WHAT NONPROFITS CAN LEARN FROM THE PENN STATE FIASCO


By James D’Ambrosio

In the wake of the egregious scandal at Penn State University involving the sexual abuse of young boys and those in positions of power not reporting criminal activity to the police, it should give everyone,  nonprofit or any other business, reason to pause. Not doing the right thing resulted in tragedy: abuse continued unchecked for years, damaging many more lives; Coach Joe Paterno and Penn State President Graham Spanier were fired; the college has a long-term PR nightmare; and a nonprofit is closing its doors, among other problems. In short, everyone lost.

The problems at Penn State likely stemmed from money, power and an organizational culture permitting self-interest to supersede the college’s mission. In a painful twist, the accused, Jerry Sandusky, was also founder of the Second Mile Foundation, a statewide nonprofit in Pennsylvania providing children programs and activities to promote self-confidence and academic success. Reportedly the charity will close and seek another nonprofit to continue its programs (read article here: http://nyti.ms/vANZkn).

If it weren’t for the many millions generated by the football program — ticket sales, corporate sponsors, major contributors, booster clubs and prominent alumni — do you think the matter would have been handled differently? We may never know for sure, but one thing is certain: there would have been far less pressure to push criminal acts aside and hope nothing happened.

AN IMPORTANT HISTORY LESSON FOR NONPROFITS

What can nonprofits learn from this fiasco? Plenty. One of the most infamous cases of nonprofit mismanagement occurred nearly 20 years ago. In 1992, William Aramony, who built United Way of America into one of the nation’s most prestigious charities, was forced out as president and served six years in prison for misusing funds to support a lavish lifestyle and a teen mistress. He recently died of cancer at 84 (read obituary here: http://nyti.ms/sH7ZvV).

The New York Times reports that in 1994, “Mr. Aramony and two associates were indicted on 71 counts of fraud, conspiracy, tax evasion and money laundering, accused of stealing $1 million from a United Way corporate spinoff.” Keith E. Bailey, chairman of United Way at the time said, “Obviously this is a personal tragedy for the individuals involved, but a self-inflicted one.” The key word is ‘self-inflicted’ — another case of too much money and power leading to tragedy. All totally preventable.

THE ALL-TOO-POWERFUL LURE OF MONEY

The lesson here is to always be above-board, especially since nonprofits are entrusted with administering other people’s money — donors, grantors, corporate sponsors, government contracts, etc. In fact, sometimes I’m taken to task by people expressing mistrust about how nonprofits use their funds, despite any specific data or incident. There is, to a  degree, a negative perception about nonprofits among certain groups of people. In response, I encourage skeptics to visit Charity Navigator (www.charitynavigator.org), an excellent Web site that rates nonprofits, to research an agency before contributing.

There’s an old Italian saying, “Money makes the dead man’s eye’s open.” It helps explain, in part, why too often the pursuit of it [money] leads people down the wrong path. Whether Penn State, The United Way or any other business scandal, it’s important the nonprofit community be mindful of these traps to reduce the possibility of future fraud and abuse harmful to people and the industry as a whole.

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QUESTION TO READERS: What is your view on this issue? Any other insights to add?

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