South-Western - Management  
Fraud Probe Hits Texas Nonprofit
Topic Ethics and Social Responsibility
Key Words Ethics, fraud, government contracts
News Story

The federal government launched a criminal investigation into whether fraud was committed at the National Center for Employment of the Disabled, a Texas nonprofit organization. The organization employs about 4,000 people who make military apparel.

The group has received $1.2 million in government contracts in recent years through its participation in the Javits-Wagner-O'Day program. This program seeks to reward no-bid government contracts to groups that employ the blind and severely disabled.

The federal panel that oversees the award of the contracts has launched a review of the group's eligibility after a study showed that the group fell far short of the requirement that 75% of labor be performed by those with severe disabilities. Findings showed that that NCED's workforce was only about 7.8% severely disabled. The committee is considering barring the group from participating in any future contracts.

Questions
1.

What is the ethical situation at the National Center for the Employment of the Disabled?

2.

The NCED is a non-profit organization. What is a non-profit organization? Are non-profits held to the same standards that for-profit companies are when it comes to ethical behavior and sentencing guidelines?

3.

What could have caused the unethical breach of contract at the NCED? In your opinion, should the company be shown lenience in the investigation?

Source "Fraud Probe Hits Texas Nonprofit," Wall Street Journal,May 10, 2006, page A4.
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