Fraud in The Nonprofit Sector: Rebuilding a Charitable Image

42 Pages Posted: 20 Oct 2018

See all articles by John Lauck

John Lauck

Louisiana Tech University - School of Accounting & Information Systems

John A. Brozovsky

Virginia Tech - Pamplin College of Business

Date Written: September 27, 2018

Abstract

Nonprofit organizations are at an increased risk for the occurrence of fraud due to their inherently trusting nature and the limited availability of resources for fraud prevention measures. Because charitable organizations rely on positive public image and donor perceptions of organizational effectiveness for continued funding, it may be difficult or impossible for a nonprofit to remain financially viable once fraud occurs. We conduct an experimental investigation with potential donors to determine which actions improved the likelihood that they would contribute to a nonprofit organization following a material misappropriation of assets fraud. Modifying and enhancing board of director oversight had the highest and only statistically significant positive effect on potential donations. Moreover, firing an Executive Director, who was not involved in the fraud, reduced both the likelihood and amount of planned giving.

Keywords: Charity, Fraud, Nonprofit, Public Image, Reputation

JEL Classification: L14, L3, M41

Suggested Citation

Lauck, John and Brozovsky, John A., Fraud in The Nonprofit Sector: Rebuilding a Charitable Image (September 27, 2018). Journal of Accounting, Ethics and Public Policy, Vol. 19, No. 2, 2018, Available at SSRN: https://ssrn.com/abstract=3256398

John Lauck (Contact Author)

Louisiana Tech University - School of Accounting & Information Systems ( email )

P. O. Box 10318
Ruston, LA 71272
United States

John A. Brozovsky

Virginia Tech - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States
703-231-6591 (Phone)
540-231-4487 (Fax)

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