In recent thought leadership emails we’ve talked about the importance of having as strong a fraud-resistant culture within your organization as possible. Newspaper headlines announcing the theft or misappropriation of assets from a charity are all too common and can be very damaging to the reputations of charities everywhere. Nowhere was this more evident than the staggering report last week of a principal behind four cancer charities that allegedly bilked donors out of $187 million.  How could this happen, especially when James Reynolds, Sr. had a history of deceitful behavior over a number of decades throughout a number of organizations and states?  Many believe that the failure of regulators to take action could be a significant contributing factor.  Most states are unable to provide adequate oversight, as they lack the substantial necessary resources.  And decreased funding for the exempt division of the IRS is problematic as well.

So what can you as an honest and well-intentioned nonprofit do to make certain your stakeholders remain loyal and generous?  How do you weather the storm of what seems to be a steady parade of misbehavior, fraud and mismanagement in the nonprofit arena?   Often transparency and information can make a difference.

• Show your stakeholders what it is that your nonprofit does and continues to do.  Educate them regarding your mission and how you are striving to fulfilling it with the help of your dedicated governing board, management, and staff.  Facts and figures can easily be displayed and frequently updated on your website. 
• Be as transparent as possible, especially when it comes to the organization’s finances. Post your most recent audited financial statements, IRS Form-990, Conflict of Interest Policy and Whistleblower Policy on your website.
• Send out educational mailers to your constituency.  Let them see what they are supporting.
• Communicate the importance of the organization’s effective stewardship of the funds entrusted to them.
• Encourage your stakeholders to be engaged.  Talk about the tone at “your” top.  Encourage their questions and involvement.
• Let them see all the reasons why supporting your organization is the right choice.

At Dermody, Burke & Brown, we encourage every organization to be as educated as possible regarding fraud in the nonprofit environment.  It remains a challenging element for all organizations.  Contact your audit and certified fraud team at DB&B with any questions or concerns.

DB&B…Educating to Empower

The information reflected in this article was current at the time of publication. This information will not be modified or updated for any subsequent tax law changes, if any.