How to Report Fraud in a Nonprofit OrganizationNovember 8, 2012 at 10:35 AM
While organizations such as charities and religious groups are given nonprofit status, abuses can still occur. As much as $40 billion annually has been lost due to fraudulent activity by nonprofit organizations. If you suspect that a nonprofit organization you are working for or have contributed to is guilty of fraud, It is important to know how to effectively report it, so that it can be stopped.
1. Lodge a complaint with the Better Business Bureau. If, for example, you have been a contributor to a nonprofit organization and believe monies have been misused, go directly to BBB's website at www.bbb.org/us/charity/ and file a complaint. Provide your contact information and give specific details about why you are filing a complaint. Be aware that the BBB gives the charity or nonprofit a chance to deny or resolve the issue.You can also write your complaint and mail it to: BBB Wise Giving Alliance, 4200 Wilson Blvd., Suite 800, Arlington, Virginia 22203. Once you report a charity or nonprofit, your complaint will remain a matter of record with the BBB, so that future potential contributors will be forewarned.
2. Contact the Internal Revenue Service with your suspicions. Go to the IRS website at www.irs.gov and fill out their Form 13909. Print it out and mail the completed form, along with any supporting documentation, to: IRS EO Classification, Mail Code 4910DAL, 1100 Commerce Street Dallas, TX 75242-1198, or fax to 214-413-5415 or email to firstname.lastname@example.org. Supplying specific examples and documentation to back up your claim, such as copies of files, financial reports and transcripts that show inconsistencies, will bolster your credibility. If the IRS feels that you have provided adequate evidence of fraud, it will investigate.
3. File a complaint with the Association of Certified Fraud Examiners chapter nearest you. You can find that chapter by going to www.acfe.com. Upon receipt of information that substantiates your claim of fraud, they will investigate and come up with their own findings.
4. Report fraud suspicions to the U.S. Postal Inspection Service. If a nonprofit organization has been sending out letters requesting contributions that have not been used as promised, this constitutes mail fraud. You can fill out a complaint form at postalinspectors.uspis.gov/forms/MailFraudComplaint.aspx .
5. Go to the media. If you believe that a nonprofit organization has committed fraud, get in touch with a local newspaper or television news station. Be prepared to provide as much information as you can, such as documentation, financial reports and witnesses, to back up your claims. If they feel your suspicions are merited, they may do an investigative report that exposes the fraud.
Read more: How to Report Fraud in a Nonprofit Organization | eHow.com http://www.ehow.com/how_5099703_report-fraud-nonprofit-organization.html#ixzz2BeKKJ1JQ
Complaints about registered charities
Should you wish to make a complaint about a registered charity, please email the Compliance Division of the Charities Directorate by selecting the link below. Please provide the name and registration number of the charity along with detailed information in support of your complaint.
Please note that, due to confidentiality requirements, actions taken by the CRA are not made public, except in cases of revocations, penalties, annulments, and suspensions. However, all complaints are reviewed and dealt with in an appropriate manner. The identity of complainants remains confidential.
If you do not wish to email, you can write to, or call, Client Service - General enquiries and your complaint will be redirected to the Compliance Division.
All charities must comply with Canada’s anti-terrorism legislation, and the Criminal Code. Charities are responsible for ensuring that they do not operate in association with individuals or groups that are engaged in terrorist activities, or activities in support of such activities. An applicant may be denied registration, and a charity’s status may be revoked, if there are reasonable grounds to believe the applicant or charity operates in such a way as to make its resources available, either directly or indirectly, to any entity, whether or not it is listed under the Criminal Code, that engages in terrorist activities or activities in support of them. The CRA’s Charities Directorate has produced a Checklist for Charities on Avoiding Terrorist Abuse to help Canadian charities identify vulnerabilities to terrorist abuse, as part of good management practices. (For more information about these provisions, see Charities in the International Context.)
Here is a sample letter of complaint in Canada.
What do I do if I suspect that a charity is a fraud?
If you are suspicious of an organization or believe you have become a victim of a charity scam, several web sites and organizations can help and are listed below.
There are public sources available to assist in determining whether a specific charity is legitimately registered with the appropriate state and federal agencies. To locate information such as exempt status, financial filings and other pertinent details, you can refer to our Knowledge Base article, How can I find information about a particular (non-grantmaking) charity?
The Federal Trade Commission (FTC) provides an online Charity Checklist with useful advice designed to help you determine whether the charity in question is a legitimate one.
Topic(s) Trust & Transparency
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How do I file a complaint against a nonprofit?
The Internal Revenue Service gives serious consideration to complaints made alleging the abuse of the tax exempt status granted to certain organizations.
When reviewing filed complaints, the IRS carefully follows special procedures designed to assure the public of the IRS’s objectivity in the treatment of tax-exempt organizations. These procedures ensure that the IRS operates in an unbiased and appropriate manner and that its compliance programs are not improperly influenced by outside intervention.
The responsibility for administering these procedures belongs to the Exempt Organizations (EO) function, which is part of the IRS’s Tax Exempt and Government Entities Operating Division.
A complaint (also called a referral) is any communication alleging that a tax-exempt organization is in potential noncompliance with the tax law. EO receives complaints from the general public, members of Congress, federal and state government agencies, as well as from other parts of the IRS.
Filing a Complaint
Members of the public may send information that raises questions about an exempt organization’s compliance with the Internal Revenue Code by submitting Form 13909 , Tax-Exempt Organization Complaint (Referral) Form.
Form 13909 and any supporting documentation may be submitted in a variety of ways. They can be sent via:
Mail to IRS EO Classification, Mail Code 4910DAL, 1100 Commerce St., Dallas, TX 75242-1198,
Fax to 214-413-5415, or
Email to email@example.com.
Submission of Form 13909 is voluntary.
Acknowledgement and Disclosure Prohibition
All referrals are sent to analysts at the EO Classifications Office in Dallas. After a referral is made, the IRS will send an acknowledgment letter to all non-IRS sources making a referral, unless it was made anonymously.
Section 6103 of the Internal Revenue Code prohibits the IRS from disclosing whether it has initiated an examination or the results of any examination. Therefore, the IRS cannot communicate with the original source of a referral beyond the acknowledgment letter.
The Review Process
Upon receipt, research is done to confirm the identity of the organization in question and once this is complete, information is entered into a database to help the IRS keep track of the progress of the review.
An experienced EO revenue agent then performs a thorough technical analysis of the allegation made on the referral. The agent uses a “reasonable belief” standard to evaluate the facts and to determine whether EO should take further action. Before taking action, the revenue agent must determine that the facts create a reasonable belief that the allegations may be true when considered fairly and in light of other reliable information.
The reviewing EO agent will decide one of the following:
The information does not warrant further action. In this case, the agent inputs information, including rationale, into the database and closes the referral.
The referral relates to activities that should be considered at a future date. The agent documents the database and schedules the appropriate date to re-evaluate the information.
The referral contains characteristics that require it to be forwarded to a committee of career EO managers and agents. This committee evaluates referrals monthly — more often in some circumstances — and decides whether to proceed with an examination. The committee also applies the “reasonable belief” standard.
The information warrants an examination of the organization. The agent documents his or her decision and the reasons for it in the database. The information item then becomes part of the examination file.
If this process results in a decision to examine an organization, the Classification Office will forward the case to a field group for assignment to a revenue agent. The revenue agent will contact the organization and schedule an appointment to begin the examination. For details on the EO examination process, see FS-2008-14 which describes the tools the IRS uses to ensure that tax-exempt organizations comply with Federal law.
DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.