or upfront payment methods such as a money orders, wire transfers, pre-loaded cards or electronic currency. These methods offer almost no security against fraudulent activity, and are not standard practice for most nonprofits.
If you receive a call from a telemarketer asking you to donate to an organization, never give credit card or payment information over the phone. If you’re interested in the cause they are fundraising for, ask for a website or other verifiable source where you can investigate some of the questions listed above before donating funds securely. Be wary of telemarketers that are overly pushy or pressure you to make donations immediately over the phone.
Use reviews to further validate legitimacy and share you experience
Using the above methods can help you verify the legitimacy of an organization you want to donate to, and checking their Trustpilot profile page can be one additional step in confirming that the organization is trustworthy. Consumers often share their experiences with nonprofits in their reviews and can reveal information such as how they interact with their donors, how transparent their practices are, and what it's like to participate in any physical events or activities hosted by the organization.
If you have had an experience with a nonprofit organization that you think other consumers might be interested in, consider sharing your experience by leaving the organization a review on Trustpilot. Your feedback may help other consumers determine that the organization you review is one that is worthy of their donation, or you may help other consumers avoid making donations to a suspicious organization.