Three Cups of Tea, Two of Them Unaccounted For

Many nonprofits can barely afford a cup of coffee. Not so for the Central Asia Institute (CAI), led by Greg Mortenson, the author of the bestselling book Three Cups of Tea.

Mortenson’s organization pulled in $13.7 million in 2008 alone (the latest year for which tax records are available) in order to meet its mission: to promote and support community-based education, especially for girls, in remote regions of Pakistan and Afghanistan.

Yet after digging into Mortenson’s work, several journalists have unearthed evidence of exaggerated claims and severe financial improprieties. And now, according to USA Today, two Montana women are filing a class-action lawsuit against Mortenson and CAI, alleging fraud, deceit and RICO violations.

We have no idea whether Mortenson broke the law. But at a minimum, he broke one of Peter Drucker’s core principles: “Management must be accountable for performance and results rather than good intentions, however beautifully quantified,” Drucker wrote in A Functioning Society. “It means that accountability must involve financial accountability.”

[EXPAND More]Writing in the Stanford Social Innovation ReviewKevin Starr noted that Mortenson’s organization has raised $60 million since its founding in 1996 and claims to have constructed 150 schools. “Even if you allow for a generous figure of 150, that represents $400,000 of donor money per school,” Starr calculated. “That’s ridiculous. Jay Kimmelman and Bridge International Academies in Kenya are building hundreds of classrooms for $1,800 each. Greg’s first school in Korphe was built with only $8,000 worth of materials.”

Also striking: In 2008, CAI spent $4.6 million on “domestic outreach” (lectures and guest appearances across the U.S.) but only $3.9 million on schools in Central Asia.

How could this happen? From what we can tell, donors were so seduced by the heart-wrenching stories that Mortenson told in Three Cups of Tea—and that have been amplified by a fawning media—that they neglected to look more closely at the numbers.

So, apparently, did CAI’s board of directors, which consists of only three people (Mortenson included). A nonprofit board has to have “the ability to audit the balance between your program and your resources,” wrote Drucker, who advised many leading social-sector organizations, including the Girl Scouts of the USA, American Red Cross and Salvation Army. “Somebody has to ask: ‘Is this the best balance between our available resources and our effectiveness?’

“A business earns its own money,” Drucker added. “The money of the nonprofit institution is not its own; it is held in trust for the donors. And the board is the guardian to make sure the money is used for the results for which it has been given.”

Whom do you blame for the mess at CAI: Mortens0n, his donors, the board of directors, the media—or all of the above?[/EXPAND]