A Crime That Flourishes Because Victims Remain Silent

There’s a fascinating article in the New York Times, “Report Sketches Crime Costing Billions: Theft From Charities.”

“I gave a talk to a group of nonprofit executives a few weeks ago, and every single one of them had a fraud story to tell,” said one of the report’s authors, Janet S. Greenlee, an associate professor of accounting at the University of Dayton. “This has been going on for years, but there’s a feeling that it shouldn’t be discussed,” because of the effect it might have on donations.

But it will now be harder for charities to hide fraud, because beginning with tax forms they must file for 2008, the Internal Revenue Service has added a question requiring them to disclose whether they have experienced theft, embezzlement or other fraud during the year.

This resonated pretty strongly with points we make in the New School. It’s about how problems fester when we don’t talk about them. There’s a principal-agent problem here, where charities, acting as agents for their donors, are actively concealing problems. And it shows yet another example of diverse perspectives helping to solve problems.

The report is available at “An Investigation of Fraud in Nonprofit Organizations.”