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Charity Transgressions, Trust and Accountability

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Abstract

This research demonstrates how sustained charity fraud is supported when organisations do not develop strong accountability links to salient stakeholders. Whilst increased regulation is one response to reduce charity fraud and to increase organisational accountability, regulators seldom recognise the myriad heterogeneous needs of stakeholders. This research explores the tactics employed by beneficiaries and the donating public to escalate their accountability demands on such charities. By preferring the most powerful stakeholders, charities miss the opportunity to design effective processes to discharge accountability to meet their moral obligations to legitimate stakeholders. This article calls for increased ‘stakeholder understanding’ by charity governors as a policy to recognise the moral rights of these stakeholders and to reduce charity transgressions.

Résumé

Cette étude démontre comment la poursuite de la fraude liée aux organismes de bienfaisance est encouragée lorsque les organisations ne développent pas de liens de responsabilisation forts avec les principaux partenaires. Tandis que l’accroissement de la réglementation fait partie des réponses à apporter pour réduire la fraude liée aux associations caritatives et augmenter la responsabilisation des organisations, les autorités de régulation prennent rarement conscience des multiples besoins hétérogènes des parties prenantes. Cette étude décrit les tactiques employées par les bénéficiaires et le public donateur pour donner un degré de priorité plus élevé aux demandes de responsabilisation qui incombe à ces œuvres de bienfaisance. En donnant la préférence aux parties prenantes les plus puissantes, les associations caritatives manquent d’élaborer des processus efficaces pour s’acquitter de la responsabilité de satisfaire à leurs obligations morales à l’égard des partenaires légitimes. Ce rapport préconise une meilleure compréhension des parties prenantes par les administrateurs des associations caritatives en tant que ligne de conduite pour reconnaître les droits moraux de ces partenaires et réduire les infractions de la part des organismes de bienfaisance.

Zusammenfassung

Diese Studie legt dar, wie nachhaltiger Spendenbetrug möglich ist, wenn Organisationen kein gutes Rechenschaftsverhältnis zu ihren wichtigen Stakeholdern unterhalten. Eine Möglichkeit zur Eindämmung von Spendenbetrug und zur Erhöhung der organisatorischen Rechenschaftspflicht ist eine verstärkte Regulierung; doch werden in den Regelwerken selten die unzähligen verschiedenartigen Bedürfnisse der Stakeholder berücksichtigt. Die Studie untersucht die von den Spendenempfängern und Spendern angewandten Methoden zur Ausweitung ihrer Forderungen nach einer Rechenschaftspflicht seitens der Wohltätigkeitsorganisationen. Wenn Wohltätigkeitsorganisationen die einflussreichsten Stakeholder begünstigen, versäumen sie die Gelegenheit, effektive Verfahren zum Nachkommen ihrer Rechenschaftspflicht und ihrer moralen Verpflichtungen gegenüber legitimen Stakeholdern zu entwickeln. Dieser Beitrag fordert von den Regulierungsstellen der Wohltätigkeitsorganisationen, dass sie dem Grundsatz eines erhöhten „Verständnisses gegenüber den Stakeholdern” folgen, um so die moralischen Rechte der Stakeholder anzuerkennen und die Anzahl der Transgressionen im Wohltätigkeitsbereich zu mindern.

Resumen

El presente trabajo de investigación demuestra que la ausencia de unos vínculos sólidos en materia de rendición de cuentas con los principales interesados propicia el fraude sostenido en el seno de las organizaciones benéficas. Aunque la proliferación de normativas es una solución encaminada a reducir este tipo de fraudes y a incrementar la transparencia de cuentas, los legisladores rara vez tienen en cuenta las necesidades diversas y heterogéneas de los interesados. Este trabajo analiza la táctica empleada por los beneficiarios y los donantes a la hora de ser más exigentes con esas organizaciones en lo que a la presentación de cuentas se refiere. Al dar preferencia a los interesados más poderosos, las organizaciones benéficas pierden la oportunidad de elaborar procesos eficaces de realizar la rendición de cuentas, con el fin de cumplir con su obligación moral para con los legítimos interesados. El presente trabajo reclama una mayor comprensión de los interesados por parte de los directores de las organizaciones benéficas con la elaboración de una política encaminada a reconocer los derechos morales de estos interesados y a reducir las transgresiones de las organizaciones.

摘要

本研究表明当组织与突出利益相关者之间没有形成强有力的问责链接时,持续的慈善欺诈会得到支持。虽然加强规管是对减少慈善欺诈与增加组织问责方面的一个反应,监管机构很少意识到利益相关者无数的、多种多样的需求。此研究探讨了受益者和捐赠民众所使用的策略,以逐步增强他们在这类慈善活动中的问责要求。. 由于慈善机构优先考虑了最强有力的利益相关者,失去了在对合法利益相关者尽其道德义务方面构想出履行问责有效处理方法的机会。本论文呼吁将慈善机构负责人增加(对)”利益相关者的理解”作为一项政策,以承认对这些利益相关者的道德义务,以及减少慈善活动越轨行为。

ملخص:

يوضح هذا البحث كيف أن غش الجمعيات الخيرية المستمر يكون مدعماً عندما لا تنمي المنظمات روابط المساءلة لأصحاب المصلحة البارزين. بينما زيادة الأحكام هو أحد الردود للحد من غش الجمعيات الخيرية و زيادة المساءلة التنظيمية ، نادراً ما يعترف المنظمين بالإحتياجات المتباينة التي لا تحصى من أصحاب المصلحة. يتناول هذا البحث الأساليب التي تستخدمها الجهات المستفيدة و الجمهور المتبرع لتصعيد مطالبهم لمساءلة مثل هذه الجمعيات الخيرية.. بتفضيل أصحاب المصلحة الأقوياء، الجمعيات الخيرية تضيع عليها الفرصة لتصميم العمليات الفعالة لأداء المساءلة للوفاء بإلتزامتهم الأخلاقية لأصحاب المصلحة المشروعة. هذا البحث يدعوا إلى زيادة “فهم أصحاب المصلحة” من قبل مديري العمليات الخيرية كسياسة للاعتراف بالحقوق المعنوية لأصحاب المصلحة و للحد من تجاوزات الأعمال الخيرية.

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Notes

  1. The New Zealand Charities Act (2005) and the Singapore Charities Act (2006) include public benefit as one of the four tests of charitable status, in line with the Pemsel Case ([1891] AC531).

  2. For example: Gray et al. (1997) and Cotton et al. (2000) in respect of social audit and stakeholders and Wolfe and Putler (2002) who considered alternative aspects of disparate stakeholder groups.

  3. The dollars in this case study are New Zealand dollars. NZ$1 = approx US$0.70.

  4. One client, Aranui, who, ironically, is now a budget adviser, related noticing $100 missing from her account some weeks, but was always given a credible explanation. She is reported as saying “it’s a lot of money and I just want to know [more about this fraud]” (Smith 2004).

  5. In researching for “The Listener” Smith (2004) stated he had “seen accounts for one year, where, typically, a benefit of $184.50 would be paid by Work and Income New Zealand, and $4.50 withdrawn by the Methodist Mission as koha, mischievously referred to by Mission whistleblowers as ‘the slush fund’ and prompting a management instruction to staff to stop calling it by such a pejorative label. In one day, koha of $48,000 (requiring more than 10,000 beneficiaries) was recorded and it is claimed but unverified that $8 million in koha went through the accounts in one year”. (Koha is a term in the language of New Zealand’s indigenous people. It can be translated as ‘gift’.)

  6. The dollars in this case study are Singapore Dollars. S$1.00 = approx. US$0.76.

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Acknowledgements

The authors wish to thank colleagues in the School of Accounting and Commercial Law at Victoria University of Wellington, AFAANZ conference participants, and Aik Win Tan for helpful comments and encouragement.

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Correspondence to Carolyn J. Cordery.

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Cordery, C.J., Baskerville, R.F. Charity Transgressions, Trust and Accountability. Voluntas 22, 197–213 (2011). https://doi.org/10.1007/s11266-010-9132-x

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