Monday, May 25, 2015

Cancer Charities Fraud Fallout – Will it affect you?

Current news is bad news for online and small scale charitable giving programs.
When four cancer charities were charged with fraud, one of the disturbing facts published was that most of the actual money that was donated came from small donors, $20 or $30 at a time.

The total amount, as charged in the settlement was reported at more than $187 million. The published terms of repayment apportion repayments between the main defendants, but give no specific date for final payment. Consumers will likely not receive more than pennies on the dollar, since the proceeds of the scam have been spent.

Another disturbing fact was that although these charities (all tied to one family) had been under scrutiny for several years, their websites and fundraising activities were not shut down
Charity related fraud is one of the FTC's most often reported offenses. That puts all charities in a bad light.

There were indications that these charities weren't on the up and up, and donors who regularly decline telemarketing calls until they have vetted the charity in question through sites like Charity Navigator soon saw that something was amiss.

It's apparent from the amount of money in question that most people didn't bother to check them out at all.
The problem is that going forward, most people still aren't going to do that. They are simply going to say no to any and all fundraising calls.

There were red flags for those who did the research, particularly the amount of in-kind donations and fundraising costs, but most people aren't going to do that. It just isn't worth their time for a measly $20 or so.

Smaller nonprofits seeking to expand are going to bear the brunt of that public distrust. Larger organizations can withstand temporary revenue downturns but the little guys and startups can't. Given that very new charities depend mostly on individual donations, they may well be the real losers.

How can you counteract the bad press?

It goes without saying, or should, that you need to establish as much publicly available legitimacy information as you can.
  •          Have a well done and informative website in addition to social media accounts.
  •          Make your contact information easy to access, including a phone number.
  •          Have an IRS determination letter and corporate documents.
  •          Have good board and executive staff bios online
  •          Have unrelated board members with online profiles on the board of directors.
  •          Have audited financials on hand to back up your 990 filings.
  •          File long form 990's even if you qualify to use the e-postcard
  •          Keep detailed and accurate records of your donors.
  •          Limit your large-scale fundraising costs. Frankly, if you are only getting 15 cents on the dollar, they aren't worth your time anyway. That's only viable when you are talking about millions of dollars in donations.
  •          If you are truly new, have a business and strategic plan, complete with financial projections.
  •          Track your results and impact and be prepared to provide that documentation when asked. 
  •         Where possible, provide names of people or agencies that you partner with or who have received assistance from your charity.
  •         Register your charity with one of the ratings sites, like Charity Navigator or GuideStar. (Although they may not actually rate you, since rating criteria are often based on minimum revenue amounts, often over $1 million, just the fact that you proactively offered up your information helps interested donors make decisions.)

Eventually, the bad PR will fade, but it's going to remain important to avoid even the appearance of impropriety or mismanagement. You can do that by being as business-like and professional as possible. 

No comments:

Post a Comment