Avoiding Scandal for Charitable Giving

Adrianne DuMond

What precautions can be taken to avoid any scandal in charitable giving? Recent scandals by well-intentioned philanthropies have caused concern in the non profit world. (See Madonna and Malawi girls; Greg Mortenson and Three Cups of Tea; Penn State’s Coach Sandusky and The Second Mile, Rev. Schuller and the Crystal Cathedral). Charity experts say there are common causes that can lead to this kind of scandal. They are: 

Insufficient oversight: At least five (5) independent Board members need to provide oversight of how the funds are spent. Charity-rating organizations usually require at least five, and more if the charity is a large one. 

Potential conflicts of interest: Are donated monies personally benefiting an individual or business of a Board member or staff? 

Celebrity Founders: Inspirational founders, who create loyal followers, impassion an audience, and blind a naïve, innocent Board to the pitfalls of poor financial oversight, can cause a scandal from which the charity has a difficult time recovering. 

Family ties: Daniel Borochoff, President of Charity Watch, a charity watchdog organization, says ‘Family members can easily collude’, and warns against Boards being dominated by family members.

Being proactive in 2012, surveying the leadership of your organization, and its policies, are the best way to stay clean from any scandal. This article was researched in the January, 2012 BoardSource Newsletter, from an article written by Sandra Block.

Author: Adrianne DuMond, Executive Coaches of Orange County, www.ECofOC.org