Tuesday, December 17, 2013

What the Navy Charity Scam Means to Legitimate Charities and Generous Donors

By Ken BergerPresident & CEO of Charity Navigator


The conviction of John Donald Cody for his $100 million US Navy Veteran’s Association charity fraud is an instructive story about the inadequate oversight of the nonprofit sector by government. But what we find most unusual is the fact that he got caught, convicted and sentenced to 28 years.  Researchers have estimated that the amount of fraud in the charitable sector runs into the tens of billions of dollars each year. This is not surprising given the fact that the IRS audits an estimated one-tenth of one percent of all charitable returns and most are simply a cursory review of documents. Therefore, most charity crimes are never discovered and even when they are, few are successfully prosecuted as laws regulating nonprofits generally lack teeth. Therefore, the crime has to be so outrageous, as it is in the case of Cody's veteran's 'charity,' for charity regulators to win a case.  

The Need for a Watchdog
This crime illustrates the need for a service dedicated to evaluating and judging the performance of organizations like the US Navy Veteran’s Association. That's exactly what we do at Charity Navigator- we rate 7,000 charities (which garner roughly $110 billion in private contributions each year) and provide our analysis for free so that donors can know if a charity is worthy of a donation.


Which Types of Charities Have the Most Scams?
I have observed a pernicious tendency within at least four types of charities to perpetrate chicanery. Three of the four types -- police officers’, firefighters’ and veterans’ charities -- portray themselves as helping those who lay their lives on the line for the rest of us.  The fourth type, purports to assist children with cancer.   

All Charities Aren't Bad

In rating thousands of charities since 2001, we've come to learn that while there are quite a few charity fraudsters, there are also many wonderful charities out there that are doing an amazing job of helping millions of people every day. Their stories and accomplishments can often get drowned out as public trust is damaged in all charities by the chicanery of the John Cody’s of the world. In fact, there are thousands of charities on our site that get our highest 3-star and 4-star ratings. That means, donors with every type of philanthropic passion, located in every state, can find a charity to support.

What's a Donor to Do?
Cody's conviction should therefore serve as a reminder that all donors must do their due diligence before making a donation. And it also indicates that we must be especially careful when giving to charities that pull at the heartstrings – those that support the troops, military families, veterans, police, firemen and sick children.  In other words, we must use our heads, as well as our hearts.  At Charity Navigator we offer tips and thousands of ratings to help you make an informed giving decision. Here are some links to help you give with your head, not just with your heart:
Please also consider supporting Charity Navigator, a charity itself, so we can continue our work as a donor advocate and free charity rating service.

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