Transparency - A Tale of Two Nonprofits

I read in today's New York Times that two nationally known nonprofits are in the news spotlight because of reports of misappropriation of agency funds. The responses of the two organizations are instructive.

ACORN (not rated by us), a community organizing group, is reported to have had approximately $1 million "embezzled" about 8 years ago. The leadership of the organization chose to tell no one, not even their Board of Directors. In fact, it is reported that they even had the person involved in the embezzlement on payroll up until June of this year! After 8 years of cover-up, in May of this year, a whistle blower "forced ACORN to disclose the embezzlement".

The Points of Light Institute (which we give a four star rating), that promotes volunteerism and citizen activism, is reported to have had bogus travel packages auctioned off on eBay by an independent contractor. The organization found out about the problem in May of this year when they got complaints from people who had not received vouchers for their travel packages. The Points of Light Institute immediately jumped into action:

1. They stopped the travel auctions immediately.
2. They contacted everyone who had bought the travel packages.
3. They have begun to repay people who bought the packages and hope to pay off all of them.
4. They posted information on their Web site about the problem.
5. They contacted the US Attorney's Office.

Here at Charity Navigator, one of our core beliefs is the importance of charity's transparency - that they maintain open communication about their operations, both good and bad, with the public. This transparency is critical for donors to maintain their trust in an organization. Without that trust, an organization can not survive for the long haul.

ACORN has explained its withholding of information as a concern that their critics would use the information against them if it was found out. How much worse will it be for them now, than if they had owned up to it at the time??