Why do organizations avoid becoming registered charities?

March 18, 2023Amr Ali Ibrahim0

Charitable organizations play an essential role in helping to address social problems and provide support to those in need.  They have a purpose to deliver a charitable benefit to the public or a sufficient section of the public. However, not all organizations that engage in charitable activities are registered charities. While some organizations actively seek charitable status, others choose not to register for a variety of reasons.

 In this article, we’ll explore some of the reasons why organizations might avoid becoming registered charities.

  • Avoiding bureaucracy and red tape

One of the biggest reasons organizations might choose to avoid becoming registered charities is to avoid the bureaucracy and red tape that comes with it. Registering as a charity means complying with government regulations and reporting requirements. This can be a daunting task for organizations that may already be stretched thin.

  • Greater financial transparency

Another reason organizations might avoid becoming registered charities is because of the increased financial transparency that comes with it. As registered charities, organizations are required to file annual financial reports, which are available to the public. This can make some organizations uncomfortable, as they might not prefer to share financial details.

  • Perception of overhead costs

Some organizations perceive that it might increase their overhead cost. While there are certain costs associated with registering as a charity, such as legal fees and filing fees, these costs are often outweighed by the benefits of being a registered charity. 

Registered charities are eligible for tax exemptions and can receive donations from individuals and corporations, which can help offset these costs.

  • Fear of losing control

Organizations fear losing control. Once an organization becomes a registered charity, it is subject to government regulations and oversight. 

Some organizations may prefer to maintain complete control over their operations and avoid registering as a charity.

 Charity Frauds are Real and Prevalent

Unfortunately, there are many cases of non-registered fraudulent charities that prey on the good intentions of donors. These organizations may claim to be charities, but in reality, they are scams that are designed to defraud people of their money.

Research data shows that fraudulent charities are a real problem. According to the Federal Trade Commission (FTC), charitable fraud is one of the top ten consumer frauds in the United States. In 2019, the FTC received more than 62,000 reports of charity fraud, with losses totaling more than $71 million.

The Better Business Bureau Wise Giving Alliance’s Charity Scams Report (2021) found that over the past year, there was a 25% increase in charity scams. The report also revealed that the most common types of scams were related to fake fundraisers, non-existent charities, and charity impersonators.

These reports and studies highlight the seriousness of charity fraud and the need for donors to exercise caution when making donations.

The best way to avoid falling victim to charity fraud is to donate only to registered charities. Registered charities are subject to regulatory oversight, and they adhere to strict standards of transparency and accountability. Donors can be assured that their donations will be used for the purposes for which they were intended.

In addition, donors who donate to registered charities may be eligible for tax benefits. Donations to registered charities are tax-deductible, which means that donors can claim a tax credit for their contributions. 


Bottom Line – If a charity isn’t registered with the IRS or state government, you should donate elsewhere!

If you suspect any scam or charity fraud you can report it here.


Amr Ali Ibrahim

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