Where Does the Money Really Go?

I was sitting in one of my favorite watering holes recently and needed to use the cash machine which doubles as a redemption machine for the video slot machines.  I stood behind someone who was cashing in a ticket from one of the video gaming machines, and I noticed something that caught my eye.  The individual had some change coming to them as part of their winnings, and the machine “asked” if they wanted to donate the change to charity.  The options were “helping needy children” or “helping needy children and families.”  It didn’t mention the names of the organizations that would be recipients of the gambler’s largesse, and that concerned me.

When I sat back down at the bar after my transaction, I asked the bartender if she knew where that money was going to.  She had no idea and told me that it was the vendor that supplied the machines that was in charge of the donations.  I asked her to ask the vendor the next time he came in, because I really would like to know.

A couple years ago, I got a request to write some content for the website of a “nonprofit” organization in another state.  I called the individual who contacted me and asked for more information.  According to my contact, the “group” supports those who suffer from two completely unrelated diseases, and they solicit businesses and individuals for support.  He thought that my content could persuade more people to contribute.  But something didn’t feel right to me, so I politely asked for some time to do a little research and I would get back to him with a decision.  I thought it was prudent to look into who I would be helping, and I am glad that I made the effort.

The first thing I did was to check with Charity Navigator, Guidestar, and the the BBB Wise Giving Alliance, and I was surprised to find that none of those organizations had any information on the “organization.” I then used several different search engines to find any information I could.  After several different searches, I found some information about a group that had registered a nonprofit with that name, but the 501(C)(3) had been expired for several years.  I finally contacted the state where the group was located and found that it was not registered with the Secretary of State’s office as required by law.  I explained to the individual who I spoke to at the Secretary of States office my concerns, and this prompted an investigation.   Considering what I found, or did not find actually, I contacted the individual who contacted me and declined his request.

A few weeks later, I received a call from the investigator in the other state.  He told me that he made contact with the “nonprofit” and told me that he talked to the individual who contacted me.  He said that the group was not a valid charity, but because the group took in a limited amount of donations (under $20,000 annually), the state would not prosecute them.  He thanked me for reporting the issue, and then ended the call.  To be honest, I am not sure what bothers me more, a group masquerading as a charity or the state that doesn’t prosecute them because they don’t con more people out of their money.

Recently, four “charities” made national news for similar actions, but apparently the amount they took in was enough for the government to notice and to take action.  The charities, Cancer Fund of America, Children’s Cancer Fund of America, Cancer Support Services, and Breast Cancer Society were all controlled by James T. Reynold Sr., his son, and other family members, and took in $187 million, but only a miniscule amount went to cancer patients.  The rest was spent on themselves and their friends.  The organizations have now been closed down, but in some cases, the money will not be returned by the fraudsters because of settlements with the government.

Although the percentage of charities who do this kind of thing is quite small, it is large enough to effect giving to valid organizations.  Stories like these make big news, and every time they are told, people think twice about giving, and really, who can blame them?

We in the nonprofit sector must do more to make sure that we do more to prevent this kind of misuse of donor funding.  Surely, those who worked in these “charities” were aware of the problems its leadership spending of organizational funding for personal use, yet it continued for years.  There are laws that protect whistle-blowers, so if you know or suspect that wrong doing is occurring, report it to the proper authorities.

Seth Godin said it well in his post today, “Kneejerks“:

“The most powerful thing we can do to earn respect from those around us, though, is to call out one of our own when he crosses the line. “People like us, we don’t do things like that.” This is when real change starts to happen, and when others start to believe that we really care about something more than scoring points.”

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About greatergoodfundraising

Richard Freedlund has been active in the nonprofit sector in a number of ways, both professionally and as a volunteer. He is the founder of Greater Good Fundraising, a business that helps schools and organizations raise money for their programs while accomplishing something positive for the community. After living in Oregon for 27 years, he has returned to his hometown of Rockford, Illinois and hopes to make his mark on the nonprofit sector there. He is the father of a talented jazz musician and the son of philanthropic parents that continue to support multiple causes. To contact Richard for consulting, fundraising, or speaking opportunities, email greatergoodfundraising@gmail.com or reach him on Twitter.com @ggfundraise
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One Response to Where Does the Money Really Go?

  1. Richard, thank you for writing about this subject. Trust is essential to fundraising. Research proves that the more trust one has in charities, the more they are likely to give. Furthermore, the more trust one has in the sector, the more one is likely to give. So, trust impacts both propensity to give and the amount of the gift. Sadly, when one charity misbehaves, it has a ripple effect throughout the nonprofit sector. Therefore, we must all protect the integrity of the sector. Government has role; employees of individual charities have a role; and we all have a role and must keep an eye on all organizations. Earning and retaining the public’s trust should be job number one for anyone involved in the nonprofit sector. Now, having said all that, donors themselves must also assume some responsibility, as you did. Donors should only give to those charities they know and have checked out.

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