The Opposite of Accountable
Eight years ago, ACORN, a national grassroots community organizing nonprofit, was the victim of an embezzlement of almost $1 million from an employee who was the brother of the organization’s founder. The fraud was never reported to their board of directors or legal authorities, but a small internal group negotiated a restitution agreement and then kept the perpetrator on staff. The situation just became public after pressure from a whistle-blower and was reported this week in The New York Times. Quoted in the article, ACORN’s president said, “We thought it best at the time to protect the organization, as well as to get the funds back into the organization, to deal with it in-house.”
Can we make a list of the problems with this scenario? Among other reactions, I want to thank the whistle-blower, though I would like to know why it took eight years for anyone to think this was not OK. Yesterday, ACORN released a statement from the president apologizing for their handling of the situation and announcing that the founder (brother of the embezzler) had stepped down. The most alarming phrase in the statement is that “The ACORN Board recently learned …” How comfortable would you be if you sat on that board – with fiduciary responsibility – and learned that you had been sitting for years on this ethical powder keg?
The statement says, “We want to assure our many friends and supporters that ACORN’s Board has taken additional steps to ensure increased transparency and accountability” (emphasis mine). It seems to me that they need to start with basic transparency and accountability. They can start with a basic accountability overview from Independent Sector.
There is a lesson here for every nonprofit organization. Public trust really is the most important asset for each individual nonprofit and for the whole sector. It’s too easy to mess it up, which is why we all get asked to answer questions and fill out forms and certifications by donors, foundations, the IRS, state Attorney General, etc, etc, etc. As long as these kind of egregious situations occur, and especially when they are mishandled, nonprofits will be subject to deeper scrutiny and misgivings about trustworthiness.
Kate -
I saw that ACORN story. How sad that they thought covering up a criminal act was the way to go. As you mention, it appears they still haven’t learned their lesson, as they only seek to “increase” their transparency. They should seek to be fully transparent!
The same story in the New York Times also included information about how the Points of Light Institute (POLI) handled misappropriation of funds from an online travel vendor with which they had a cause-marketing relationship. (Disclosure: I sit on the board of Hands on Twin Cities, a Points of Light Institute affiliate.) The contrast between ACORN’s and POLI’s reaction is substantial. Points of Light quickly disclosed that their travel vendor was under investigation for selling trips and not providing any services. They shut down the online site and disclosed the situation on their website, and have continued to provide updates.
The lessons are simple: 1. Ensure financial oversight and sound internal financial controls; 2. If you discover or suspect fraud or criminal acts, don’t cover them up!
Soren Jensen
M.A., Nonprofit Management
Comment by Soren — July 14, 2008 @ 9:12 am
Interesting post. I was wondering if you could associate the lack of board fiscal oversite; as more prevalent with ‘representative boards’ that do NOT receive exhaustive, ongoing board training and development. I identify representative boards—as when the organization places low income, homeless, HIV/AID, women, etc.,whatever the target population for the organization—as the majority of the board.
I should also emphasis, the point is not specifically, the placement but the lack of training provided in an ongoing manner. A single class or a single board meeting stating these are your responsibilities seems woefully inadequate, when members of the board have no business experience, no board experience, etc. I’ve just always felt that these type of boards don’t provide an adequate checks and balance for the organization.
Comment by allgood2 — July 16, 2008 @ 8:21 am
Allgood2, you make a great point about training, and especially about the need for it to be ongoing. While many (most?) boards have NEVER been trained in governance, many others see a one-time training session as somehow adequate. For any training to be effective, it has to be sustained over the long haul, then started over again.
This also applies to internal staff training, of course. I have worked for more than one organization that thought showing a video — once — was an effective training strategy.
- Soren
Comment by Soren — July 17, 2008 @ 2:08 pm
The contrast between ACORN and Points of Light Institute is remarkable, as the NYT reporter made clear. POLI took immediate action, disclosed the information, and carried out a process to make sure that the misappropriation was not only reported but also referred to law enforcement. An interesting set of cases to discuss.
The training questions raised by both commenters is really important. I think it goes way beyond training though to the issue of board culture. Good governance is grounded in everything from process and procedures to leadership to recruitment. Above all is a shared understanding of the role of a governing board and actively walking the walk. Many boards, and executive directors, don’t acknowledge that the board needs to actually set aside time at meetings and as part of planning to develop good governance. Formal training is a step and the hands on regular practice is the rest.
Comment by Kate Barr — July 18, 2008 @ 1:09 pm