Magazine article Stanford Social Innovation Review

The Problem with Trust

Magazine article Stanford Social Innovation Review

The Problem with Trust

Article excerpt

The most trusted employees cask in on lax internal controls to fleece nonprofits

In the early 1990s, Janet Greenlee was working as a program director at a family service agency in Denver when the organization's bookkeeper came to her with a dark confession: She was stealing from the nonprofit. The bookkeeper's misdeeds started out small. Her car was in the shop, she was short on cash, and so she "borrowed" $10 for a cab. No one noticed.

And so the bookkeeper decided to let the organization pay for the car's repairs as well. Soon enough, she was regularly looting the till, rationalizing that the nonprofit didn't pay her enough anyway. External auditors failed to find anything amiss.

When the bookkeeper finally copped to her crimes, the organization's executive director didn't fire her. She was a well-liked, longtime employee, he said. Frustrated, Greenlee resigned.

Some 15 years later, Greenlee is a professor at the University of Dayton in Dayton, Ohio, where she studies nonprofit accounting. In the December 2007 issue of the Nonprofit & Voluntary sector Quarterly, she and her co-authors report research showing that the pilfering bookkeeper was a typical nonprofit fraudster: a female with no criminal record who makes less than $50,000 per year, steals less than $50,000 from the nonprofit, and has logged at least three years with the organization. Their median age is 41 years.

"It's the last people you would suspect," says Greenlee.

But the most common embezzlers are not the most costly, the authors find. Instead, male executives earning more than $100,000 tend to pinch larger chunks of change - an average of more than $100,000. "White male managers get more because they are in a position to do so," notes Greenlee. "They are older, have the longest tenure in the organization, and have the highest-ranking roles. They are the people in whom you have the most trust. …

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