Is the Non-Profit World Teeming With Fraud?

When we recently wrote a column suggesting that philanthropies be run more like businesses, one factor we didn’t look into — but perhaps should have — was fraud.

According to a Times report by Stephanie Strom, fraud and embezzlement in the non-profit sector account for a loss of $40 billion a year, or roughly 13 percent of philanthropic giving.

The article is based on a report (gated) recently published in the Nonprofit and Voluntary Sector Quarterly. Strom’s article peaked at about No. 6 on While Strom’s article hasn’t hit the Times’s “most e-mailed list“; I am guessing that just about everyone in the non-profit world has read it by now, and are readying their replies to anxious donors.

Thirteen percent gone to fraud! That’s about the same loss experienced by the Bagel Man — and he didn’t even have anyone watching the till.

TAGS: ,

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 54


  1. Wow 13% says:

    This should be a wake-up call to the NonProfit industry. But what’s the answer to the problem? Fraud can’t be entirely elminated. There’s a cost to monitoring, policing & prevention. What costs could they expect to incurr & what return could be expected? Obviously, spending 2% to cut the number down to 5% would be a good return. Total fraud cost would be 7% (2% prevention + 5% loss). But is something that good possible? I’d assume they’ll have to go to the private sector to recruit experts & figure out a game plan.

    Thumb up 1 Thumb down 0
  2. TT says:

    Pretty simple, if money is involved. There will be fraud.

    http://dailychatter.wordpress.com

    Thumb up 1 Thumb down 1
  3. Joe Ventimiglia says:

    Steve,

    It’s all about the lack sustainability within the non-profit world. I believe that if you have a pure mission then you should be able to sustain the non-profit by spreading your message, sharing best practices, publishing, corporate programming (turn your program into a training program and sell it to other organizations) or develop sellable materials. If a program cannot eventually fund itself I would revisit the mission. By definition non-profits community based organization should add to the community not waste resources.

    Joe V

    Thumb up 1 Thumb down 1
  4. Shan says:

    Maybe 13% is about the amount of money that everybody loses to dishonesty if it’s not closely monitored. I’ve never heard of an anti-fraud department at any nonprofit organization… it’s not that much harder to fraudulently take their money than it is to fraudulently steal a bagel. I’ll bet there would be much less loss if there was closer monitoring; the question is just whether the cost of the monitoring would justify the gain.

    Thumb up 0 Thumb down 0
  5. luke says:

    at first, i wondered if there is something about 13% (about 1/7th). perhaps this is related to the principle of just noticable difference, where this is about the level of theft of fraud before people take action…

    however, i know it isn’t true… why? because it seems unlikely that the 13% fraud is accross the board. some non-profits will have rather low fraud rates (probably close to the level of for-profit groups), but some will have much higher rates.

    consider: if there were 4 charities, and three were completely fraud free, but one charity had 50% fraud, then the average would be about 13%…

    Thumb up 0 Thumb down 0
  6. Cindy says:

    The Time articles points out the source of the 40 billion– it is calculated based on total nonprofit revenue of 600+ billion multiplied by 6%, which is an estimate of ALL fraud cross ALL organizations whether for profit or not, including governments. Although 40 billion is numerically 13% of roughly 300 billion that were donated, it is not true that 13% of donations were lost to fraud, as a cursory reading of the article would suggest. The article never suggested that nonprofits lost more or less than other organizations.

    It would be way more helpful to compare fraud in different KINDS of organizations instead of lumping them all for an overall percentage and then PENALIZING the nonprofits because they have two main sources of income.

    Thumb up 0 Thumb down 0
  7. Rachel says:

    I don’t know how much of a story this is, I mean was there any doubt that this was happening. It shouldn’t and it is outrageous, but it happens every where, so why wouldn’t someone assume it happens in charity foundations as well?

    It would be nice if it was a problem that could be fixed, and I hope they come up with some sort of solution.

    Rachel
    The baked blogger
    http://bakedblog.com

    Thumb up 0 Thumb down 0
  8. Opus says:

    It may be interesting to look at those nonprofits receiving federal earmarks in light of this report.

    Thumb up 0 Thumb down 0
  9. Marc says:

    Does that 13 percent include the charities that _are_ frauds?

    Thumb up 0 Thumb down 0
  10. Garland Walton says:

    I am a nine year veteran of a $12M Stamford, CT human services nonprofit (www.domuskids.org). Beyond internal controls we’ve set up, we are audited by an outside firm every year. I think those two steps, plus a vigilant board of directors with reputations to protect, can truly eliminate most fraudulent activity. But, just like in any organization, if a clever person wants to steal from you, s/he will figure it out–hopefully your controls will point that theft out quickly and definitively.

    Garland Walton
    Domus | http://www.domuskids.org

    Thumb up 1 Thumb down 0
  11. Kent says:

    I’ve spent a lot of time looking into non-profit budgets as part of one of my reluctant civic duties.

    Based on this experience and the fact my wife works for a non-profit, I would guess that fraud is equal to, if not higher in non-profits than it is in for-profit companies.

    The biggest problem is a lack of checks and balances.

    A board is in theory supposed to be the largest check for a non-profit, but the reality is that a board is limited in its insight into operations. They rely on the director/president/ceo for most of their insight and that’s usually the person participating in the fraud, directly or indirectly. This is assuming the board is a real board. Smaller non-profits have barely functioning boards which consist of a few people trying to do what’s right 1 hour a month.

    The other major check is supposed to be the donor’s fickleness with their money. Results should drive donor dollars and supposedly non-results should limit donor money. But when the group that gives you money is not the same group that receives the benefits of your service and the two groups rarely, if ever, interact then it’s very easy to commit fraud. Results can easily be inflated or created.

    Adding to this problem is public opinion. Non-profits are generally given the benefit of the doubt because they are a non-profit. It’s easy to overlook minor improprieties because “look at all the good they are doing.” Some long standing charities invoke such an irrational and emotional response that a single bad word about it can invoke public shame upon the person speaking. This give the non-profit a lot of room to mis-spend money. The Boy Scouts and the Red Cross are great examples.

    Another problem is the combination of small size and lack of tangible benefits. A lot of non-profit action happens at the local level, even for big organizations. As a result, a very small administrative group makes the majority of the financial decisions. When Bob is supposed to be the financial check against Cindy and Bob and Cindy are married, everything breaks down. Even if they aren’t married, but just long time acquaintances, the objectivity disappears. This combined with the fact that employees are poorly compensated usually leads to minor acts of fraud like unnecessary conference trips or purchases for personal use or worse.

    Thumb up 0 Thumb down 0
  12. raldes says:

    I wonder what the percent of fraud and embezzlement in the business world is?

    Thumb up 0 Thumb down 0
  13. Tom Kelly says:

    I spent years working for three different non-profits. Fraud was no the problem for any, feathering the CEO’s nest was.

    All three unrelated non-profits were dominated by a CEO who did as he/she pleased. Mainly the CEOs were pleased to spend lots of money on their own perks and hiring multiple friends and family members.

    And I can’t even say that I blamed them. These were people who could have commanded much higher salaries in the private sector. Their self indulgent ways were probably justified by the job they did.

    Thumb up 0 Thumb down 0
  14. Winston says:

    But how does it break down? I’m sure it’s not 13% across the board. Is the majority of this fraud concentrated in a small percentage of charities? How much is fraud within legit charities and how much is charities that were set up with fraudulent intent? How much is cash that’s syphoned off and how much is stuff like supplies taken for personal use?

    Thumb up 0 Thumb down 0
  15. Ex-Auditor says:

    As a former auditor of non-profits, I’d say no, and to the extent that fraud occurs, its fairly minor (compared to the stock options backdating schemes, and other frauds committed at for profits). That said, many non-profits are smaller organizations without the internal controls to properly identify fraud risks and detect fraud in a timely manner. One of my personal favorites that came out during an audit (it had been identified and addressed by management prior to our audit) was a case where an employee who was a recovering crack addict went on a bender on his company card, and pawned his laptop for crack money. He was promptly terminated, the NPO received restitution for their losses.

    This probably could have been avoided by checking references, or confirming information in the employee’s resume… but that’s too expensive and time consuming for a smaller non-profit.

    The real fraud is inflicted on the taxpayer, who pays for some truly wasteful programs funded in part by federal grants. Considering how poorly the books are maintained at some non-profits, the thought of giving them federal funds should terrify the average taxpayer.

    Thumb up 0 Thumb down 0
  16. Joe Ventimiglia says:

    It’s interesting to see this weekends papers full of non-profits pleading there case because of the budget cuts,in Albany. Is timing everything?

    Thumb up 0 Thumb down 0
  17. Browning says:

    Tom Kelly’s post (#13) makes a good point about the “motive.” Many non-profits pay below market and their employees feel cheated. (Never mind that those employees may have no chance of a better position in a competitive organization.) A charity’s executive, who gets no stock options but hobnobs with corporate executives who wear expensive suits and who belong to three country clubs, can readily convince himself that it’s only right he should have the perks. The same phenomenon explains some of the civic servant bribery problems we see daily.

    Thumb up 0 Thumb down 0
  18. Troy Camplin, Ph.D. says:

    My wife used to work for nonprofits, and she said that aside from monetary fraud, the nonprofits are rife with corruption — especially those that get most of their money from government. Maybe 13% of the paperwork done is actually legitimate. She says that maybe 10% of the people her organizations tried to help actually needed help, and that most of the rest wouldn’t even show up to get something for free. She’s talked to me about all the ways people would scam the system, filling out applications in such a way as to ensure they would never get a job offer while filling out enough applications to continue getting government services. If you really want an interesting article, you should get my wife to write one for you exposing what welfare is really like. She should know, having worked in the system for many years. She had to leave because she could no longer continue being a moral person while working in the system.

    Thumb up 0 Thumb down 0
  19. David says:

    I’ve worked in the religious non-profit sector for over 11 years and at seven different organizations. Each place was a management crisis and my job was to maneuver most through their crisis. The common problem was a status quo culture, nobody striving for more efficient and effective activity. Hence, any change agent was undermined because he caused more or unfamiliar work.

    Where do many nonprofits get into trouble? For the most part, I think it comes down to the fallacy that working in the non-profit sector means paying employees less. Organizations that hire employees who are willing to work for less-than-market wages in some other sector could equate to hiring more inefficient and ineffective workers than other sectors.

    Non-profits usually operate on tight budgets, where every dollar needs to be stretched to its greatest elasticity, and that requires unique skill sets. However, non-profits create a vicious cycle of inefficiency by attracting less skilled employees. Rather than pay workers less to make a dollar work harder, they should try to attract the highest skilled employees to be more efficient and effective.

    Federal and state government impose regulations on nonprofits, regulations that are easy to run afoul of via any of the following:
    Financial reporting fraud -Overstating program expenses/understating fundraising and administrative expenses, charging unallowable costs to grants or inflating contributions.
    Fundraising fraud -Making misleading statements to donors or noncompliance with restrictions.
    Program reporting fraud -Misrepresenting program accomplishments or failing to comply with regulations.
    Poor control of unsolicited donations -Failing to have controls in place so that unexpected funds (e.g., Tsunami relief) are not used fraudulently.
    Tapping restricted funds -”Borrowing” restricted funds when cash flow is tight.

    The last organization for which I worked was a nightmare of malfeasants. Executives were willing to do things as illegal as accounting fraud, tax fraud, stock trading fraud, banking fraud, insurance fraud, and fundraising fraud; basically everything stated in the preceding paragraph. Remember, this was in the religious non-profit sector too, but if the executives are willing to substitute ethics for less consequential values, then it is no wonder why organizations are inefficient, ineffective and teeming with fraud.

    Thumb up 0 Thumb down 0
  20. zinzanthropus says:

    The non-profit is littered with individuals with
    ba of arts, social sciences etc. Mostly idle
    and looking to sustain their idleness.

    Thumb up 0 Thumb down 0
  21. Troy Camplin, Ph.D. says:

    ALong with that last comment, my wife pointed out that at one of her jobs she would typically get all of her week’s work done on Monday and have to look busy the rest of the week. Her friend, on the other hand, had the responsibilities that should have gone to 5 people, meaning much of his work was made up.

    Thumb up 0 Thumb down 0
  22. Gerard Verschuren says:

    19 years ago I was stranded in Goma, Zaire for 10 days with a party of 6 other kiwis. During that time, we were taken out clubbing on several evenings by a couple of ex-pat millionaires from an EU country. They unashamedly told us that they had made their millions by selling to the locals the clothing that western countries had donated as aid. I have viewed all such aid programmes very differently since then, and I suspect that a good deal of what is given in aid goes into the pockets of the un-needy.

    Thumb up 0 Thumb down 0
  23. Sandy Frost says:

    For more information about what I describe as the biggest non profit fraud scandal of our time, please visit my site at http://sandyfrost.newsvine.com. There you will read my two year investigation into the Shriners and their sub-group, the Royal Order of Jesters, three members of which were recently caught by the FBI transporting women over state lines to Jesters parties for the purposes of prostitution. In March, 2007, Stephanie Strom did an outstanding job describing this very thing in a front page story about how those reporting Shriner crime are intimidated, “tried” by kangaroo courts and otherwise bullied into silence instead of prosecuting the crimes.
    Thank you,
    Sandy Frost

    Thumb up 0 Thumb down 0
  24. Betsy Kain says:

    It is not technically fraud, but the public is often misled by glossy, clever ads by agencies that spend a huge amount of the money donated to them, on development and corporate expenses. In Rwanda, a major American NGO is housed in expensive(for Kigali)office space, on a major thoroughfare that is paved. A huge banner, in English, is spread across the entire front of the building. While not far from this expensive banner and office space, many poor Rwandans are fortunate to eat even one meal a day. Meanwhile,some other American aid agencies manage, in their cramped, small work spaces, off of rutted dirt roads. Before donating, I suggest visiting http://www.Charity Navigator.org or another such website to look at the rating given to these organizations. The very poor and hungry need the money more than the comfortable executives. We Americans need to be aware of how an agency spends our money. It is not difficult to investigate. It will be time very well spent.

    Thumb up 0 Thumb down 0
  25. Karl Forister says:

    Including religious organization, based on my life’s journey, 13% is much too low! Cash-handling nonprofits, in general, do not have a reputation for practicing basic, fundamental, “due diligence” by performing pre-employment background screening and following that with scheduled post-employment Credit Reports and criminal records checks. Those that do the minimum, their own county’s criminal records search, ignoring the remainder of the nation and federal courts’s records, plus searches for civil court records and credit reports, cast a microscopic “net” that will rarely identify any jail bird applicants who simply migrate to another state when sentence is served and look for another “soft” nonprofit. Criminals are attracted to nonprofits in general because they know that the odds are in their favor that the nonprofit will not spend the money to do a thorough background check in full compliance with Fair Credit Reporting Act recommended protocols.

    Thumb up 0 Thumb down 0
  26. Dr. Jean-Christophe Paquin says:

    The last comment about Rwanda couldn’t have been more accurate, having lived and worked there, as well as in Swaziland. In fact, 13 % appears rather low as a percentage. Two things come to mind immediately: poverty, indeed, and what is referred to as neo-colonialism. Changing the way aid receivers view donors is a daunting task; we’ve too often heard the saying “give them a fish a they will have food for a day; teach them how to fish and they will feed themselves for the rest of their lives.” Alas, it’s not as simple as that.
    I too attended lavish expat parties where poor people were outside begging for food, chased away by guards: no one really cared, even the national about. The ones who genuinely care are often disillusioned and quit too early.

    Mentalities die hard and the problem won’t be resolved overnight: we need more “specialists” and more humanists.

    J.C. Paquin

    Thumb up 0 Thumb down 0
  27. Michael Ilyinsky says:

    If the U.S. government needs money, simply have the IRS audit all of the non-profits and hold the board of directors financially responsible.

    Thumb up 0 Thumb down 0
  28. clara says:

    Any comments about the ACS?

    Thumb up 0 Thumb down 0
  29. Troy Camplin, Ph.D. says:

    Actually, it’s the specialists and the humanists who have gotten Africa to where it is: nowhere, and worse off. How about we fire all those people and cut off all aid so that these countries will be forces to make the free market and property rights reforms that are the only things that that will result in and have ever resulted in prosperity? It seems to me that the primary barrier to people getting out of poverty is the existence of people whose livelihoods are made by “helping” the poor.

    Thumb up 0 Thumb down 0
  30. David says:

    # 27 “If the U.S. government needs money, simply have the IRS audit all of the non-profits and hold the board of directors financially responsible.”

    That would probably have the reverse affect. While the amount of money that the non-profit sector receives has been growing (currently about $280 billion and 80% from individuals), it has not been increasing as a percentage of GDP (steady at about 2%). Meanwhile, the Federal budget for social programs has been increasing and will soon engulf the Federal budget.

    Non-profit organizations may not be as efficient and effective as they could or should be with promoting the common good, but they are still more so than any government. Increasing government regulations would probably only cause more harm than good to non-profits, which in turn would put organizations out of business, open government agencies up to increase their bureaucracies, increase tax burden, and increase inefficiency.

    Market forces will improve the non-profit sector. Donors will demand more accountability, transparency, and better stewardship. The organizations that provide greater satisfaction in this regard will survive and maybe thrive while others will be exposed and close.

    Thumb up 0 Thumb down 0
  31. Vince says:

    There is a lot of “politics” in non-profits. This leads to people having their territory.

    I do not think most people start out stealing, but take a little out at first as a loan. This may happen more since the economy is tanking.

    Since there is little oversight over these territories the first time a person “borrows” the money it is realized how easy it is and with people living beyond their means it is easy to justify their using the money because of how underpaid they are.

    Someone other than the people who have access to them should reconcile bank accounts and cash accounts.

    I’m sure a lot of theft in these organizations is not reported, unless the amount has grown to large to cover up, because of the bad publicity.

    Thumb up 0 Thumb down 0
  32. charles labrecque says:

    Good morning,
    In Canada Québec gouv. ad discover the same problem few years ago so , they have requeird back a five years IRS audit sign by a professional to all of the non-profits, and hold the board of directors financially responsible.

    you will be suprise of what you will discover and the board of directors wil fly away like bomb shell splinters.

    Thumb up 0 Thumb down 0
  33. LaPlace says:

    I have served as a consultant to many not-for-profits and am on the board of one. I have observed many of the issues discussed above and feel that the reasons for the problems are not going away in the near future.

    Nevertheless, there are several comments more favorable to NFPs that I would like to make:
    >the $40 billion is a made-up number, derived by a ‘fraud estimate” of 6% of revenue to NFPs based on an estimate of losses by “all organizations” – FP, NFP, and government – to NFP income. There is no mention of any data to support for the idea that all organizations suffer fraud at the same rate, or that 6 % is applicable in any way to NFPs. It is alarming to see such a fuzzy number treated as a fact.
    >there is increasing pressure from donors, including organizations such as United Way, for more accountability, more quality control, etc., to demonstrate that the $$ that are donated are wisely spent. The NFP world is becomingly increasingly competitive as organizations have to meet higher standards to get their share of donations
    >Both the larger fraud cases and the “overstaffing” cases (eg people with no work to do) are limited to the few NFPs with significant resources – large income streams or big endowments. Most of the NFPs I have worked with don’t have the money to pay people to sit around or the assets available to steal in large amounts. Many of the NFPs work on such narrow margins that a loss of 6% of income would be noticeable.
    >In the increasingly competitive NFP world, the importance of having a good CEO cannot be underestimated. A good one can energize and inspire an organization. A Board would want to keep such a person happy.

    There are many, many NFPs that function properly, spend their money wisely, and do as well as they can to fulfill their mission. The biggest problem is lack of access to experts. Most depend on pro bono work from lawyers, accountants, investment advisors, etc., and the amount generously donated by the professional communities should be considered as well.
    Similarly, the Board members donate a great deal of personal time, often in their fields of expertise (the Chairman of our Finance Committee is a banker who personally reviews checking account statements and other financial statements regularly) ; the portrayal of Boards as generally lazy and clueless is uncalled for.

    Thumb up 0 Thumb down 0
  34. Amb says:

    I am going to apologize in advance if my questions is out of line for this topic, but I could not come across any other information on Non-profit/Charity Problems.

    I am by no means rich, I am not even financially secure, but no matter what I give. Well I started giving 10% of my ebay sales to a Non-profit that then distributes the monies to whom ever you choose.
    Not really paying attention, here, not only am I no making a profit myself, but I a realize I am digging myself into a financial hardship because between the 10% I am paying faithfully and ebay/paypal fees, I am giving my product away and making nothing.
    I contacted this organization and asked that they please hold off on taking my DONATION until I can get back on my feet and get other important things taken care of that pertain to the lively hood of my family which includes 3 kids.
    They not only told me NO, but in a very disrespectful manor DEMANDED payment. They even went as far as to restrict my ebay selling for $15.00!!
    I emailed them and asked what in the world the problem was and the only response I received was an auto response “Your payment could not be processed” as my checking account is getting charged $35.00 each time they try to take this money I just asked to wait 2 weeks until I receive my disability check.
    I’m baffled. I have never ever heard of a Non-profit/Charity Organization, nor would I ever expect an organization of this reason, to act like this to anyone.
    I sure could use some feedback on this situation because I am beside myself over wanting to give to a great cause and the people who are taking the money to “persay” give….
    By the way, the charity I was donating to was for Vets coming home from the Iraq war who were homeless or disabled.
    Thank you for listening.
    Amb

    Thumb up 0 Thumb down 0
  35. CJF says:

    Anything involving money and power without adequate regulation and sufficient supervision inevitabaly lead to corruption or fraud. People working in nonprofit organizations may be not so greed as men in financial sector, but they are still human and thus susceptible to human weakness and taking their great influence to shape our perception of morality and social awareness they must be put into constant scrutiny and held accountable through exposing to public observation of their activities.

    Thumb up 0 Thumb down 0
  36. Werner says:

    I used to be an employee for a non-profit that closed. I’m still waiting for 2 months of pay by the way. It closed for two main reasons. 1. A non-active board lead to poor management 2. The IRS doesn’t seem to monitor non-profits as closely as other companies. Not many people want to serve on the board for a small non-profit for free, which led to the inactive board.

    Thumb up 0 Thumb down 0
  37. Todd in Cali says:

    Surprise ! Now you know what I’ve known since the 80′s, when everyone and their brother had an AIDS non-profit. The funds of one shady non profit that attempted to hire me, were spent, uhm, liberally. On the guy running it, that is.

    Non-profit fraud is rampant, and I blame the so-called non-profit industry for not policing itself. Where do you go to verify the veracity of a non-profit ?

    Well you can see if they’re resisted with the IRS. But frankly, anyone can start up a non-profit, or inherit one for that matter.

    You can check to see how much money they’ve brought in over the years with the IRS – still not a verification that the non-profit is legitimate.

    Fact is, there’s nothing the public can do to make sure some guy soliciting on behalf of a non-profit is legitimate.

    Guy comes by my house, opens my carport gate, a big no-no, and knocks on my door. He has a really crappy photocopy of his non-profits information – it’s in a city 25 miles away.

    All the information checks out via the IRS – but the phone number doesn’t work, and the address is at a commercial mailbox rental. Shady ? You bet. But he can’t be stopped from knocking on doors and pestering people. It’s his “right”.

    This one’s easy, but other abuses are more overtly grievous, and non-profits are hardly in any position to police themselves, much less properly inform the public.

    Non-profits should be aggressive about abuses. They aren’t, and people do not give a red cent to any, and in my opinion, rightly so.

    Yeah, yeah, everyone working for/owning a non-profit is gonna say it’s your responsibility to know who you are donating to. This is a bigger problem than that. Non-profits “network”, and entangle themselves so thoroughly with illegitimate ones, as to ALL be seriously sullied.

    Thumb up 0 Thumb down 0
  38. Elizabeth Doyle-Propst says:

    Does it happen? Yes. Should it happen? No. I started a NPO after working in the industry as a volunteer and employee for 20 years. I didn’t see it at the NPOs I worked but we have heard all about it. I account for every penny to our Board of Directors and I don’t get reimbursed for many things that I spend funds on for the NPO. Our organization is purely run by volunteers – including myself.

    It is called ETHICS – something that you used to be raised with and now must be taught in schools and colleges. And it happens in corporate American too!

    If you have questions about a non-profit – ask. If they don’t answer – don’t donate. Or then there are those evasive “political” answers that are really fluff and untrue.

    Ask who benefits from their organization – what and how do they benefit? We have started a scholarships fund and we also are going to start a research fund too. We distribute Newsletters, Awareness Ribbons and other items to those we are supporting and the general public.

    States also should take on some of the responsibility of following up on non-profits too. Many don’t. The IRS is not the one that should solely be enforcing laws.

    ~ Elizabeth in Virginia

    Thumb up 1 Thumb down 0
  39. Anonymous says:

    NPOs should also be held accountable for the behavior of their leaders as well. Falsely accusing organizations of unethical behavior is just as bad as stealing funds because it is purposely attacking the reputation of a good, honest organization and trying to divert funds to another organization. Do a search on “Elizabeth Doyle-Propst” and see how “ethical” she is.

    Thumb up 0 Thumb down 1
  40. Blah Blah.... says:

    In a few words, Yes, the non-profit sector is teaming with corruption. It could almost be reasoned, that in some areas the non-profit sector is almost entirely comprised of corruption dynamics. Especially, and knowing saying this expecting argument – the ‘Anonymous’ groups. Many aspects as result of the omni-presence of such an organization. There are no boundaries concerning the anonymous groups due to their nature in supposedly combating addiction(s). Simply put, they exists as an affiliation within every aspect of modern society… including governance and finance. Doing so with a ‘secrecy code’ built in. Any other standards on the planet would recognize such as a white collar crime organization.

    Thumb up 0 Thumb down 0
  41. Ruth says:

    Hi I work in the non profit sector in the UK. I think there are different types of frauds happening.

    1. People who deliberately set up a charity to defraud money. These are the charities that are rarely around for long, but long enough to rake in money for the top people.

    2. Small charities where there is no-one with the necessary money management skills. These usually have no paid staff or only 1 or 2 people. In these cases there is not deliberate fraud and the money may have been used very wisely, but there are no proper records to prove how the money is being spent.

    3. Charities that pay way below the going rate for jobs and thus attract staff who are not up to the job. I can think of one manager who has worked at a few smaller charities and left them all in financial chaos. She isn’t deliberately defrauding the charities, but she is using money for different purposes than it was given, not keeping proper records or following any financial rules. The charity she currently works with hadn’t even checked her references and are now panicking.

    4. Charities not following the rules for the benefit of their clients. This is charities who have been given money for 1 purpose, but the staff/board think the money would be better spent in another way. Or staff are getting money twice over for 1 service and use the excess to do something else. In this case the money is being used for charitable purposes but financial rules are being broken.

    5. The goods or services being given out by a charity going to people who are not entitled to it or being sold on for a profit. For example aid agencies goods being sold in a country rather than being given for free. Although in war torn chaotic countries it can be difficult for aid agencies to control and monitor their resources.

    6. Deliberate fraud by staff or Board members. In my experience this either tends to be a very small group where someone has ‘borrowed’ a few hundred pounds and says they intended to pay it back. Or a larger organisation where the chief executive is defrauding money, often with the complicity or in partnership with the some board members. This is usually a charity where people on the ground suspect something dodgy is going on but for local political reasons no-one with any power is prepared to challenge the situation.

    Saying all that I know there are many charities where there are very good control measures to prevent fraud or any kind of wasteful spending – I know because I have worked for some of them. I also think if you interpret frauds as not following financial rules or keeping proper records, then the rate of fraud in the private sector will be very high.

    Thumb up 0 Thumb down 0
  42. Cathy Berry says:

    I permit food service for a state. How do people obtain a non profit with a program called PIG N Out as the name of their not for profit organization? How does someone explain that to a government official when they file for a tax exempt status? Any body else see some thing really wrong with this?

    Thumb up 0 Thumb down 0
  43. bodycount says:

    My disability status and the last administrations strategy to shift service public benefit delivery over to pvt NFP’s: forced me to become”client”. I have 13 years experience. Most are very slick operations fleecing the general public. The bulk of your donations or tax money is spent on six digit director’s salaries and lavish expenses

    Most, but not all of the NFP are leeches. One meal service salvages meat that can’t be legally sold because the USDA has graded itt unfit for human consumption. This is re-packaged packaged as “meals with love” for the needy. . No nutritional labeling, no ingredients. No accountability. I give the meals away but even the low income families in my tenement won’t eat them!

    If you are compassionate for the disenfranchised. ASK questions! The last thing these agencies want to do is assist a client to reach self-sufficiency. That is the saddest part They depend on client body count to “justify ” spending. Much of what they spend is on lobbying the legislators for continued funding.

    One organization out of 12 in San Francisco .runs a clean , efficient and compassionate shop. They have a modest office. They collect cash donations and help the needy out by paying rent, doctor bills or utilities. The rest are just savvy con men and con women who are little more than parasities leeching off the suffering of others. at your expense.

    Before you donate, check out the service from a “clients” perspective. eat a few meals that you choose at random. Call the intake and pretend to be a client. Follow up with the referrals and see how many disconnected phone numbers they give you,

    Ask for case studies of persons that have actually been rehabilitated and now have gainful employment. How many of the “services” offered on their web page is actually available?

    The most offensive NFP’s to me are the ones that collect your taxpayer dollars and are under contract by the local government to provide services. They are not supposed to retaliate against “clients” who file grievances But they sure do, and terminate you in a heart beat without giving federally mandated hearings or even warning letters. . They operate with absolutely NO oversight.

    To prevent client abuse, insist that the NFP’s to which you donate have a Grievance Process that is run by an independent Community Board.

    No police department internal review commission ever seems touncovers corruption. Ask Serpico! (or Dianne Feinstein) about that.

    Thumb up 0 Thumb down 0
  44. Julian Dinkins says:

    Working with non profits over the past Fifteen years has shown me that the 13 percent figure is so low and wrong I can tell no true investigation was done. In my experience at least 80 percent of non profits are corrupt in some significant way. The sad and pathetic part of this is when people try and compare non profits with for profit organizations. Comparing the two is like comparing the church with a strip club. It makes no sense. They are supposed to be doing a community service, a business is supposed to make money(profit). Making excuses for them makes no sense at all.

    Thumb up 0 Thumb down 0
  45. John says:

    A friend of mine has been in litigation with a major charity for well over a year. His claims are well warranted, and to the layman, blatant. To make matters even more disturbing, discovery revealed an institution fraught with fraud and fiduciary irresponsibility. He reports outright lies in depositions and more unbelievable tactics. Of course, insurance companies will pick up the charity’s legal tab, out-lawyer the little guy and all will be swept under the rug. And the guy who only wanted to help forward the charity’s mission will be forced to file bankruptcy. But alas, this is how it works. Personally, I am sickened by the non-profits, as well as our legal system. I pray this man goes public.

    Thumb up 0 Thumb down 0
  46. Mazarine says:

    There need to be checks and balances in place in nonprofits, where, so often, senior leadership can go astray, by “feathering the nest” of the CEO (which is wrong) and stealing from government programs to cover costs in other areas.

    I’ve got a post on my blog now on how to be a good nonprofit leader, and I’ll have another one on Monday up to continue the job. http://wildwomanfundraising.com

    Thumb up 0 Thumb down 0
  47. Richard says:

    Gosh, I hope not but it certainly does seem like it at times. It is hard to say no to a good cause but at the same time we don’t want to get ripped off. Maybe any type of charity programs have to have some type of professional screening done.

    Thumb up 0 Thumb down 0
  48. Betty says:

    The agency I work at received $400,000 from Absolute Vodka for Katrina relief efforts. Not one penny went to the Katrina relief. It has been put in an account for Executive Directors salary. At one point, the agency almost closed it’s doors after losing it’s United Way funding so the money was moved to a separate savings account so that our bull riding E.D. and Assistant Director could ride the bull until the money ran out. They have fired person after person who have tried to address this fraud – skimming off the top of grants, not using them for what they say they will, asking employees to lie about what funds are used for, pretending to be part of the oil spill when in fact we are not. Since this director took over, she has fired every employee and has a 100% turnover rate every year. They begin by harassing employees and setting them up for blame on whatever their current scheme is. Apparently, this is acceptable to the board because, after months of auditing ($18,000 of the Katrina money unaccounted for) they are still in their jobs.

    Thumb up 0 Thumb down 0
  49. Roman says:

    Black Swans in Churches: Tails and Biases in Religious Giving.

    Shestakov, Roman (2010) “Black Swans in Churches: Tails and Biases in Religious Giving.,” Journal of Religion and Business Ethics: Vol. 2: Iss. 1, Article 3.
    Available at: http://via.library.depaul.edu/jrbe/vol2/iss1/3

    Thumb up 0 Thumb down 0
  50. kazi hossain says:

    We are looking for sum fund for technical education for development poor and low education or educated person for Learn for earn program

    Thumb up 0 Thumb down 0
  51. Sandy Frost says:

    Here’s one for you.
    Prostitution facilitated by nonprofits at tax payer expense.
    Google “Sandy Frost” and “Royal Order of Jesters.”

    Thumb up 0 Thumb down 0
  52. Appalled says:

    Unreal. I have spent the last four years looking for pro bono and/or legal aid help. There are tons of websites that lead to nowhere- and you can look up their 990 tax forms and see they get millions and grant money. And not one of them provides any meaningful amount of pro bono services. They tell you that they provide very limited help and the tell you about the services you can actually purchase from them. One of the them is the Legal Aid Society in Norristown, Pennsylvania at lasp.org They get 5 million a year-95% from government grants- and their tax return is very suspicious. Go to http://www.grantspace.org/Tools and in the right hand column is a widget to look up any “nonprofit” in the country. Judicialwatch.org is another one run by attorneys down in Washington- none of these organizations do anything but generate jobs for the people who run them.

    Thumb up 0 Thumb down 0
  53. Deborah says:

    There are many problems with non-profits that need to be investigated. Inflated documentation robs tax money from state & federal governments. There is no law specifying what part of their income has to go to the reason they were given the status. Some of what people think are clothes or some other staple needed for the poor are actually hiding drugs. They could also include weapons and/or ammunition. I say we turn all the accountants in the USA into deputies and have them investigate all non-profits. If World Vision can run their empire on 10% of their income then so should all non-profits.

    Thumb up 0 Thumb down 0
  54. Amy Jensen says:

    It is sad to see articles like this. There are so many good Non-Profit organizations out there; it is a shame to hear about those who are dishonest. There are so many people who need help, especially in Africa. It is important to really research an organization before donating. Find out what inspires them and where the money goes. http://sahbu.org

    Thumb up 0 Thumb down 0