LibraryLeadership Ethics Case Library - University of Arizona Center for Leadership EthicsReluctant to Report: One Charitable Organization’s Experience with Fraud

Leadership Ethics Case Library - University of Arizona Center for Leadership Ethics

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Reluctant to Report: One Charitable Organization’s Experience with Fraud

Last Updated: 04/02/2026

Case Organization

Eller Center for Leaership Ethics

https://eller.arizona.edu/departments-research/centers-labs/leadership-ethics

Eller College of Management 520-621-2165 1130 E. Helen St. | P.O. Box 210108. Tucson, AZ 85721-0108

Case Contributors

Case Disciplines

Legal, Regulatory, Compliance

Skills & Expertise

Accountability Systems Design Action Planning Board Decision-Making Crisis Management Ethics & Fiduciary Duty Analysis Financial Controls & Internal Audit Financial Transparency Fraud Risk Assessment Internal Controls Improvement Legal & Compliance Analysis Nonprofit Governance Nonprofit Operations Organizational Trust & Culture Policy Development Reputation Management Restitution & Recovery Planning Risk Management Scenario Planning Segregation of Duties Stakeholder Communication Whistleblower & Investigation Process Review
Background & Objective

The challenge or opportunity you are trying to address for the organization.

The chair of the board of directors for a local non-profit (dedicated to providing social services to families of children who have degenerative diseases) sat in her office contemplating the fate of the organization. Just an hour earlier she had been notified by the auditor that the CEO confessed to skimming funds, misclassifying restricted donations, and creating a fictitious vendor through which he paid himself without supplying the goods that the invoices claimed. The frauds perpetrated totaled approximately $25,000.The CEO had been at his post for many years and had earned the respect and trust of the community. The organization’s mission had been achieved and in fact had expanded under the CEO’s tenure. Still, with the recession, the organization’s reserves were near depletion. The CEO could not have picked a worse time to breach his fiduciary duties given that the organization had just “kicked off” their capital campaign. The chair worried how all this would be received by the community if it became public.When the CEO admitted to the fraud, he explained the dire personal circumstances that led to his dishonest conduct. His wife was suffering from terminal cancer, had consequently quit her job, and he was left as the sole support for his family. He agreed to legitimately borrow against his home to pay back the stolen money, but conditioned his agreement on being allowed to leave “quietly” so that he would be able to seek other employment to pay his debts and support his family.Empathy for the CEO and other practical reasons made the chair reluctant to report the incident to the authorities and handle the matter internally.
Learning Objectives

This is what students will learn as they complete the case.

This case examines ethical decision-making, governance, and accountability within a nonprofit organization facing internal fraud. It challenges students to balance empathy, legal responsibility, and stakeholder trust while evaluating real-world consequences of transparency versus concealment. 

  •  Analyze the structure and mission of a nonprofit organization and the fiduciary responsibilities of its leadership 
  •  Evaluate how internal fraud (embezzlement, misclassification of funds, fictitious vendors) can occur and be detected within nonprofit settings 
  •  Assess the ethical implications of the CEO’s actions, including whether personal hardship can ever justify financial misconduct 
  •  Examine the legal, financial, and reputational risks faced by the organization following the discovery of fraud 
  •  Compare potential response strategies (e.g., internal resolution vs. reporting to authorities) and evaluate their short- and long-term consequences 
  •  Analyze stakeholder impact, including effects on donors, employees, beneficiaries, and community trust 
  •  Develop communication strategies for crisis management and maintaining organizational credibility 
  •  Design governance and internal control mechanisms to improve financial transparency and prevent future fraud 
  •  Create an actionable plan for strengthening accountability, including auditing practices, reporting systems, and ethical culture development
Key Action Items

These are activities and action items you might want to complete in order to achieve the expected outcomes.

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