Tag: charity

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Stopping Charity Fundraising Phone Scams: What Consumers Need to Know

This week, the Office of the Attorney General for the District of Columbia, along with the Federal Trade Commission (FTC) and 46 agencies from 38 states, shut down the operators of a massive and long-running charity fundraising phone scam. These scammers bombarded 67 million consumers with 1.3 billion deceptive fundraising calls (mostly illegal robocalls) and duped generous Americans into donating more than $100 million to charities that never delivered the services they promised.

Consumers received calls asking them to give to charities that supposedly supported homeless veterans, victims of house fires, breast cancer patients, or children with autism—but the fundraising companies making the calls knew that these organizations spent little or none of that money on the causes they claimed to support. Instead, the fundraising companies themselves kept as much as 90 cents out of every dollar they collected on behalf of the charities.

Under the terms of a settlement, which are now pending court approval, the remaining active group of companies behind this scam will be forced to shut down. The owners and senior managers of the fundraising companies will also be required to pay back hundreds of thousands of dollars they collected through the deceptive charitable solicitations, and funds will be directed to legitimate charities that support similar causes. Many of these individuals will be permanently barred from raising money for charity, telemarketing to sell goods or services, using robocalls in any form of telemarketing, using abusive calling practices, or making any misrepresentation about a product or service.

This group of scammers is being held accountable, but there are others out there. That’s why it’s important to donate wisely and make sure your donations to charity will make a difference.

Check out charities before you give
Here are things you can do to avoid scams and make sure charities you donate to are using your money the way you expect:
•Research a charity online through online independent sources like IRS Select Check, BBB Wise Giving Alliance, Charity Navigator, GuideStar, and the National Center for Charitable Statistics.
•Ask questions—a legitimate charity, or fundraising company calling on behalf of a legitimate charity, should be able to give you the organization’s official name, address, telephone number, mission, and information about how your charitable donation will be used.
•Search the charity’s name online with the words “scam” or “complaint.” See what other people say about it.

Warning signs—charities to avoid
Here are some warning signs that tell you that a charity may not be legitimate, and you should avoid donating to them:
•The charity makes vague sentimental claims and can’t tell you specifically how your donation will be used.
•The charity asks for your payment via a money order or cash. (Never donate using cash, gift card, or wire transfer. Use a credit card whenever possible.)
•The charity tries to rush you into donating immediately and offers to send a courier to collect your contribution.
•The organization uses a name that sounds very similar to another charity’s name. Scam artists often try to take advantage of names that sound or look like those of respected, legitimate charities, which is why it’s important to do some research.

If you see these warning signs or you’re just not sure about a charity, consider donating to another organization. There are many excellent organizations that will use your donations well.

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Minnesota Attorney General’s Office releases publication on charitable giving for those individuals who may be new to raising money for a cause they believe in.

What Individuals Need to Know When Raising Money for a Charitable Cause

https:///Consumer/Publications/RaisingMoney.asp

You Might Be a “Charity”—Yes, You!

Minnesotans are generous people during the best of times.  When faced with hardships like natural disasters, pandemics, or other emergencies, many step up that generosity even more by raising money to help people in need through giving platforms like GoFundMe, on social media, or through fundraising events.  You should know that raising money to help people comes with specific duties under the law that apply to everyone—not just nonprofits and charities.  They may even apply to you.

Some generous people raise money to help specific people facing hardships.  Raising money to benefit a specific individual, business, or family is not “charitable” under the law.  On the other hand, if you fundraise money or collect goods for a general charitable purpose to help the greater good—such as protective equipment for healthcare workers, food for families in need, or money to help communities rebuild and repair—that conduct comes with important duties and responsibilities under the law.

It is important to be aware of the important responsibilities that you have when others trust you with their charitable donations.  “Charitable” donations can be for a wide variety of causes, including social services, education, the public interest, or the arts.  You don’t need to be a 501(c)(3), a nonprofit, or other organization to be subject to charitable giving laws.  In fact, any person raising money in Minnesota for a charitable purpose can be a “charity” under the law.    This publication is intended to help you navigate the duties that come with fundraising for a charitable cause. 

What Laws Do I Need to Follow if I Fundraise for a Charitable Cause?

  • You must share specific information when you ask for charitable donations, such as where donations will go, whether the donations are tax deductible, and how donations will be used.  See Minn. Stat. § 309.556. 
  • It is important to be very clear what you will do with people’s money when you fundraise.  You cannot be misleading or deceptive when raising charitable funds.  Minn. Stat. § 309.55.
  • You must be very careful to use the money you fundraise for the exact purpose donors intended.  People who fundraise charitable funds have strict fiduciary duties to safeguard that money.  Minn. Stat. § 501B.41, subd. 6.  To fulfill these duties, you must, among other things, only spend money as the donor intended, and have procedures in place to make sure the money is used properly, as described further below.
  • At any time, the Minnesota Attorney General’s Office may request information like donation records, bank statements, and receipts to look into potential violations of these laws.  In addition, if you raise more than $25,000 and meet some other conditions, you may have to register and file specific paperwork with our Office.  See Guide to Minnesota’s Charities Laws. 
  • While the vast majority of people raising money for charity are careful to follow these laws, there can be consequences for those that do not.  The AGO can go to court to get a violator to stop the conduct and seek penalties up to $25,000 for each violation.  See Minn. Stat. §§ 309.57 subd. 1; 501B.41 subd. 7.  There may also be criminal or other penalties that are outside of the scope of this publication for people who misuse charitable donations.
  • You need to be aware of potential tax consequences that come with raising money.  This is outside the scope of this publication. Consult an attorney or accountant if you need help. 

What Steps Can I Take to Protect Charitable Funds?

  • Be honest, upfront, and specific with donors about how exactly their donations will be used.  Be transparent about any expenses, such as fees charged by a fundraising platform that might reduce the actual amount going toward the charitable purpose. 
  • Keep careful records of how much money you raise and where the money goes. Specifically, keep (1) bank statements, (2) receipts of donations, (3) receipts of how you spent the money, and copies of other records.  You should track and account for every single penny that comes in the door, and every single penny that you spend.
  • Consider setting up a separate bank account to safeguard the funds you raise for charity.  Avoid comingling charitable funds with your own money in your personal bank account. 
  • Create checks and balances to ensure the money safely gets to its destination.  For example, have more than one person in charge of receiving, recording, and depositing donations, and require multiple people to sign checks and approve the money you spend. 
  • Be especially careful with cash, because it is difficult to trace and easily lost.  It is best to have two people simultaneously count any cash donations. 
  • At the end of the fundraiser, update your donors about how their money was used.

Where Can I Learn More?

If you would like to learn more, the Minnesota Attorney General’s Office offers several resources, including Guide to Minnesota’s Charities Laws, Fiduciary Duties of Directors of Charitable Organizations, and Don’t Just Follow the Crowd on “Crowdfunding” Websites. You can find additional information on our website at www.ag.state.mn.us.