Small businesses are often victimized by scam artists and may never even know they have been scammed. Here is one common scam and tips on how to protect your business.
From requests to support the neighborhood's latest fundraising project to requests for sizeable charitable contributions, most businesses are regularly asked to donate funds to needy causes. While many requests are legitimate, every year small business people become victims of fraudulent or deceptive charitable solicitation schemes. Some of these include:
Law enforcement & firefighter organizations
A common solicitation involves purchasing advertisements in various "official" publications. These publications appear to be associated with organizations or groups such as firefighters, law enforcement or other official agencies. While many of the publications do exist, the promotion is often an independent, profit-making venture.
Telephone solicitors often ask if businesses wish to renew ads from last year, leaving the impression that the transaction is merely routine. In many cases, however, the business has never dealt with the publication. Other callers lead businesses to believe that the group is affiliated with the local law enforcement agency or that the business will receive preferential treatment after purchasing an ad. The advertising price is usually not given unless you ask and the caller may be reluctant to provide specific distribution information.
Businesses are often asked to buy tickets for charity events or to donate to worthy community causes. Promoters may ask you to contribute enough money to buy a block of circus tickets with the understanding that low-income youth will attend the event. In some instances, the tickets have not been made available to the youth as represented.
Protect your business
- Before agreeing to make a donation or lend support to a charitable cause, ask the following questions:
- Who are they? Obtain the organization's complete name and address, as well as the names of the principle officers.
- Are solicitors volunteers or paid telemarketers?
- What is the organization's stated purpose? Does it publish an annual report that contains detailed budget information for public review?
- How much money is being collected on behalf of the organization and how much is going towards the stated purpose?
- What percentage of contributions goes toward professional fund raiser's salaries and other administrative costs?
- If the solicitor is selling advertising space in a publication, ask to see a copy of the latest issue. When will the next issue be produced? How many copies will be printed? Who will get copies?
Any legitimate group will disclose financial information and answer detailed questions about how it uses the money it collects. Kentucky law requires all organizations soliciting for charitable donations, unless exempt from filing annual reports with the IRS, to register and file an annual report with the Attorney General's Office, Consumer Protection Division, (502) 696-5389. Additional information, including an online database, is available from the Consumer Protection Division.
The Better Business Bureau also rates many charities.