Now that the “giving season” is upon us, we want to remind everyone that not all actions stem from goodwill.  In the nonprofit sector, we witness everyday individuals generously contributing to our charitable causes, inspired by the desire to give back to their communities. Sadly, this goodwill can also make individuals and organizations more vulnerable to fraud. Scams run during the final months of the year that defraud both those donating and the charities they support are an insidious problem. Fraudulent “nonprofits” take advantage of people’s generosity, diverting funds away from legitimate nonprofits that strive to make a positive difference. Furthermore, some individuals and companies engage in pay-back schemes, using dubious tactics to redirect funds that were intended for charitable purposes into their profit-driven ventures.

In the final months of the year, donations to charitable nonprofits typically surge. Most studies show that approximately 30% of annual giving happens in December alone, with many people making their contributions before year-end for tax purposes. Sadly, this uptick in donations makes the season an attractive target for fraudsters. Whether through fake charities, misleading campaigns, or deceptive donations, criminals prey on people’s willingness to help others.

The consequences of charitable fraud are not just financial but emotional. Donors feel betrayed when they learn that their contributions have been misused, often hindering future charitable giving. Worse, the real beneficiaries—people and communities who rely on legitimate nonprofits—lose out as fraudulent organizations siphon off vital funds that could have supported essential programs.

How Fraudsters Operate

Fraudulent organizations often use high-pressure tactics to take advantage of people’s generosity. Some common schemes include:

  1. Impersonating Known Charities: Fraudsters frequently set up fake websites or create social media profiles and phishing scams that mimic reputable and beloved nonprofits. They may use similar names or logos to confuse potential donors, making it difficult to determine whether the organization is legitimate.
  2. Pay-back schemes: Some individuals or companies will contact a nonprofit with a donation but require the organization to buy something from a particular company. These fraudsters will often appear unsolicited and claim they are giving the nonprofit a donation (from a DAF or a company-controlled foundation) but require a purchase from the company they favor. These schemes can be hard to detect at first but become more obvious when pressure is exerted to buy goods (office supplies, wine for galas, etc.) for exactly or nearly the amount donated.
  3. Unregistered or Non-Transparent Organizations: Many scams involve organizations that are not officially registered as charities/foundations or those that fail to provide clear financial transparency. Without access to financial reports or a clear mission statement, donors cannot assess how their contributions will be used. We highly encourage organizations to register through groups like CANDID, which is free for nonprofits with annual revenue under one million dollars.

How to Protect Your Nonprofit

While the risks of charitable fraud are real, there are steps you can take to ensure your contributions go to reputable causes:

  1. Adopt a gift acceptance policy: There are some kinds of gifts (think old cars, outdated computers, or gifts with too many strings attached, as just three examples) that your nonprofit simply may not want to – or should not – accept. Some gifts may result in more hassle and expense than benefit to the organization. A donation or gift acceptance policy will help manage the expectations of donors. You can find several examples here.
  2. Avoid High-Pressure Tactics: Be wary of outreach to your nonprofit telling you that they need to process something immediately, need to have access to any of your portals or passwords, or that requires you to engage in the purchase of a specific good or service with their donation. If you feel rushed or uncertain, take the time to verify the donor, foundation or company before committing.
  3. Use Secure Payment Methods: Avoid receiving donations through cash or wire transfers where possible. Use credit card processing software or secure online payment platforms. These offer methods of fraud protection and a record of the transaction.
  4. Trust Your Instincts: If something seems too good to be true or feels off about a donor’s approach, trust your instincts. It’s better to double-check than to risk becoming entangled in a scam.

Stay alert to the increasing risk of fraud during your year-end fundraising efforts. Although scams can be quite elaborate, there are straightforward measures you can implement to protect your nonprofit. During this giving season, let’s ensure that your valuable contributions are not taken advantage of by opportunists looking to profit personally.

In an effort to help you with your year-end fundraising, NAO is working to produce a PSA that you can use to raise funds and spur generosity in your community. Be on the lookout for the release soon.

Good luck with your year-end fundraising!

Jim White,
NAO’s Executive Director