Let us review some important definitions:
By: Pam ~
- Donation – an act or instance of presenting something (time, money, gift) to an organization or cause
- Charity – generous actions or donations to aid the poor, ill or helpless
- Scam – a confidence game or other fraudulent scheme, especially for making a profit, a swindle
With that as a beginning point, let us look at our perceptions and realistic expectations.
We are presented daily with ways to part with our cash. Some we have information on, others not. The homeless on the street corner, the red kettles at holiday times, continuous mailings and emails soliciting for money. We know how much our heart strings are pulled, which lessons to teach children for giving to the poor and needy, and the question of “am I being generous enough?”
Then we have the cultural and generational impacts to deal with. Do my parents know not to respond to online or mail solicitations? Are we practicing “planned giving” so we can budget this activity? Are we enabling a drug habit rather than a food or shelter option? Are we donating to an entity due from family history, peer pressure, or cultural pressure? Why exactly am I giving? A “feel good” moment that I can give to?
- Why do we give, or why not?
- What do we know about who or what we are giving to?
- How do I know my donation is actually going to public services, health research, supplies or direct care? How do I know my donation is not just going for the higher overhead of an organization?
- There is a difference between a local event and a non-profit or charitable activity. The local event is most likely representing a human interest outreach of which we hold an interest in. However, a charitable act, if using money, should give us a clear understanding of where our resources are going or how they’ll be used.
Now, let’s look at the new and evolving world of nonprofits. It is not how we remember it!
Non Profit – (Also referred to as a 501(c)3, IRS designation). In the past, a non-profit or charity appeared to be for the same purposes. Maybe for a time it was. The game has changed and there are new players on the field. A nonprofit is defined as “an organization not established for the purpose of making a profit, not entered into for money”. Given that definition, as an accountant, I see that some legitimate non-profits do want to make money, use up grant funds, and continue to appeal for support. However sometimes not in the same way or for the same purpose they solicit. For-profits are outright trying to make a profit to allow them to expand, pay shareholders and pay debt. You know that going in. Nonprofits, for the most part, do try to make a profit, it’s how they use that profit that makes a difference.
Nonprofits must either use the excess contributions to increase their export to the community it serves, or use it in-house to attract personnel, benefits, professional funders and such. There is nothing wrong with this, unless that is not why you are giving.
The Secretary of State is usually the governing entity to set up and monitor the compliance of the original mission statement and funding process. Some states have published an annual pamphlet that showed, for each nonprofit registered, annual income and expenses, and would detail out the items of specific interest. Such as, what is the change of fundraising activity, and then view the amount of resources that go directly out to services and supplies of the community. I found this to be a very good monitor of how resources were being managed. If you have a passion or interest in a charity or non-profit in your state, it is worth doing some research.
Charities are often perceived as services such as the Red Cross, Salvation Army, Union Gospel Missions, etc. Their use of funds and services to the public are often grass roots and visible. Input equals output. They find board members, usually in the community, for these non-paid positions, but their business acumen and passion is needed. The Secretary of State also governs charities.
A charity usually is a nonprofit. A nonprofit is not always a charity. Either nonprofit or charity, beware of scams and frauds!
Scams and frauds– This is an incredible rising activity. Most likely because it appeals to our heartstrings for several reasons. I will define one just to get you thinking.
Affinity fraud –is a form of investment fraud in which the fraudster preys upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly, or professional groups. The fraudsters who promote affinity frauds frequently are – or successfully pretend to be – members of the group. This type perpetrates on people who are already members, or want to be members. It can guise as a large-scale project, one that will absolutely give contributors their name on a stone, on a plaque, on a wall, etc. or so the claims go. This is so strong for our elderly who are both trusting and believing. We are not talking pot- lucks here. Life savings, a portion of their meager monthly check, etc. This affinity outreach can come in many forms and places.
These frauds involve exploitation of the trust and friendship that exist in groups of people who have something in common. Because of the tight-knit structure of many groups, it can be difficult for regulators or law enforcement officials to detect an affinity fraud.
On a side note, years ago when I was gaining knowledge on what to look for, I read an article in which it described a scammer who would come to a recent widow/widower homes. He would scour the obituaries, find a name and location and present a bible that was inscribed with the initials or name of the recently deceased. He/she would tell the spouse that the deceased had ordered that bible for the spouse shortly before death. The bereaved widow/widower would claim the book as a last gesture from the newly departed and pay ridiculous claim fees. FURTHER, I read how the obits were being followed by scamsters to follow widows/widowers and offer home services, professional services, inventory management (for the IRS, of course). Anything to penetrate the belongings, banks and such of a vulnerable adult. That one got to me!