The field of nonprofit forensics is seemingly on the upswing. New York City's Department of Investigation (DOI) has established a Nonprofit Vendor Fraud Unit in the wake of DOI's investigation into the scandal at Gloria Wise Boys and Girls Club (see the articles by our own national correspondent, Rick Cohen [pdf], and Paul Sieminski [pdf] on this topic).
"Most of these cases start through complaints from within the nonprofits themselves," says DOI Commissioner, Rose Gill Hearn. "The classic complainant is someone who has been asked to falsify a record or pay for something that is not a legitimate purchase for the program. People who are put in those positions do not want themselves to get into trouble. They are being asked to do something that is not right. It concerns them; it angers them. So, they come forward."
While the state of affairs at Gloria Wise was extraordinary, the ethical slips that led to the steep slope into disrepute were, unfortunately common. Witness the following letter to the Nonprofit Ethicist, in the forthcoming Fall issue of the Nonprofit Quarterly:
Dear Nonprofit Ethicist,
I worked for a supervisor who was concerned about posting figures that presented the fundraising department in a flattering light — although, for various reasons, our figures did not do so. We were always struggling until (literally) the last minute before a board meeting, the 31st of the month, etc., counting money, to get every last cent posted, when comparing it with last year's month-to-date, etc.
As the year progressed and we failed to compensate, however, my supervisor's "creative accounting" got to be very difficult to deal with. As the one who was responsible for reporting the figures from the database, I was instructed to do a variety of increasingly questionable things.
Although a certain, separate fund was not counted in any previous year's total, I was instructed to add this fund's income into the general Annual Fund total for this year.
When I refused to alter the data entry of <gift date> from the postmark on various gifts received by mail, my supervisor made a point to volunteer to photocopy gifts himself on crucial days during the end of certain months and did not copy the envelope, which indicated the postmark.
At year's end, many, many gifts that were received — either by mail or by hand in late January or even early February were posted to the prior year's income. I explained that this was not only wrong but illegal! He dismissed my objections as "not understanding what was at stake."
Sign up for our free newsletter
Subscribe to the NPQ newsletter to have our top stories delivered directly to your inbox.
There were certain things I would do, such as lump this fund with that fund. It was money earned, just being counted together. There were other things I refused to do, such as list funds earned on dates when they weren't. When I refused to falsify dates, my boss just threw away documentation so that I had no idea when donations were legally received. I no longer work at that organization.
The writer who signed him or herself as "Pressured" eventually left the organization in question but the Ethicist suggests that he/she should have taken more responsibility for calling the problem to account. This is undoubtedly hard to do and risky at a personal level but just leaving the scene of the crime even when the transgression is not your idea constitutes complicity.
At stake, of course, is the credibility of nonprofits in the eyes of the public.
If you have an ethical question to ask the Nonprofit Ethicist, he stands at the ready. Please address your question to him or just reply to this email. As you know, we won't reprint your letter without your permission, so please feel free to write back to us and the Ethicist will reply.
p.s. If you are not yet a paid subscriber to NPQ, now is the time to sign up. If you only get the e-Newsletter, you are missing a ton of good information and advice on management and trends among nonprofits and their funders. Subscribe today and you will receive Nonprofit Reality Shows, Part I, absolutely free. That's five issues for the price of four!