Beware the False Not-for-Profit

Unfortunately in the day and age in which we live, it is far too easy for individuals and groups to create the image of being a valid not-for-profit entity.  The ability to pop up a website and capture images that lend credibility to the “front” is an ever increasing challenge for regulators and those who would truly organize for the purpose of raising funds for a cause.

In the wake of natural and man-made disasters, the scrutiny given to alleged not-for-profit groups rises.  As the “opportunities” for fraudulent dealings occur, individuals and businesses must take the time to ensure that the support they are willing and able to contribute will get to those they seek to help.

Speed of Response or Magnitude of Results

If speed of response is the primary measure, then contributing to and working with well-established organizations is usually the safe bet.  If some other factor such as religious or other affiliations comes into play, then looking to reputable established for-profits, government agencies, and civic groups for guidance may enable you to screen out the false not-for-profits from the real thing.

In the age of instant gratification, we often succumb to wanting to get something done today although a reasonable delay and planning can improve the overall and long term results generated.  Also, too ambitious plans of fledging organizations can often create more havoc than results and lead to donated funds being squandered on flash versus invested in substance.

Not-for-Profit – Charitable Institution or Taxable Entity

Another frequently overlooked or misunderstood element of the contribution equation is this:  “not-for-profit” is not synonymous with “charity”, “tax-exempt”, “tax deductible”, or a host of other terms.  All not-for-profits start out as taxable entities.  They then follow a rigorous application and screening process through the United States Internal Revenue Service and state agencies to obtain a charitable and/or tax-exempt status.

A taxable not-for-profit may be organized to serve a “common cause”, a “greater purpose” just as tax-exempt entities are.  Keeping in mind that “not-for-profit” doesn’t mean NO profits, a taxable not-for-profit may operationally have less profit to go back into a cause due to their taxable status, but the profits they do have can have significant impact.

What Purpose? What Cause? What Impact?

When you decide to get involved with a not-for-profit, whether it is taxable or tax-exempt, whether it is charitable or organized for another purpose, understand

□        mission

□        structure

□        leadership

□        management

□        volunteers, members, associates

□        tax status

□        how funds are used

□        how funds are tracked

□        how “business” is done

are all elements of your due diligence process.  In times of crisis or when we are passionate about a “cause”, we often want to act quickly.  We are eager to contribute and make a difference.  The biggest difference we can make is to analyze our options actively, seek out the organization(s) which share our beliefs and purpose, and do our homework to make sure that the contributions we make truly will make a difference in the hands of qualified, experienced, and capable organizations.  The best of intentions isn’t enough.  Results and impact are what truly matter.

Copyright ©2006 FOCUS Resource, Inc.

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