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Charity fraud: Are you protected?

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March: the month that normally segues winter into spring. But did you know it's also Fraud Awareness Month?

The issue was brought into sharp focus this month with scammers using the March 11 earthquake in Japan to commit charity donation fraud. The RCMP even published an alert on its website to guide the public in ensuring organizations were legitimate and that donations were used for their intended purpose.

It?s critical, however, for organizations to be vigilant about the potential for charity fraud all year-round. And as Fraud Awareness Month will soon come to a close, it's the perfect time to take a hard look at measures that can help ensure one's reputation and brand are safeguarded in the months ahead.

Fighting the good fight

Kirstin Beardsley, communications manager for, reminds readers that her organization recently partnered with Capital One Canada and polling organization Angus Reid to conduct a poll about charity fraud in Canada.

The survey showed that 65% of Canadians are worried about fraudulent charities, up considerably from a survey done in November 2009 (51%). These beliefs, coupled with the difficulty in recovering their lost donation, ultimately results in 53% of Canadians stating they are less likely to give to charities because of concerns about fraud.

Beardsley said that one of the main takeaway lessons from the research was that a charity's reputation in the community is of the utmost importance.

"Charities need to actively manage their reputations. They should be explicit with stakeholders on how they spend their dollars and always have annual reports posted up to their websites. Additionally, they should be active in their communities in order to safeguard their image and let people know that fraud is not tolerated in their organizations," she said.

Another vital piece of information for charities is to make sure they are "deliberate" in how they protect their data. Whether it's donor lists, financial statements, or any sensitive document — be it hardcopy of softcopy — charities should tell their donors and stakeholders how they guard this info and what they do with it once they need to dispose of the information. In other words, it's all about how transparency protects a reputation.

On the question of how a charity can protect its reputation when fraudulent individuals seek to use its good name for nefarious purposes (i.e., door-to-door solicitation using fake logos which replicate a known or high-profile charity), Beardsley said that the sector is seeing an increase in frustration levels among donors.

"We have to make sure we solicit respectfully and are able to provide donors with any answers or proof of who we are," she said. "Charities need to make sure they're clear on how they solicit. If your charity does not do door-to-door [soliciting] as part of your fundraising, make that known. Search for your organization's name on the web and ensure there aren't any fake sites using your name. And if this does happen, charities should contact law enforcement immediately."

Beardsley said that even if a "good" charity gets caught up in a fraudulent situation not of its making, there is "a lot of goodwill" towards Canadian charities and that usually, the organization can make a recovery from a bad public relations hit if it exposes the scam.

Get with the Code

At Imagine Canada, Lindsey Vodarek, manager of communications and public policy echoes Beardsley's comments.

Speaking to what charities can do to protect themselves from fraud, she said there "isn't much one can do to prevent someone from using your image or brand. If they are going to commit fraud, they are going to commit fraud." That said, charities could make sure that their brand is trusted using a combination of transparency and accountability measures, "so that donors will not be duped by those impersonating a charity, or so it can be clearly demonstrated that a charity had no association with the fraudulent individual."

Vodarek suggested that one good way to demonstrate their accountability is by signing up to Imagine's existing Ethical Code, and soon through their larger Standards Initiative.

Though there aren't many reliable numbers on how much fraud occurs in the sector annually, she said, the CRA's website lists all those charities that were "revoked for cause".

According to Vodarek's breakdown of the CRA site, there were 292 cases of fraud in the sector over last 20 years. "However, those causes vary. It would take some looking at each case to determine whether it was fraud, a tax shelter, etc. All in all, fraud will remain an issue, but we are doing our best to stay out ahead of it, and to ensure donors know how to make an informed decision."

Tracking the fraudsters

The CRA itself tells CharityVillage® that it is always trying to educate sector organizations on how best to avoid fraud or looking like they may be perpetuating this activity.

A spokesperson for the agency said that while the Charities Directorate does not have a web page devoted specifically to the subject "Avoiding Fraud" designed specifically for charities, what it does have is "The Checklist for Charities on avoiding terrorist abuse [which] can be helpful for charities to prevent abuse in general, not only terrorist abuse."

Also, in a recent CRA newsletter (#33) the agency put out an article on "Improper receipting" and provided a list of "internal controls that charities can use to guard themselves against the inappropriate or unauthorized use of its official donation receipts."

Since 2007, the CRA has also run its "Project Trident" initiative. The agency describes it as an "enforcement project that helps protect the tax-base by prosecuting key players in fraudulent tax schemes and reassessing related tax returns. Project Trident targets three types of fraud: tax preparer fraud, charity related fraud, and, identity theft."

On the Project Trident website, the CRA provides a current snapshot of how effective it has been. To date, the agency's investigative activities in this area have resulted in 90 current ongoing investigations; $2,759,042 in fines meted out; and 568 months in mandatory jail time for those convicted.

But with more than 85,000 Canadian charities to police, the project and agency would seem to be woefully outnumbered.

Learn about fraud and be protected

Even though many Canadians are concerned about the possibility of fraud, the Angus Reid survey indicated that a large proportion (41%) say they do not take simple steps to check if a charity is registered, ask the solicitor for ID, or visit the charity's website before making a donation. They simply rely on the reputation of the charity and/or past personal experience with the organization. The survey also found that 52% of Canadians say they are not confident they would know where to turn in the event their donation did not go to a legitimate cause.

Speaking to this point the CRA noted a handy webpage that provides a checklist for donors (and it would be wise for charities to view this document as well) to ensure they are as protected from charity fraud as is possible.

It offers four main suggestions to potential donors to help them suss out fraud:

  1. Get to know the charity you want to donate to. Perhaps by volunteering first.
  2. Beware of donation schemes that promise you returns greater than your donation.
  3. Learn to recognize the signs of fraud. E.g., calls that thank you for a donation you don't remember making; organizations that use names similar to popular; and overly friendly canvassers who ask personal questions, among others.
  4. Take action and write cheques payable to the charity only, not an individual, or make sure that your online payments are secure; and refuse to donate if there is inappropriate pressure to give immediately, or if there are signs of fraud.

Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at


Please note: While we ensure that all links and e-mail addresses are accurate at their publishing date, the quick-changing nature of the web means that some links to other web sites and e-mail addresses may no longer be accurate.

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