Are You Accidentally Supporting Corrupt Nonprofit Organizations and Charities?

Former Pennsylvania State Rep. Movita Johnson-Harrell has a compelling story.  Even the State Attorney General, who recently charged her with several crimes, alluded to the pain she experienced in her life.  It was a remarkable story of perseverance after being affected by gun violence, triumph and helping others. Yet, there she is, facing time in prison for using a charity called “MECA” for assorted alleged acts of theft, fraud, and other crimes of dishonesty.  

According to the Attorney General, Johnson-Harrell has accepted responsibility for her crimes and is pleading guilty.  She has also resigned from her public office.  Johnson-Harrell has stated she may dispute some charges. She like any other defendant is innocent until the state proves her guilty.   

What is also undeniable is that many of the kinds of things the Attorney General accused Johnson-Harrell of are common with nonprofits, both Muslim and non-Muslim.  Indeed, the President of the United States has also done egregious things with his “charity” in New York, undetected by law enforcement despite his public profile, until news media started asking questions. The President faces no criminal charges.  

My purpose here goes beyond Johnson-Harrell’s legal troubles. Instead, it is to help nonprofits and their leaders stay out of trouble and to give donors an essential tool in being a thoughtful donor. We often donate because of “social proof.” Someone invites you to donate online; a friend invites us to a fundraiser, we hear a good speech or testimonial, and we give.

 We often don’t particularly care about accountability. We should. Let’s dig deeper to understand how charities work so that we can be better donors with the limited funds we have to give with excellence. 

The Role of Government Oversight in Charities 

What state a nonprofit is in makes a difference.  The state attorney general typically has regulatory authority over the nonprofit sector.  Charities have tax benefits because of the social good they theoretically provide. But what happens if the charity is not keeping faith with its beneficial role?  If a CEO of an environmental charity pilfers funds for personal use, you cannot reasonably expect a family of ducks to sue. The Attorney General is there for the ducks, the trees, the homeless, the addicted, the mentally ill, the beaches, the works of art, the future poor patients who are not yet poor or sick, and everything else charity should benefit.  At least that’s the idea.  

Abuse by nonprofits is a violation of the public trust.  It is public corruption against society and not merely cheating a donor.  

Because of this role, from time to time, you see lawsuits and even criminal prosecutions by state attorneys general for corruption by nonprofit leaders. A high-profile state representative like Johnson-Harrell is an obvious target since prosecuting her lets the rest of us citizens know law enforcement is paying attention. But these lawsuits and occasional criminal prosecutions are rare compared to how rampant nonprofit corruption is. Attorneys General typically don’t put adequate resources into regulating the more than trillion-dollar nonprofit sector.  

Religious Charities Can Usually Get Away With More

In some states, for example, California, religious corporations are exempt by statute from oversight for things like breaches of fiduciary duty. The lack of accountability is remarkable since religious charities can be extremely corrupt, something known to Americans for much of its history.  Exposing religious charity corruption has long been fodder for documentaries and movies. Certain Christian preachers on TV are known to abuse nonprofit status to flaunt extreme wealth with no negative consequences.

People who run religious nonprofits, including Executive Directors and board members, can still be criminally prosecuted, but you usually would not expect it. Various taxing authorities also have authority over charities. The IRS is the primary regulator for charities nationally. For the most part, though, the IRS has been leaving nonprofits, even obviously bad ones, alone. Religious nonprofits, like those classified as “churches,” don’t need to file Form 990s, annual disclosures required for other nonprofits. Therefore much of what these groups activities are opaque to both the government and the public.   

With some notable exceptions, governments and law enforcement at all levels mostly ignore nonprofit corruption. The times they do is typically the exception that proves the rule.  

For the most part, then, sorting out the good nonprofits from the bad ones is left to donors. We all contend with hard-sell data-driven marketing tactics from social psychology.  We don’t usually don’t know how to distinguish between good organizations and bad.  

Look Beyond The Pitch

Stories of nonprofits and their leaders can be compelling. But narratives can also be used to manipulate, distract, and hide. The raw charisma of a speaker quoting Quran and Hadith can be waived up to donors to make them think they are doing good work in the path of Allah when they may sometimes be enabling criminality. Charisma and the power of stories can get us to contribute to causes better than just about anything.  

There are various red flags to look out for, but I will focus on perhaps the most obvious one, an executive of a charity acting as a member of the board.  

No Real Board Accountability

Johnson-Harrell was on her own nonprofit board while also serving as an executive.  This practice was also present at scandal-plagued Ta’leef Collective. State law does not typically forbid a CEO or other employee (like an imam) from being a board member, despite it being a glaring conflict of interest. It has never been nonprofit best practices to have employees oversee themselves since it is a horrible idea on its face.  The only possible real justification for this is when a nonprofit is new, small, all volunteer-run, and there are not enough volunteers or funds available to make accountability a priority.  While there is potential for abuse here, we tend to ignore it out of practicality.  

Now larger nonprofits can have employees, as well as others, with personal, family or business interests with the charity (like a vendor) on the board might point to a “conflict of interest policy.”  Of course every nonprofit should have one in case unexpected conflicts come up.  They are not, however, solutions to self-created problems the organization never needed to have.   

Accountability is Hard 

It still begs the question:  Why engage in the reckless practice of having an executive overseeing himself or herself?  Are there no sufficiently qualified people in the Muslim community capable of helping with the board of an organization?  Unlikely. 

What we do know is the main reason Muslim leaders (non-Muslims as well) chose to police themselves is that real accountability is hard, maybe even a little messy.   

You may have heard this story before: An Imam and a Masjid Board have a conflict, resulting in the Imam leaving.  The Imam does not go quietly, though, since he is angry with the board. He tells his supporters (of which he has many in the local community) that boards are incompetent, imbecilic, don’t understand the “youth” or whatnot.  The best way to run a Masjid, you see, is for the Imam to call all the shots. He will usually adorably say all this with the earnestness of someone who feels he is the first person who ever had this insight. Plenty of Muslims believe him and are hurt by whatever petty drama took place at the Masjid last week. They will join his new storefront Masjid, sometimes across the street from the Imam’s former Masjid.  

These are often pop-up institutions born out of vainglorious temper tantrums, built on the foundation of one man and some upset donors who soon move on to chase the next shiny thing, or simply rejoin their old Masjid. Such places typically do not last over the long haul. If you have been around a Muslim community for a few decades, you have seen several come and go.  

Badly Governed Respected Institutions 

More of a long-term threat for the Muslim community is when real institutions with staying power with endowments, employees, and buildings go the route of slipshod accountability-free governance where an executive gets to oversee himself.  Eventually, when you set up institutions with plain-as-day opportunities for corruption and abuse, everything can collapse. It happened in a spectacular style for Christian institutions with no real accountability for the people running it (many are still like that).  Many Muslim institutions we all respect that do good work have nonprofit governance so poor they almost seem custom-built for corruption. 

The beautiful Crystal Cathedral outside Los Angeles once boasted a massive endowment, a global TV viewership for its “hour of power” and donor memorials that would last forever.   It fell into bankruptcy because of the same kind of nonprofit governance increasingly common in the Muslim community. Inadequate or non-existent board oversight is a form of structural corruption, even if no abusive practices are currently taking place.  It should be enough of a red flag that someone can abuse authority with no real accountability. Unless we start demanding accountability from Muslim leaders, those we trust our donations to, we should reasonably expect more criminal charges as we saw with MECA, scandals like Ta’leef, and spectacular failures like the Crystal Cathedral. 

Other Board Members May Not Be Much Help

One response by self-interested board members may be to point to the existence of “independent” board members to keep insiders (like the CEO or equivalent) in check.  You should never assume this creates accountability. We cannot stereotype nonprofit boards, of course, and many operate in different ways. I have seen Muslim institutions were board members: 

•  Have no visibility into the organization’s operations, budget, or much of anything else important. Though they do have meetings and manage to argue about things. 

•  Never attended board meetings despite being members for many years and did not know if the charity has been having meetings all these years.

•  Were never informed they were members of the board, despite their names being on public information filings with the state.

• Helped start the organization as Ph.D. students and got a lifetime membership on the board, but that was decades ago when they lived in the United States.  

Those who dislike accountability prefer “straw” board members who are either not present or can be “handled” by management.   A well-known example of this is Theranos, a Silicon Valley “unicorn” startup with a fake blood-testing product. Many supposedly sophisticated investors were reassured when the company stacked its board with famous octogenarians and nonagenarians. None of them knew and did not bother to ask if the entire operation they were overseeing was a fraud.  

These kinds of board shenanigans generally take place where there is a CEO who is also a board member and would prefer to run things without dealing with pesky difficult questions.  Board members are there for the appearance of accountability but are often little more than seat-warmers.  

It’s Not About a Leader’s “Integrity”

Some Muslim leaders will take a call for accountability as a personal insult to their integrity.  This sentiment is misguided. Instead, it is about building systems that make our institutions sustainable. I don’t know Johnson-Harrell.  However, no Muslim can honestly claim to be better than her, either in intent or commitment to the community.  Yet, without a system of accountability, the fallibility of decent men and women magnifies.

 You need to have a Shura (mutual consultation) in leadership, that is how the Quran advises us to handle our affairs.  A nonexistent or fundamentally insincere “Shura” designed to not hold anyone accountable is asking for trouble.  

Muslim nonprofit leaders can find their freedom to spend charitable dollars without meaningful accountability intoxicating. Leaders who you would never think can make severe errors in judgment start to make them.  It only gets worse from there.  

Work in an Islamic charitable institution is bigger than one man or woman.  If you create a charity with no meaningful checks and balances, your work won’t be sustainable.  

Abu Bakr , the first Khalifah, could not determine his salary as the leader of Muslims.  He was always accountable, and as I pointed out in a previous article, he preferred it that way. Muslim leaders should welcome accountability and not think of it as a personal slight when asked about the issue from within the community.

What Board Members Should Do 

If someone entrusted you with oversight of a charity, there are helpful educational resources that can help you be excellent. Use them.  Remove board members with conflicts of interest, especially employees and vendors.  

You need to prepare for and be present at meetings.  Hold the organization and each other as board members accountable.  Don’t be on the board to win anyone’s favor, least of all the CEO or Imam. You have an Amanah (a trust), to make sure the charity is operating with excellence in everything it is doing.   Ask difficult questions that donors will rarely know to ask. Read all financial statements and reports, that is where the mischief happens.  Make sure no executive can “handle” you into submission.  If you cannot do these things, don’t be on the board. 

The common denominator in virtually all nonprofit corruption cases is executive domination. Don’t be used.

What Donors Should Do

Encourage charities you like that have weak governance to change their practices. Uncritical support can enable structural problems, which can be destructive to the organization over the long term. Sometimes, the best contribution you can make to an organization is to encourage them to reform their governance. You can do this as a small donor. Don’t expect major donors to request such changes.  

You may not know much about the organization’s finances or how good or bad the organization’s operations are. However, you do know an employee or vendor is on the board of a charity is a signal the organization is uninterested in holding its leaders accountable. There are plenty of good charities worth supporting. If the charity remains stubborn about not allowing accountability, move on to the next one.