Protecting Your Nonprofit: How to Spot Fundraising Scams Before They Cost You

Nonprofit leaders spend a great deal of time thinking about fundraising, grants, donors, sponsorships, and new opportunities to support their mission. Unfortunately, scammers know this too.

According to the The Better Business Bureau estimates that more than $10 billion is lost each year to fraudulent charitable solicitations.

Over the past year, I’ve seen several situations where nonprofit organizations were nearly targeted by fraud. Fortunately, in each case, the scam was identified before any significant damage was done. However, the experience served as an important reminder that nonprofits of all sizes need to be vigilant and perform due diligence in all relevant situations.

This week, one of our clients received an email from an individual claiming to be a consultant representing a donor interested in making a significant recurring donation. The communication was professional. The website looked legitimate. The opportunity sounded promising.

However, after a quick online search and some additional investigation, it became clear that the individual had been linked to similar fraudulent activity. Thankfully, the organization had not yet shared any sensitive financial information.

In another case, a nonprofit board member received an invoice from what appeared to be a legitimate company claiming payment was overdue. Rather than routing the invoice through the organization’s normal approval process, the board member paid it directly. The invoice was fraudulent.

Unfortunately, these situations are becoming increasingly common, and with advances in artificial intelligence and technology, scammers are becoming more sophisticated than ever.

Why Nonprofits Are Attractive Targets

Nonprofits are often targeted because they:

• Rely on donations and external funding
• Frequently communicate with new donors and funders
• Have volunteers and board members involved in financial decisions
• May have limited administrative resources
• Are accustomed to responding quickly to funding opportunities

Scammers understand that nonprofit leaders are often busy, mission-focused, and eager to pursue new sources of support.

Common Fundraising Scams Every Nonprofit Should Know About

The “Major Donor” Scam

This is one of the most common scams targeting nonprofits.

An individual claims to represent:

• a wealthy donor
• a family foundation
• a charitable trust
• a philanthropist interested in making a large gift

The communication is often polished and professional. The individual may have a website, social media presence, and even references.

Eventually, they request:

• banking information
• wire transfer details
• account verification
• other sensitive financial information

In some cases, the scam escalates into requests for “processing” payments or attempts to access organizational accounts.

Fake Grant Awards

Another common scam involves organizations being notified that they have “won” a grant.

The catch?

They are asked to pay:

• administrative fees
• release fees
• processing fees
• registration fees

Legitimate grant funders do not require nonprofits to pay money in order to receive a grant award.

However, it is important to note that some legitimate grant platforms, grant databases, contests, or business grant programs may charge application or participation fees. The key difference is transparency. These fees are disclosed upfront as part of the application process, not requested after an award has supposedly been approved.

Fake Invoices

As one nonprofit unfortunately experienced, scammers may send invoices that appear legitimate.

These invoices often:

• use professional logos
• appear urgent
• reference services never received
• pressure recipients to act quickly

Without proper internal controls, it can be easy for someone to assume the invoice is legitimate and submit payment.

Executive Director and Board Impersonation Scams

Scammers may pose as:

• Executive Directors
• Board Chairs
• Treasurers
• Major Donors
• Vendors

An email may arrive requesting:

• gift card purchases
• wire transfers
• invoice payments
• urgent financial action

These scams rely on creating urgency and bypassing normal approval procedures.

AI Is Making Scams More Convincing

Artificial intelligence has dramatically increased the sophistication of scams.

Today, scammers can use AI to create:

• professional emails
• realistic websites
• convincing donor profiles
• polished proposals
• social media accounts
• marketing materials

The result is that many scams no longer contain obvious spelling mistakes or amateur-looking materials.

Organizations can no longer rely solely on appearances when evaluating legitimacy.

Red Flags to Watch For

While every situation is different, some warning signs include:

• Requests for banking information early in the conversation
• Unsolicited offers of large donations
• Pressure to act quickly
• Requests to bypass normal procedures
• Generic email addresses
• Refusal to participate in phone or video calls
• Poorly documented organizations
• Inconsistencies between communications and public information

If something feels unusual, take the time to investigate further.

Best Practices for Nonprofit Safety

Verify Before You Trust

Always conduct basic due diligence.

Search:

• names
• email addresses
• companies
• consultants
• foundations

A simple Google search can often uncover warning signs.

Never Share Banking Information Prematurely

Establish clear procedures regarding what financial information can be shared and under what circumstances.

Require Multiple Approvals

No single individual should have authority to approve significant financial transactions without oversight.

Train Staff and Board Members

Many scams succeed because well-meaning volunteers or board members simply don’t know what to look for.

Regular education and awareness can prevent costly mistakes.

Slow Down

Scammers often rely on urgency.

Legitimate donors, grant funders, and vendors will understand the need for proper verification and organizational procedures.

Protecting Your Mission

Nonprofit organizations work hard to earn every dollar they receive. Protecting those resources is just as important as raising them.

A few minutes of verification can prevent:

• financial loss
• reputational damage
• administrative headaches
• stress for staff and volunteers

The good news is that most scams can be identified with proper procedures, healthy skepticism, and a commitment to due diligence.

As nonprofit leaders, we should absolutely remain open to new opportunities, partnerships, donors, and funding sources. But we should also remember that not every opportunity is what it appears to be.

Protecting your organization’s finances is ultimately another way of protecting your mission.

Do you have question or need some support with your Fundraising Strategy? Contact us today!

Frequently Asked Questions

Are nonprofits commonly targeted by scams?

Yes. Nonprofits are increasingly targeted by fundraising scams, fake invoices, donor fraud, and phishing attempts because they frequently interact with donors, funders, vendors, and community members.

How can I tell if a donor inquiry is legitimate?

Verify the individual’s identity, research their organization, review their online presence, request a phone or video call, and be cautious about sharing sensitive financial information early in the process.

Should nonprofits share banking information with prospective donors?

Organizations should have clear policies regarding financial information. Banking details should never be shared without proper verification and approval procedures.

Do legitimate grant funders charge fees?

Legitimate grant funders do not require organizations to pay a fee in order to receive an approved grant. However, some grant databases, contests, business grant programs, and application platforms may charge participation or application fees that are clearly disclosed upfront.

What should I do if I suspect a scam?

Stop communication, avoid sharing additional information, document the interaction, notify organizational leadership, and conduct further research before proceeding.

How can nonprofits improve financial security?

Implement approval procedures, train staff and board members, verify donors and vendors, maintain strong internal controls, and regularly review cybersecurity and fraud prevention practices.