To Our CultureSource Community:
Like you—whether a local or national colleague—I have been shocked by the startling magnitude and historic nature of alleged fraud at the Detroit Riverfront Conservancy.
We should all react to this situation as an eye-opening jolt.
It has certainly prompted me to re-check my financial leadership and our organization’s financial management practices. Across my six years as CultureSource’s executive director, we have experienced revenue growth well over five hundred percent. Amid that progress, I have adhered to business advice of financially savvy leaders and mentors: sign all checks, segregate duties, avoid expense management that leads to “death by a thousand cuts,” and be aware that leaders of color receive little forgiveness for screwing up.
External to my looping mental monologue, I am most concerned right now that relative to this single, potentially extraordinary case, a narrative is forming regionally that nonprofits are uniquely vulnerable to fraud or being duped, that their business practices inherently lack rigor, that limited or dull attention to detail is pervasive in them, and that they require burdensome levels of scrutiny.
These targeted characterizations are unwarranted and unfair. They wrongly reinforce outdated conceptions of nonprofits being charities solely operated by volunteers who are well-intentioned and creative though frightfully under-skilled and under-engaged in administration.
Fraud can happen to any group; that is true. However, as Crain’s Business Detroit wrote Thursday: As an industry, nonprofits represented the smallest percentage of cases (10%) in the Association of Certified Fraud Examiners’ “Occupational Fraud 2024: A Report to the Nations” study. And they saw a median loss of about $76,000—roughly half the loss for-profits and government groups reported. [My emphasis above.]
In response to the allegations of nonprofit fraud in our region, the calls I am hearing for increased financial management standards should be directed to ALL businesses (publicly traded, privately held, and nonprofit) and ALL agencies (governmental and non-governmental).
Everyone can improve and learn from this situation.
I do not want oversized skepticism of nonprofits to dampen enthusiasm or inhibit engagement of those groups’ supporters. If the fraud allegations are true, reflexive micromanagement and mistrust of nonprofits writ large would be exponentially damaging and detrimental to their mission-based work our communities rely on. Additionally, enterprises led by women and people of color would be disproportionately negatively impacted.
CultureSource continues to be there for the nonprofits, philanthropists, and start-up enterprises we serve—whenever they need us. In our next two email newsletters we will share aggregations of resources, best practices, and standards for sound fiscal management and controls. And if you have anything that has been particularly helpful to you, please share with us at [email protected] and we will re-share.
Take good care.
-Omari
Omari Rush
Executive Director