Legitimate charity or scam? Donors should do their homework

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It can be difficult to know which charities are legitimate and which ones are frauds.

A man who raised more than $187 million dollars for “charity” but spent most of it on himself and his family has those who work at legitimate nonprofits shaking their heads.

A lawsuit, filed in May by the Federal Trade Commission, called four groups organized by or affiliated with The Cancer Fund of America and James T. Reynolds, Sr., “sham charities” that constituted one of the largest charity fraud cases in history. Those involved included family, friends and some members of Reynolds’ LDS congregation in Tennessee, according to government officials.

For many this case serves as a reminder that it can be difficult to know which organizations to trust. Most Utahns are familiar with what state officials dub “affinity fraud,” when people use friendship or church affiliation to build trust in order to then ask for money — either for “charitable” or “investment” purposes. Those who donate or invest later find their money was not used for the purposes promised.

Two local nonprofit directors say there are ways to determine whether money donated will be used appropriately, what to look for in a charitable organization and why it’s important to donate wisely.

“The public is skeptical and rightly so,” said Kate Parkinson, a BYU graduate and director of Kaiizen Project Kenya: The Asande House Orphanage, a nonprofit organization dedicated to providing food and other necessities to orphans at the The Asande House Orphange in Kenya. It can be difficult to convince donors that a charity has a legitimate operation.

“It’s tricky; unless people know you they’re still going to be skeptical,” Parkinson said.

Parkinson explained that most donations come from acquaintances or as a result of word-of-mouth recommendations, including those made via social media.

“Something that makes Project Kenya so unique is that it is a grassroots organization that is small and run by volunteers. This makes it possible for those who sponsor the children to know exactly where their money is going,” Parkinson said.

She explained that knowing the money is directly linked to food and education makes people more excited and willing to give.

Parkinson acknowledged that large charities help a lot of good causes but said it can be difficult to know exactly where donations are going and whether they really make a difference.

“We have pages explaining exactly where the money will go when it is donated,” Parkinson said. The Project Kenya website explains what the organization is, how it started, and it includes anecdotes about the children.

Project Kenya is also transparent in how it allocates the budget, she said, adding that detailed record-keeping means if someone donates to a specific cause, that money goes exactly to that cause.

Parkinson acknowledges that people aren’t as trusting in general because of past fraudulent activities by other nonprofits. “Do your research, and make sure the money really will go to the cause,” Parkinson said.

Brent Crane, another BYU alumnus, is the executive director of the Utah Food and Care Coalition, a nonprofit dedicated to fighting poverty in Utah. He said there are two reasons why it is important for donors to give to an organization, as opposed to an individual.

First, “our tax system incentivizes giving to charities,” Crane said. “The nonprofit sector can help alleviate some of the demands that we normally shift to government.”

The Utah Food and Care Coalition was started to feed the hungry. However, over the years its mission has expanded to services such as hygiene, shower and laundry services, haircuts, shelter, Internet access and more.

Second, “there is safety in giving to a charity,” Crane said. People tend to be cautious when giving to an individual, but giving to a charity that reaches out to individuals tends to feel more safe. Before donating, Crane recommends visiting an organization’s website and, if possible, visiting in person to see how the organization functions.

He also recommends talking to those affiliated with the organization to find out why they got involved with the charity.

Crane explained that in the state of Utah, nonprofits are required to have a Charitable Solicitations Permit. In order to obtain a permit, the nonprofit is required to undergo an audit.

The state Department of Commerce is pursues charities that misuse funds.

“Legal recourse depends on the criminal offense and would be prosecuted by our Division of Consumer Protection’s law enforcement partner,” said Jennifer Bolton, a spokesperson for the Utah Department of Commerce.

In addition to pursuing fraudulent charities, the Division of Consumer Protection website offers several resources for those considering donating to a charity.

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