Whether or not Wyclef Jean and his foundation committed any acts of impropriety will not matter in terms of the effect on his charitable organization. Damage is done. His nonprofit has taken a major reputational hit, and people might stop making financial contributions to the Wyclef Jean Foundation, also known as Yele Haiti, for Haiti relief efforts.
Yele Haiti was criticized by the Better Business Bureau, based on their review of Jean’s foundation’s IRS filings that are available on the internet along with the filings of all nonprofits. Among the concerns raised by the media and others were that three years of filings were submitted all at once, three out of the five board members are involved in Jean’s personal and business dealings, and funds for the foundation seemed to be intertwined with Jean’s business.
Although Jean has defended himself, and ultimately there may be no finding of impropriety, there has been harm to his foundation and to his efforts.
This story immediately brought to mind many boardroom discussions I have had with my nonprofit clients. The most important lesson for nonprofits and their boards is to be vigilant in following the rules and considering appearances. Don’t leave your organization open to public criticism and loss of credibility by failing to comply with regulations and implement sound operational practices. Unfortunately, there are too many nonprofits doing truly important work, but who are not getting annual audits, following proper accounting policies and procedures, attending to conflicts of interest on the board, filing their IRS 990s properly, documenting their process for establishing the CEO’s salary, and so on.
Frequently, nonprofit boards ask me “Is it legal for us to do such and such?” My response to such questions is usually this: “I’m not an attorney, so do check with one. But my advice is to consider how ‘doing such and such’ will reflect on the organization if it becomes known. Think about how it will look when it’s exposed on the internet.”
We can all think of brand name nonprofits whose reputations have been hurt by scandal. Unfortunately, donations suffer, and so do the people that the organizations serve.
So for business people who serve on nonprofit boards, do be attentive. Read and heed the management letter that the organization’s auditor gives you. Do have at least one attorney on the board who agrees to be observant, and ideally, an attorney whose law firm will provide pro bono services to the nonprofit. The good will for your organization depends on you.