Less than a month ago the Federal Trade Commission (FTC) – in conjunction with law enforcement in all 50 states – announced its intention to crack down on fraudulent veteran’s charities that swindle consumers by falsely promising their donations will help veterans and service members.
This nationwide action, dubbed “Donate with Honor,” is certainly necessary and, many non-profit executives would argue, long overdue. One sham charity, Help the Vets, fleeced individuals and corporations of $11 million over three years. Help the Vets is facing pending legal action and is one of the charities that helped spur federal officials to take action.
The FTC and law enforcement are urging prospective donors to any charity to research the charity first; and only then consider donating.
When prospective donors do their research, they will quickly ascertain whether a charity is registered to solicit donations. Currently, 40 states and the District of Columbia require non-profits to register for solicitation. Online fundraising, in particular, has many nuances; in 14 states, there are specific statutes related to online fundraising.
While some non-profits have ignored requirement to register their fundraising efforts, more and more charities are unwilling to risk flaunting the law. Executive directors, CFOs, and development officers recognize that donors are becoming increasingly savvy in tracking an organization’s balance sheet and its compliance with federal regulations like non-profit charity registration.
“Donate with Honor,” while specifically targeting the abuses of sham veteran’s charities, indicates a harbinger of things to come for non-veterans-related charities proclaiming to support groups or individuals in other industries and categories.
As more states face financial issues like bankruptcy (see: Illinois), state legislatures will be more likely to penalize those charities that are fundraising without proper registration. Even more worrisome: the financial penalties for failing to comply can be severe – both for the charity and its board members. Some legislatures may view the ability to recover lost compliance revenue as a way to ease some of the fiscal burden facing their states.
Right now, sham veteran’s charities are in the crosshairs of the FTC – and rightly so. It doesn’t stop there – charities across all affinity groups should be equally conscious of ensuring that they comply with charitable solicitation registration.