By: John S. Morlu II, CPA
1. The American Red Cross (ARC) – Haiti Earthquake Response (2010)
Amount at Stake: Nearly $500 million in donations
Scandal: Mismanagement, inflated results, lack of transparency
Only six permanent homes were built despite huge fundraising. Funds were diverted to overhead and partner organizations.
Lesson: Reputation and scale do not excuse poor transparency. Always follow the money, not the brand.
2. Feed the Children – Internal Power Struggle (2009)
Amount at Stake: Over $1 billion in revenue over 5 years
Scandal: Financial mismanagement, nepotism, retaliation
Founder fired over misconduct including misuse of funds and retaliation against whistleblowers.
Lesson: Weak governance allows founders unchecked control. Strong, independent boards are essential.
3. One Laptop Per Child (OLPC) – Idealism Without Accountability
Amount at Stake: Over $100 million raised
Scandal: Financial mismanagement, overspending, lack of transparency
Mission failed due to poor oversight and inflated costs.
Lesson: Ambition without financial discipline leads to collapse. Track, report, and adapt.
4. Central Asia Institute (Three Cups of Tea) – Greg Mortenson (2011)
Amount at Stake: Over $60 million in donations
Scandal: False claims, misused funds, fabricated impact
Donor funds used for personal expenses and promotional tours.
Lesson: Charisma is not accountability. Verify impact with evidence, not anecdotes.
5. Kids Company (UK) – Government Darling to National Embarrassment
Amount at Stake: £42 million in public funds
Scandal: Irregular accounting, unverified outcomes, cash giveaways
Collapsed due to reckless spending and undocumented aid.
Lesson: Even politically favored nonprofits need auditable results and financial controls.
6. National Center for Employment of the Disabled (NCED)
Amount at Stake: $63 million in federal contracts
Scandal: Misrepresenting workforce to obtain government subsidies
CEO falsely claimed 75% of workforce was disabled, was sentenced to 10 years in prison.
Lesson: Fraud in nonprofits isn’t just unethical—it’s criminal. Compliance audits matter.
7. Bayview Hunters Point Foundation – San Francisco
Amount at Stake: $650,000
Scandal: Embezzlement by former CFO
CFO funneled funds into personal accounts for five years.
Lesson: Small nonprofits need strong internal controls too.
8. United Way – Historical Misuse of Funds (1992)
Amount at Stake: Estimated $1.2 million
Scandal: CEO misused funds for personal luxury expenses
CEO William Aramony was sentenced to 7 years in federal prison.
Lesson: Donor dollars are sacred. Violating that trust has severe consequences.
9. Susan G. Komen Foundation – Political Fallout (2012)
Amount at Stake: Over $75 million in lost donations (estimated)
Scandal: Politically motivated funding decision led to massive backlash
Donations and participation plummeted after the defunding of Planned Parenthood.
Lesson: Mixing politics and mission can shatter donor trust.
10. Confucius Institutes – Hidden Funding and Influence
Amount at Stake: Tens of millions globally
Scandal: Foreign government funding without transparency
Institutes failed to disclose Chinese funding and control over curriculum. Over 60 U.S. universities shut them down.
Lesson: Transparency and disclosure are essential, especially in international partnerships.
Common Threads: What All These Scandals Share
✅ Lack of Financial Oversight – Preventable by independent audits, board reviews, and transparency.
✅ Hero Worship or Board Capture – Unchecked charismatic leaders caused deep damage.
✅ Poor Documentation – Weak records enabled fraud and misuse.
✅ No Whistleblower Protection – Silence and retaliation allowed scandals to fester.
Final Thoughts: Integrity Is a Daily Discipline
The nonprofit sector thrives on public trust. That trust is earned through transparency, discipline, and relentless accountability. If you’re on a board, a donor, or a leader—ask tough questions, demand audits, and never let the mission become a shield for mismanagement.
Final Word
Nonprofits don’t get a free pass just because their mission is noble. The road to prison is littered with good intentions, bad accounting, and unchecked egos.
Author: John S. Morlu II, CPA is the CEO & Chief Strategist of JS Morlu, a globally acclaimed public accounting and management consulting powerhouse.
Through cutting-edge technology and data-driven strategy, JS Morlu helps organizations operate with clarity, control, and compliance.
– ReckSoft (www.recksoft.com ): AI-powered reconciliation for nonprofit and donor accounting
– FinovatePro (www.finovatepro.com ): Cloud accounting for donor-driven missions
– Fixaars (www.fixaars.com ): Empowering nonprofits with maintenance and repair logistics