Instead, nonprofit leaders sometimes tap people who have benefited from the organization, figuring they know best about the group's purpose and goals.
Although that might be true, "that's not the purpose of the board," said Jeff Gordon, president and CEO of the Nevada Childhood Cancer Foundation.
Gordon and other experts also noted it's crucial to have business-savvy management.
Gordon, for instance, ran minor-league basketball teams, a radio station and an outdoor advertising agency before taking charge of the cancer foundation.
When he took the helm in 1998, the foundation had one part-time employee, $50,000 in the bank and scant programming. Today, it has nine full-time workers, four contractors and a $1.7 million annual budget, which pays for free counseling services, schooling and summer camp for critically ill children and their siblings and numerous other programs. About 80 percent of its funding comes from private donors.
"You've got to administer that business side or you will not be able to help anybody," Gordon said.
Nonprofit fraud is common in Nevada and across the country.
Fraud can take many forms. Sometimes, politicians and others set up nonprofits as fronts to win public grants and private donations. Other times, staffers with access to bank accounts skip town with organization revenue.
"I've seen it many times," said Dianna Russo, managing principal of accounting firm Houldsworth, Russo & Co.
Nonprofit groups lose a median $100,000 per fraud case, compared with $200,000 at privately held companies, $127,000 at public companies and $81,000 at government entities, according to the Association of Certified Fraud Examiners. The most common methods of theft are billing schemes, check tampering and expense reimbursement scams.
Altogether, nonprofits lost $40 billion to theft in 2006, according to a December 2007 report in Nonprofit and Voluntary Sector Quarterly, the most recent available. Experts believe that number is growing.
In Nevada, an American Red Cross officer once stole $120,000 from the organization, while an official with Citizens for Affordable Housing embezzled $1 million, said Gary Snyder, publisher of Nonprofit Imperative, a newsletter on industry fraud.
State prosecutors often lack the resources to tackle the problem, Snyder said. What's more, industry leaders at Independent Sector, a Washington, D.C., coalition of nonprofits, foundations and corporate giving programs with 600 member organizations, refuse to discuss nonprofit theft for fear of scaring off donors.
"Nobody cares," he said.
A spokeswoman for Independent Sector did not comment.
Most states have regulations for charities, including registration protocols, audits and publicly available databases of groups that have been disciplined.
Nevada, however, is one of 10 states with none of these, according to a report by the Tampa Bay Times, Center for Investigate Reporting and CNN.
The state took a step toward better scrutiny -- albeit a very small one -- in late May when Gov. Brian Sandoval signed Assembly Bill 60. The law, which takes effect Jan. 1, requires charities that seek donations from residents to include selected information from their latest tax form and a statement about whether collections are tax-deductible when they file incorporation papers with the secretary of state.
If a charity fails to comply, it faces a $50 penalty. Eventually, it could lose its right to do business in Nevada.
Nevada Attorney General Catherine Cortez Masto and Secretary of State Ross Miller introduced the bill to try to quash nonprofit fraud. Scammers, for instance, tell people they are collecting tax-deductible charitable donations when in fact they have no charity and simply pocket the money. AB60, in theory, should help donors by giving them more information about groups that ask them for money.
"It only makes sense to provide a little transparency," Miller said.
(c)2013 the Las Vegas Sun (Las Vegas, Nev.)
Visit the Las Vegas Sun (Las Vegas, Nev.) at www.lasvegassun.com
Distributed by MCT Information Services
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