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Better Business Bureau ®
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ID Theft in the Charity Sector
October 17, 2011

We all know identity theft is a serious problem that continues to affect our country. Last year, 8.1 million Americans were victims of ID theft, according to a 2011 report from Javelin Strategy and Research. A couple of years ago on the Big Island, my wife’s Visa debit card was stolen from her purse while she was working. The thief drove to the nearby computer store, purchased $800 worth of equipment, and then returned the card to my wife’s purse. Fortunately she caught the unauthorized charge a few hours later and had it reversed. Good news for our bank account, but when the store owner didn’t receive payment for his merchandise, he filed charges against my wife for theft.

The awful stories of ID theft we hear or read about mostly involve ID theft of individuals, and on occasion, businesses. But make no mistake, nonprofits are just as vulnerable.

According to a Forbes magazine article published earlier this year, it was discovered that someone was able to steal the tax IDs of almost 2,400 small or dissolved nonprofits. The thief was able to use the IRS form 990-N e-filing system to list the same person, William Alexander of Non Profit Accounting Services, as the charitable official for thousands of charities. The charities with Alexander listed as the principal officer, not surprisingly, all have the same private mail-box address on North Rainbow Boulevard in Las Vegas.

As you might expect, attempts to locate Alexander were unsuccessful and Non Profit Accounting Services is not listed in Las Vegas phone directories nor does it appear to have filed paperwork with the state business registration office in Nevada. Additionally, the fraudulent “relocation” of these nonprofits is appearing on the private database services that regularly use IRS data, such as Melissa Data and Guidestar. Furthermore, the Urban Institute, the organization that the IRS outsources the 990-N e-filing system to, was unaware of the problem until Forbes called to gather information for their article.

The reason for concern here should be obvious; the high potential for fraudulent solicitations in the name of a charity that is no longer in operation or isn’t aware that their ID has been stolen.

In the wake of such large-scale fraud, ID theft prevention for nonprofits should be more important than ever. Taking the initiative to stay abreast of important changes in the nonprofit sector and disposing of sensitive information properly are two effective methods for reducing the opportunities for ID theft.

Here in our state, the BBB Foundation of Hawaii helps nonprofits, as well as individuals and small businesses, keep their identity safe by annually holding a public service event where documents are shredded for free. Secure Your ID Day 2011 will be held on Saturday October 22 from 9am to Noon at three locations: Mililani High School, McKinley High School, and Kailua Elementary. The public is allowed to bring 2 file-size boxes or bags of documents for secure shredding. Cell phones, computers, laptops, and servers will also be accepted for recycling and hard drive destruction

The IRS hasn’t commented as to what action they may take regarding the almost 2400 falsely filed 990-Ns or to locate the person responsible for the nonprofit ID theft. But not every story ends so ominously. A few days later, my wife caught her thief red-handed and turned the thief over to the police. The charges filed by the computer store were eventually dropped and my wife’s name was cleared.