Giving Tuesday: How to Give Back Thoughtfully This Holiday Season

Giving Tuesday is upon us.

Charitable giving surges around the holidays and in the wake of natural disasters, wars, displacements, and other significant domestic and global events. As Giving Tuesday approaches and there are so many causes people may be interested in contributing to, careful consideration of organizations is critical before donating your money.  Giving Tuesday is an annual, international movement for charitable giving that takes place on November 29th. Giving Tuesday raised approximately USD 2.7 billion in 2021 in the US alone, according to Philanthropy News Digest. It is likely this amount will be even higher this year – for example, a recent survey conducted by Fidelity Charitable found that due to current humanitarian crises, such as the Russian invasion of Ukraine and Hurricane Ian, 59 percent of their donors planned to donate more in 2022 than previous years. And unfortunately,  giving always comes with the potential for fraud that can have negative impacts on the individual donating as well as the legitimate charitable cause the money was intended to help . The Internal Revenue Service (IRS) reported that charity fraud is on the rise and will steal an estimated 5 percent of revenue from legitimate charity organizations in 2022. As such, the need for donors to conduct due diligence on intended recipients has become all the more crucial.

Charities Losing Money to Fraud

Charities reported losses of approximately USD 8.6 million between April 2020 to March 2021 due to fraud, according to Accountancy Daily. As a result, the intended help from many donors resulted in a waste of resources, criminal funding, and  failure to make a difference for the intended recipients. Importantly,  a non-profit being granted tax-exempt status does not guarantee it is legitimate. For example, the IRS 2014 fast-track application program denied only one in 2,400 charities for tax-exempt status, according to The New York State Society of CPAs. It was under this program that the IRS approved 76 fraudulent non-profits in 2020 for one conman alone, according to The New York Times. The perpetrator, Ian Hosang, was able to scam donors out of USD 150,000 under the guise of “The American Cancer Society for Children, Inc.” It is necessary to be aware of the potential for fraud and ultimately, the responsibility of conducting effective due diligence on organizations claiming to be charities comes down to individual donors.

Humanitarian Efforts and Disaster Relief

While charity fraud can involve a range of different causes from cancer to disabled veterans to homelessness, recent trends in charity fraud have involved humanitarian issues and disaster relief. 2022 has seen numerous natural disasters and global events that have displaced individuals and left them in dire need of help. The Federal Emergency Management Association (FEMA) has declared over 400 Major Disaster Declarations in the US in 2022 so far, and international turmoil, such as the Russian invasion of Ukraine and the protests in Iran, have inspired people to donate to charitable organizations purporting to help the affected individuals and families. However, the IRS warns that fraudsters take full advantage of donors during tumultuous times. Furthermore, digital transactions and cryptocurrency have introduced a new, opportunistic world for charity fraud. There was a 569 percent increase in cybercriminals registering domains for “charities” related to the COVID-19 pandemic in 2020.The Russia-Ukraine war in particular has been used to defraud donors after it sparked a rise in charitable digital transactions in February 2022. That same month, Ukraine’s national fraud reporting center received 196 fake requests to fundraise for victims of the war (LexisNexis). The BBC reported in May 2022 that a website claiming to have raised USD 100,000 for Ukrainian citizens under the name ‘Save Life Direct’ was shut down after investigators discovered that the site was run by a man based in Abuja, Nigeria, who could show no proof as to the legitimacy of the organization. The internet provides a faster, more efficient way for donors to lend assistance to those in need, but fraudsters can exploit the sense of urgency and convenience to make donors neglect appropriate attention to due diligence.

Recommendations

With new opportunities arising for scammers to take advantage of and the IRS’s recent struggles with distinguishing legitimate from illegitimate charitable organizations, donors may begin to feel as if their donation is too risky, but there are resources available for donors to mitigate risks. Nonprofits such as CharityWatch and CharityNavigator work to evaluate charitable organizations in the US. The Milken Institute released a due diligence questionnaire in 2020 that guides donors through the assessment process for charitable organizations. The FBI also released a list of tips to help people avoid charity fraud, which was echoed by Florida Attorney General Ashley Moody during a press release regarding disaster relief during Hurricane Ian:

• Consider giving to a well-established charity before being solicited.
• Research a charity before donating. Search the organization’s name at CharityNavigator.org for further vetting.
• Use a credit card for the extra protections provided.
• Avoid aggressive solicitors and urgent deadlines to give.
• Do not click on any suspicious links in emails or text messages soliciting money or financial information, even if it seems like it is for a good cause.
• Pay close attention to email addresses and website URLs—fraudulent sites will have slight changes from the legitimate sites.

Due diligence does not just protect the donor; it protects every legitimate charity from losing potential funds. Careful attention to where exactly your money is going is essential for ensuring  it reaches those in need.