CanadaHelps and Capital One did a survey of Canadians about charity fraud which shows that the public’s concern about being defrauded is up considerably. This is part of an initiative by CanadaHelps and Capital One to highlight dangers of charity fraud as part of Fraud Awareness Month. Charities should be concerned about the results and their potential impact on donations and confidence in the sector. I was interviewed by Global TV and by the Vancouver Sun on the issue. While fraud has gone down considerably over the last couple of years, media coverage of some cases has resulted in heightened concern about the issue.
The links are below:
Global TV (under Consumer SOS and the piece is entitled “Charity Fraud”)
Fraud fears make B.C. residents less likely to give to charities by Gillian Shaw.
Asking Canadians whether they think charity fraud is up is not going to much of indication of whether it is in fact up but largely an indication of what the public is hearing from the media. One woman, who was not a registered charity, but faked cancer and took up to $20,000 is probably about half the coverage. I think that fraud is a big problem, but not the type that people think it is where an honest donor is duped . Currently, the registered charity sector has revenue of $182 billion dollars - that includes universities, hospitals, international development, social services, religious charities etc. The biggest charity problem currently is abusive donation tax shelters where a person “invests” a $1000 and through a complicated scheme and receives a $5000 receipt. In 2006, it was a $1.3 billion dollar problem. By 2009, it was down considerably to $285 million because CRA was and is aggressively pursuing the promoters and participants and denying all deduction claims and imposing hefty penalties plus interest. Therefore, with the biggest problem (which involves about 70 willing charities out of 85,000) there is a substantial decline. The next biggest problem is what is called receipting fraud - which is when someone just buys a receipt from a tax preparer or someone else and submits the receipt. CRA has been aggressively going after these schemes and a number of people have gone to jail over their involvement. CRA also denies all of these deductions on people’s personal returns. Because of the underground nature of this problem it is not as easily quantified but I have no reason to believe it is getting worse. The key takeaway from this whole issue is that most of the time people are “defrauded” they are willing participants (perhaps naïve but definitely greedy) and they are trying to pay less taxes, which hurts all of us who have to pay more taxes or we receive less government services.
Here is a blurb from CRA on avoiding charity fraud:
“How can I donate wisely and avoid fraud? Confirm that the organization is a Canadian registered charity or a qualified donee.
If you would like an official donation receipt, remember that donations have to be made to Canadian registered charities or other qualified donees in order to claim a tax credit. To confirm that an organization is a Canadian registered charity, go to the CRA Charities Listings.
Get to know the charity.
Start by visiting the charity’s Web site to learn about its activities and how it’s managed. You can also review its financial information and activities by looking at its Registered Charity Information Return on the Charities Listings. One of the best ways to learn about a charity is to volunteer.
Beware of donation schemes that promise you returns greater than your donation.
The CRA strongly advises that you not participate in donation schemes or illegal tax filings.
Learn to recognize the signs of fraud.
Start by testing your knowledge by visiting the ABCs of Fraud and review our list of common Warning sign of fraudulent activities.
Write cheques payable to the charity, not an individual, or make sure that your online payments are secure.
Refuse to donate if there is inappropriate pressure to give immediately, or if there are signs of fraud.
Put a stop to fraud!
You can report suspected fraud to the Canadian Anti-Fraud Centre (formerly known as PhoneBusters), at 1-888-495-8501.”
Canadians should continue to be generous with charities who do a lot of great work in our communities and around the world. I will be helping the Charity Law Information Program launch a website this month for average Canadians encouraging to donate to good charities and avoid the fraud and ridiculous schemes.
Here is the press release by CanadaHelps and Capital One
Number of Canadians Concerned about Charity Fraud Up Considerably
CanadaHelps and Capital One Canada launch the second annual charity fraud awareness quiz with $20,000 grand prize
TORONTO, Feb. 24 /CNW/ - Canadians are generous donors, but two-thirds (65%) of them are worried about fraudulent charities, which is up considerably from a survey done in November 2009 (51%). These beliefs, coupled with the difficulty in recovering their lost donation, ultimately results in more than half of Canadians (53%) stating they are less likely to give to charities because of concerns about fraud.
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 and instead rely on the reputation of the charity, and/or, past personal experience with the charity. The survey also found that just over half of Canadians (52%) say they are not confident they would know where to turn to in the event their donation did not go to a legitimate cause.
“What concerns us most is the growing number of Canadians who are worried about these crimes,” said Owen Charters, CEO of CanadaHelps. “In educating Canadians to understand the warning signs of these scams, we hope that the well-earned trust in legitimate charities will remain high and Canadians’ eagerness to donate will continue to grow.”
Today’s survey also found that up to 22% of Canadians say they prefer to donate online - an 8 point climb from a similar study conducted in November 2009. In contrast the number of Canadians who say they prefer to donate by cheque is down 7 points over the same time period (from 32% to 25%). Younger Canadians appear to be a driving force behind this change - nearly a third of Canadians aged 18-34 (31%) say online donations are their preferred method.
“With more and more Canadians preferring to donate online, it is increasingly important for credit card users to understand what to look for to ensure they are donating through a legitimate and secure website,” said Laurel Ostfield, spokesperson, Capital One Canada. “We know that awareness is key in helping Canadians protect themselves from fraud. By partnering with CanadaHelps on this campaign, we hope to educate as many Canadians as possible so they are empowered to make safe, charitable donations.”
To educate the public about charity fraud, Capital One Canada and CanadaHelps are teaming up during Fraud Prevention Month for the second annual Charity Fraud Awareness Quiz. This quiz will help participants identify the signs of charity fraud to hopefully avoid these malicious schemes.
The online Charity Fraud Awareness Quiz is designed to inform Canadians about the risk of charity fraud and how to prevent it. Accessible at http://www.canadahelps.org, every participant who completes the quiz will be eligible to enter into a draw to win a $20,000 grand prize donation, or one of $1,000 weekly donations from Capital One, to be made to the winner’s charity of choice. The Charity Fraud Awareness Quiz runs from March 1-31, 2011.
Capital One and CanadaHelps offer the following charity fraud prevention tips:
- Make sure the charity is registered with the Canada Revenue Agency
(CRA) and provides you with their charitable registration number.
CanadaHelps.org only lists charities registered with the CRA.
- Ask to see a charity’s financial statements. These should be readily
available to anyone who asks and give you a sense of how the charity
spends their money.
- Understand the impact the charity has and what difference they make in
the community. Charities should be able to give you clear outcomes of
the programs or services they provide.
- Research the causes you want to support and how much of your budget
you want to donate to charity. You will feel less pressured to give
when solicited if you have already planned your giving.
- Avoid any charity that pressures you into making a donation or isn’t
open to sharing more information about their organization.
Additional Survey Results
- 77% of Canadians made a charitable donation in the past 12 months with
women being more charitable (81%) than men (72%)
- Over one-quarter (28%) of people report they are solicited for
charitable donations at least weekly, with 45% saying they get
solicited more often in the event of a natural disaster
- In the wake of a natural disaster, the majority of Canadians (61%)
report an increased concern over the possibility of charity fraud
- While only 5% of Canadians overall prefer to donate via door-to-door
solicitation, a surprising 22% of Atlantic Canadians prefer this
method of solicitation
- In terms of deciding who to trust, respondents said the most important
factor is a charity’s reputation (53%) followed by its media
coverage/advertising (31%) and being asked to donate by a friend or
About the survey
From February 2nd to 3rd, Angus Reid Public Opinion conducted an online survey among 1,008 randomly selected Canadian adults who are Angus Reid Forum panelists. The margin of error-which measures sampling variability-is +/- 3.1%, 19 times out of 20. The results have been statistically weighted according to the most current education, age, gender and region Census data to ensure a sample representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.
About the Charity Fraud Awareness Quiz
No purchase necessary. Each person who completes the online quiz on charity fraud at http://www.canadahelps.org and provides the name of their preferred charity is automatically given one entry. Organizations must be federally registered charities with the Canadian Revenue Agency. Contest begins at 9:00:00 a.m. ET on March 1, 2011 and closes at 9:00:00 p.m. ET on March 31, 2011. Full contest details at http://www.canadahelps.org. Skill testing question required. Four prizes of a $1,000 donation and one grand prize of a $20,000 donation available to be won. Not open to residents of the Territories.
About Capital One
Located in Toronto, Ontario, Capital One has offered Canadian consumers a range of competitive MasterCard credit cards since 1996, when the company first introduced the Platinum MasterCard in Canada. Capital One Canada is a division of Capital One Bank, a subsidiary of Capital One Financial Corporation of McLean, Virginia (NYSE: COF).
CanadaHelps is an online donations website where donors can give safely and securely to all charities in Canada that are registered with the Canada Revenue Agency. The mission of CanadaHelps is to engage Canadians in the charitable sector and provide accessible and affordable online technology to both donors and charities to promote - and ultimately increase - charitable giving in Canada.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.