A recent story on Bloomberg.com highlights some pretty ridiculous charity fraud. Their investigation finds many cases where telemarketers, in this story the company InfoCision, are hired by a charity to raise money for a cause. The people donating are assured by people who pretend to be volunteers that the majority of the money is going directly to the charity but in reality over 80% of it (in some cases it looks like over 100% of it) goes to pay the telemarketers. Charities raising money in this manner range from medical charities such as The American Cancer Society, March of Dimes, the Diabetes Associate to political groups like Citizens United.
The charities are doing this in order to identify donors and volunteers that they can later on contact directly for support without giving the telemarketers a cut. But the initial cut isn't just from money raised directly by telemarketers, it's also taken from money raised by the volunteers recruited by telemarketers. And in the meantime donors are often told that over 70% of their money is going to the charity.
It’s an InfoCision filing with North Carolina that reveals that the Diabetes Association got just 22 percent of the money raised nationally by volunteers recruited by the telemarketer in 2011. That figure isn’t found in any public filing with the IRS.
So far, only Ohio has looked into this fraud and they settled with InfoCision for a nominal fee. This strategy of defrauding donors in order to find those willing to donate might work for charities in the medium run, but systematically defrauding new donors and lying to volunteers could impact their brand in the long run.
Hopefully people who decide they want to donate will learn how to give well instead of funding telemarketers who disrupt everyone's dinner time. In the meantime, there is always the Do Not Call registry (which the founders of InfoCision lobbied against) - and if a friend asks for a donation for their favorite big name charity you'll want to check and see who recruited them to act as a fundraiser.