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Avoiding accusations of charity fraud

Like many in New York, you might assume accusations of fraud to be limited to organizations operating in the professional, for-profit word. Your charitable work for a non-profit organization could certainly not be subject to such suspicions, right? That is what many of those that we here at Sapone & Petrillo, LLP have worked with believed, yet a lack of knowledge or poor management ultimately led to them facing fraud charges. How, then, can you avoid such penalties with your charitable organization? 

Given that research data shared by CNBC shows that $335 billion was given to charitable organizations in the U.S. as recently as 2013, it is little surprise that such entities are often the subject of legal scrutiny. You might think charity fraud only applies to those cases where one solicits money for a charitable cause and then pockets any and all donations, yet in reality, a majority of charity fraud accusations come as the result of questionable money allocations. 

Even when you run a charity, it is assumed that you will have some operating and overhead costs. If a majority of your revenue comes from charitable contributions, you need to be mindful of how much of those funds you allocate to purposes other than your stated cause. Use too much on expenses that are unrelated to said cause, and you might end up being accused of fraud. Thus, here are some elements to remember to avoid such accusations: 

  • Ensure that all expenses are (in some way) related to your tax-exempt purpose
  • Avoid committing substantial time (or making substantial profits) on events unrelated to your charitable cause
  • Avoid becoming extensively involved in lobbying efforts or financially supporting individual political candidates

You can discover more information on dealing with accusations of fraud by continuing to explore our site. 

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