Transparency Leads to Trust

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November 14, 2010; Source: Times Herald | Sixty-three miles north/northeast of Detroit is the Blue Water Area around Port Huron, Mich., adjacent to Lake Huron and the St. Clair River. It is a lovely waterfront get-away area comprised of several beautiful small coastal communities. It is also an area where despite the small town resort setting, some nonprofits have faced ethical or even criminal problems within their ranks.

In 2010, the now-former treasurer of Marine City Boosters, a backer of high school sports, was charged with stealing as much as $20,000 from the organization. Another woman was sentenced to community service for embezzling money from Can-Am BMX, a nonprofit that conducts bicycle races at a county park. In Port Huron, a woman got a year in jail plus required restitution of $185,000 for having stolen money from her church.

Apparently, the small town setting hasn’t been immune from embezzlement in the past, as a former Goodwill Industries exec in the region acknowledged walking off with $750,000 back in 2004. The solutions require strong nonprofit oversight and a revived sense of ethics. The board’s oversight is key, according to Melanie Herman, the executive director of the Nonprofit Risk Management Center, which requires all board members to engage in fiscal oversight, not just relying on one or two board members with financial backgrounds.

What doesn’t seem right, for example, are fundraising events with more people this year than last but generating less money. This should raise questions for all board members, not just those with “CPA” initials after their names. Kyle Caldwell, president and CEO of the Michigan Nonprofit Association, makes the point that transparency, within and outside the nonprofit, is a key tool for heading off potential embezzlement and other problems. In small cities, transparency about how groups operate helps instill and maintain community trust—and helps rebuild trust when problems occur and are remedied.

At Marine City Boosters, the president of the organization described the policies and procedures that have been adopted since the embezzlement was discovered, hoping that knowledge of what the group has done to minimize the potential for this kind of abuse in the future will help maintain the community’s faith in the nonprofit. Transparency leads to increased trust, not just in Blue Water nonprofits, but throughout the nonprofit sector.—Rick Cohen