of State Scott Gessler reminded Coloradans today to beware of possible charity
scams in the wake of the devastation caused by Typhoon Haiyan, and offered
guidance to help citizens raise funds legally or donate wisely to help
survivors, their families, and affected communities recover from the disaster.
with the recent flooding in Colorado, disasters often mobilize people to
support recovery and rebuilding efforts, but they can also attract unscrupulous
If you decide to make
a financial contribution or raise funds on behalf of a charity, please keep in
mind the following wise giving tips:
Under Colorado law,
most charities that solicit contributions in Colorado are required to register
with our office. The law also makes two important distinctions:
- Volunteers who have written authorization from a
charity to raise funds on the charity’s behalf are exempt from the
- Individuals exclusively making an appeal for funds on
behalf of a specific individual named in the solicitation are exempt from
the registration requirement, as long as all of the proceeds of the
solicitation are given to or expended for the direct benefit of the specified
individual. Any money destined for a specific individual or family is
considered a private gift, not a charitable donation, and they are not
If you wish to
establish a fund to assist those affected by a tragedy, be especially careful to
respect the wishes of the individuals’ family and friends. The law requires
that you have written permission to use the names or photographs of any person
or organization in your fundraising appeals, so be aware that your
well-intentioned efforts could be derailed by harsh criticism from affected
parties’ families if you fail to obtain their permission first.
Be specific and
transparent about how the funds will help affected parties or their families
and how quickly collected funds will be spent. A best practice is to post an
accounting of the fund on your website and update the receipts and expenditures
frequently in order to head off any concerns about transparency. Donors may not
be satisfied to wait for the results of a financial audit of the funds.
Any private assistance
fund should be received and administered by a responsible third party, such as
a bank, CPA, or attorney.
assistance, you may want to contact a regional nonprofit resource center or an
association, like the Colorado
Nonprofit Association, the Center
for Nonprofit Excellence, or Community
Resource Center. These organizations offer educational materials and advice
for nonprofits, including volunteering for relief efforts and forming a
501(c)(3) charitable organization.
The IRS has resources
on its website to help people involved in providing disaster
relief through charities.
If you wish to start a
nonprofit to help raise funds, our office has also created a checklist
of issues to consider when forming a business or nonprofit. Before starting a
nonprofit, you may want to seek guidance from an attorney, tax, or business
When considering gifts
to an individual or family, do not give cash. Contribute by check that is
payable to a charity or fund, not to an individual, and mail directly to the
charity. Before making a donation, ask the fundraiser or charity whether there
is a trust or deposit account established for their benefit. Contact the banking
institution to verify the existence of the account, and check locally to
confirm that there really is such a need.
You cannot deduct
contributions earmarked for relief of a particular individual or family, even
if they are made to a qualified charitable organization. Ask whether the
charitable contribution is tax deductible, and verify with your tax advisor or
the IRS. The fact that a charity has a tax identification number does not
necessarily mean your contribution is tax-deductible. Ask for a receipt showing
the amount of the contribution and stating that it is tax-deductible.
Ask what portion of
the contribution will be paid to the charity and make a note of which specific
programs your contribution will support.
Watch out for
charities with names that sound similar to well-known organizations. Sometimes
these sound-alike names are simply intended to confuse donors.
Do not click on links
to charities on unfamiliar websites or in texts or emails. These may take you
to a lookalike website where you will be asked to provide personal financial
information or to click on something that downloads harmful malware into your
computer. Don’t assume that charity recommendations on Facebook, blogs or other
social media have already been vetted.
Beware of newly formed
charitable organizations. These may be formed with the best of intentions, but
an existing charity is more likely to have the sound management and experience
to quickly respond to the situation, and it will have a track record which you
If you are solicited
for funds, call the charity to see if it is aware of the solicitation and has
authorized the use of its name.
Verify with local
charities any claims that the soliciting charity will support local
Ask for the caller’s registration
number with the Secretary of State, and then confirm that the organization is
registered and current with its filings.
If the charity is
required to file the federal form 990, 990-EZ, 990-N, or 990-PF with the IRS,
ask to see it. You are also entitled to see a copy of its IRS Application for
Tax-Exempt Status and Determination Letter.
If you believe that you have been solicited by a
fraudulent charity, please file a complaint with the Secretary of State (PDF),
or the Attorney General at 800-222-4444.