Sarah Ford | October 31, 2013

Washington Post Piece Gives the Misimpression That the Nonprofit World is Rife With Fraud

By Rick Cohen

The salacious headline of the Washington Post article on reported “diversions” of nonprofit assets reads, “Inside the hidden world of thefts, scams and phantom purchases at the nation’s nonprofits.” Therein lies the problem: the lure implies that the nonprofits are involved in and parties to these “thefts, scams and phantom purchases,” as opposed to victims of people inside or outside of the organizations who were quite intent on plundering charitable resources. It looks to the Nonprofit Quarterly that the diversions reported in the article are nonprofits that had been cheated by employees, vendors, and outside financial advisors, but not engaged in trying to cheat donors or the public.

We plan at NPQ to go through the Washington Post database of nonprofits with inappropriate financial diversions, and even provide more detail, but consider this piece a first part of our analysis, with some perspectives on the revelations in this article that do not deny the facts of the diversions, but put them into context.

Doing the right thing

In some cases, to be sure, entities such as the American Legacy Foundation “screwed up,” in the words of founding president and CEO Cheryl Heaton. Created as a result of a government settlement with tobacco companies to address the carcinogenic effects of smoking, the foundation should have reported the alleged embezzlement quickly and accurately. Too often, groups suppress bad news, with the result that when it leaks out in dribs and drabs, they look stupid and the impact metastasizes. The story here is that in many cases the best way to deal with problem, potentially criminal employees is to get ahead of the game. The decision of some charities to avoid going to the police and hoping for a quiet settlement means that low-level swindlers and others get to go from group to group, perpetrating additional crimes.

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Source: Nonprofit Quarterly

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