We talked about ethics in our last post – it’s quite the issue these day in the world of nonprofits. Tuesday’s topic du jour - fraud. 

A recent NYT piece outlined a report by the Certified Board of Fraud Examiners which estimated that the overall cost of fraud to nonprofits was at $40 billion for 2006, or some 13 percent of the roughly $300 billion given to charity that year.  The piece states that if in fact $40 billion was lost to fraud, then the corporations and foundations who gave in 2006 might have just as well burnt their benjamins – it was the same amount.

And we know this report lumps all the organizations together.  But does one bad apple spoil the bunch? In this case, maybe.  How do nonprofits expect donors to give when 13 percent of the donation ends up paying for some employee’s vacation or sports car?  Who do they know who to give to when the report tells us that almost all nonprofits encounter some fraud. The report also told us that ethics or no ethics, most givers don’t have very much faith in the way charitable organizations spend their money.

In the case of all this fraud, accountability might just hold us over. If we don’t have faith in these organizations, why don’t we question them? If we ask them measure their efforts and clearly show us the outcomes, and we like what we see, we might just take that leap and hand over the cash.  Rather than tattling, let’s be the bigger guy . Let’s show nonprofits what they can do to stay good apples and show donors what they need to demand in order to feel good about giving.