By Katy Snyder, JVA Consulting
In the last week or so, a firestorm has been brewing over the validity of some of the stories in Greg Mortenson’s books, Three Cups of Tea and Stones into Schools, and the financial practices of his organization, the Central Asia Institute (CAI), which builds schools in Afghanistan and Pakistan. Among the accusations, which have come from sources such as 60 Minutes, are that his stories of wandering into the desolate Pakistani village of Korphe in 1993 and being inspired to build a school were fabricated, or at least exaggerated, and his tales of being kidnapped for days by the Taliban may have been totally false. In fact, some of those accused of kidnapping Mortenson in the dangerous Pakistan town of Waziristan, which borders Afghanistan, are now suing him for fabricating the kidnapping, saying they were actually his guards.
Financial mismanagement accusations abound as well—CBS had the American Institute of Philanthropy take a look at CAI’s financials and found that in its 15-year history, it only released one set of audited financial statements—statements that show that the organization has spent more promoting Mortenson’s books and school-building in Afghanistan than it has spent actually building schools. CBS reports that Mortenson is not donating the proceeds from his books and speaking engagements back to the CAI, yet CAI spent over $1.7 million on “book-related expenses,” $1.5 million in advertising and promotions and almost $1.3 million in travel expenses—much more than they spent on all schools in Pakistan last year. In other words, CAI seems to be funding Morteneson’s book tour, without sharing in book royalties or fees that Mortenson receives for speaking engagements. Board members gave a statement to CBS saying that while they receive no funds from Mortenson’s speaking engagements or books, they benefit from the awareness and contributions these mediums bring. It was just reported that the attorney general of Montana, where CAI is located, will be launching an investigation into the charity
Perhaps even more problematic than possible fabrications of Mortenson’s personal story and a lopsided budget are the questions surrounding where and how many schools Mortenson’s organization has built. While CAI and Mortenson say that 141 schools have been built or are supported by CAI, of the 30 schools that 60 Minutes traveled to or otherwise checked out, about half were either not in existence, were not functioning or were not receiving money from CAI. No one seems to know how many total CAI schools exist.
While the situation seems dire—for Mortenson, the CAI, and perhaps most importantly, the students who are benefiting from the schools that are up and running and who have the most to lose if CAI is dismantled—there are some important takeaways for nonprofits from this mess:
Financial audits are paramount. With a budget as large as CAI’s (about $20 million a year) there is absolutely no excuse why it would not be undergoing an audit annually. It is common practice for organizations with organizational budgets of $500,000 and over to receive yearly audits, and many organizations with budgets of just $300,000 and more elect to get an audit. If your organization has a budget over $500,000, you should consider an audit. And this brings us to a larger issue—transparency.
The truth is always best. While it may sound clichéd, it bears repeating. Maybe you think that funders and donors don’t want to hear that you’ve tutored only 15 students or built only three clinics—but that’s not the case. There are plenty of potential funders that prefer to fund organizations that provide in-depth, thoughtful assistance to a smaller number of recipients over organizations with many constituents. Funders want to fund what you’re actually doing, not what you wish you could achieve. In fact, nonprofits can be stripped of their funding if they fabricate numbers served or services provided.
Beware the (too) charismatic leader. Mortenson is undoubtedly a personable and dedicated supporter of his organization and those it serves. And while being charismatic is a desirable, and some would argue, essential, quality of an executive director, make sure that the executive director’s personality does not usurp your organization. As a recent article in CommUlinks of Colorado on Mortenson states, “Nonprofits are about a mission, not about personalities.” Make sure that you strike a healthy balance between charisma and someone who can shine the spotlight on your organization. If Mortenson were to leave CAI, or be forced to step down, is there any way it could keep up amount of donations it has been used to? It’s doubtful, and unfortunate, given the fact that 91% of its funds come from individual donations, according to its website. Donations need to come from a variety of sources—sources that won’t go away if the famous face of an organization is no longer there.
Evaluation is nonnegotiable. In a series of questions posed to CAI’s board of directors by 60 Minutes that are available on the CAI website, the board was asked if it carries out any evaluation of its programs by an outside evaluator. The answer? A resounding “no.” In fact, the board went so far as to say it is “unaware of any organization qualified to undertake such a study” of its programs. For me, this may be the biggest red flag. Numerous organizations who build schools and do other work in developing countries around the world undertake outside evaluations. I can think of several organizations in the metro Denver area alone, with much smaller budgets and staffs, that do so. At JVA Consulting, we always tell our clients that no organization is too large or too small to evaluate. Flagrantly dismissing the need for evaluation is a big no-no, especially for high-profile, big-budget organizations like CAI.
There is a bright side. No matter how bad it looks right now for Mortenson and the CAI, I can’t help but agree with the side that New York Times columnist Nicholas Kristof takes in a recent column—that despite whatever motives Mortenson has, be they a product of inexperienced leadership or of self-aggrandizement, he has done some good. While this scandal may ruin his organization, and may cause the schools that it has opened and are running successfully to close their doors, he has reached a broad audience through his books with the message, as Kristof says, that “building schools tends to promote stability more than dropping bombs.” And he has inspired many thousands to give. My hope is that donors can look beyond this high-profile story and know that the vast majority of nonprofits are doing good work, and while they may fly under the radar with less flashy executive directors and causes, they have mastered many of the lessons that CAI has yet to learn.