November 17, 2013

Regarding the Nov. 12 editorial “Uncharitable actions”:

There is no excuse for abuse of the public trust through the direct or indirect theft of taxpayer dollars, particularly from social service agencies trying to make a difference on a shoestring. But the predictable indignation in response to such disclosures is naïve and hypocritical.

According to a study by the Association of Certified Fraud Examiners, organizations worldwide lose an average of 5 percent of revenue a year, or $3.5 trillion a year, from theft. So while unfortunate and sometimes heartbreaking, the fact that more than 1,000 nonprofits over the past four years — of more than a million required to file federal form 990 — have reported losing more than $250,000, or 5 percent of receipts, from fraud is no greater incidence than occurs in the for-profit sector.

Having audited nonprofits for more than 30 years, I can report that most of these organizations do not need “a wake-up call,” and they are keenly aware of the threat of financial and reputational loss as a result of fraud. Unfortunately, the public expectation and associated view that the best nonprofits spend the smallest percentage of their total support on “overhead” can be a Catch-22 for those that should spend more of their funding to ensure sound financial controls but risk funding for doing so.

John P. Langan, Alexandria

The writer leads the nonprofit practice at the accounting firm CliftonLarsonAllen.