Fraud in the world of non-profit organizations and charities is a particularly abhorrent type of evil as it prays on the kindness of people and makes tapping into that kindness more difficult for legitimate charitable efforts. Non-profit health care fraud is even worse as it can involve important issues related to an individual's long-term quality of life. Investigating and combating such fraud is an important skill. This article will help you acquire those skills.
In the United States, both state and federal law govern the formal establishment of non-profit entities. In order to do business within a given state, non-profit organizations must either be incorporated within that state or incorporated within another state and registered as a "foreign" corporation doing business within that state. In order to determine whether an entity meets those prerequisites, you can do a name search on your secretary of state's web site (simply type "secretary or state [your state]" in any web search engine such as google). Most states now have comprehensive online databases that can be searched by the public, for reasons just like this. If your state is still in the dark ages, contact your secretary of state directly and ask that the name be searched.
Obviously, if the organization is not listed, then a red flag exists. Also, the name might be found, but registered as a for-profit rather than a non-profit, resulting in another red flag. Finally, you need to be sure that the people you are dealing with are the same as the people who registered. The best way to do this to compare information recorded with the secretary of state with the information you already know. For example, the incorporation documents will include names and addresses of the incorporating parties and the address of the entity. If those don't match up with the information you have been given or have uncovered yourself, then you need to follow up.
In addition to being incorporated or registered as a non-profit within your state, most non-profits will also seek federal recognition as a tax-exempt charitable entity. A small charity might not be at this level yet, but if you want to deduct a donation on your federal income tax return, you better make sure the charity is federally recognized. In addition, if the entity you are suspicious of is representing themselves as a large organization operating on a statewide, regional, or national level, then they should be federally tax-exempt. These organizations are often referred to as 501(c)(3) organizations, which is a reference to the Internal Revenue Service (IRS) regulations that they fall under.
The IRS makes checking the status of charities easy. The following IRS link contains an updated list of all currently recognized federally exempt charities. Remember, some small local charities might not seek federal recognition. But, the majority of organizations will seek federal charitable status, and all major entities do. To view the list, go to:
The lack of state and/or federal non-profit status is a sure danger sign that the people you are dealing with are not legitimate. On the other hand, however, just because an organization has met the formal requirements of state and federal incorporation does not mean that the organization is guaranteed to be legitimate. You need to look deeper.
THIRD PARTY VERIFICATION
There are a variety of organizations that compile information on charitable entities. One of the best private organizations is the Better Business Bureau (BBB). The BBB has helped to establish the Wise Giving Alliance (www.give.org) to assist donors and beneficiaries in evaluating professed charitable organizations. The site contains an alphabetically listing of charities. In addition to providing publicly available information from the state and federal resources discussed above, the BBB also sends out accountability questionnaires. The results are published under the charity listing. If the charity does not respond, that fact is also reported. Any verified complaints or enforcement action would also be reported.
In addition to the information clearinghouse function, the give.org site also contains education guides for individuals and mechanisms to inquire about or to file a complaint regarding a particular charity.
In addition to the BBB, there are other third-party charity "evaluators," such as Charity Navigator and Choose Your Charity. These organizations maintain databases of legitimate charities whose identities and legitimacy the site has confirmed. Be aware, however, that these databases are seriously incomplete. Many, many local and regional organizations, even federally recognized organizations, are not included. This is a disservice since many smaller organizations have far less overhead costs, are more effective on the local level, and, therefore, provide more "bang for your buck" compared to large organizations with complex bureaucracies.
Finally, if your research has not panned out, or your suspicions are confirmed, contact your state attorney general's office (simply type "state attorney general [your state]" in any web search engine such as google). The state attorney general's office might be able to tell you if they have received complaints about the specific organization. In addition, there will be links to file an online complaint at the office's website.
Criminals prey on the most vulnerable in our society. Nothing could be more exemplary of this fact than non-profit health care fraud. Your best defense is to be careful suspicious and well informed.