Prof. Aseem Prakash on The Washington Post Monkey Cage blog, "The Oxfam scandal shows that, yes, nonprofits can behave badly. So why aren’t they overseen like for-profits?"

Last week, news media outlets reported that Oxfam who was well respected for its humanitarian work had employed aid workers in Haiti who hired prostitutes. Other scandals from similar nonprofit organizations were exposed to the public also. Because of these scandals, donations from donors have declined. 

 

The reason why these scandals exist is that the public believed that they have a virtue serving the people, so they were not regulated as strictly as for-profit organizations by the stakeholders and the government. However, nonprofit sectors in the U.S. need to file a form disclosing their finance and activities. Despite this requirement, the Federal Trade Commission and state attorneys general rarely investigate charity fraud. This causes some entrepreneurs to start “briefcase nonprofits” that take advantage of the deregulation without providing real services. Also, this causes real charities to abuse public trust by using charity money to fund their extravagant lifestyle.

 

In conclusion, global bureaucratized nonprofit groups need regulations like those in place for global for-profit firms and their funding models should be revised.

The full piece is here.