Harsh light thrown on employee theft among nonprofits
Problem of employee theft at nonprofits blown out of proportion
Charities were dealt a low blow in last Sunday’s front-page story about employee theft at nonprofits (“Theft at nonprofits ‘shockingly common,’ ” by Todd Wallack, Page A1, Jan. 28).
This is an important problem, and we shouldn’t downplay it, but is it really “shockingly common”?
The story reports that, in the past seven years, 1,100 tax-exempt organizations in the United States have reported theft, embezzlement, or other major diversions of assets.
Without context, that sounds like a big number. However, there are more than 1.5 million registered nonprofits in the country. That means the 1,100 charities in question represent less than 0.1 percent of organizations in the sector. Even if that number is underreported by a factor of 10 (it probably is), that’s less than 1 percent of organizations. That doesn’t sound “shockingly common” to me.
Researchers have found that a publicized fraud case for a single charity may result in an unwillingness of donors to give to any nonprofit. So why use a sensational headline that blows the problem out of proportion? Stories like this are bound to erode confidence in the nonprofit sector. To communities in need, that’s “shockingly” unfair.
The writer is the executive director of the Charity Defense Council.
Nonprofits get a bad rap
In his article “Theft at nonprofits ‘shockingly common,’ ” Todd Wallack gives the impression that employee theft is a scourge affecting nonprofit organizations more than for-profit businesses. The argument is that nonprofits are understaffed, with people who are underpaid and overworked, and run by people who are dedicated to the cause but are not business people.
I object to the insulting perspective that nonprofit organizations are somehow inferior to the management and integrity of private-sector businesses.
To make a very long story short, I uncovered significant embezzlement by a trusted volunteer and his wife when I took over leadership of the Massachusetts chapter of the Juvenile Diabetes Research Foundation in 1994. I presented the situation at an international board meeting of the foundation, which was attended by several CEOs and senior executives of Fortune 500 companies. After I described how this theft was perpetrated, almost to a person the executives in the room acknowledged that dealing with theft and embezzlement is part of “normal” business for them. They were swift to decide how to deal with the breach of trust: Sue the couple and report the crime, which we did. They were subsequently indicted.
Where there is money and there are things of value, there will be theft, and the best systems in the world will always spawn creative ways to steal them. Fortune 500 companies presumably have the best systems, and the 25 million small businesses in the United States likely do not. National employee theft numbers are staggering, and they affect all sectors.
Larry G. Raff
The writer is now president of Copley Raff Inc., a fund-raising consultancy to the nonprofit community.