There was a nasty surprise waiting for Troy Wiseman in Zambia. The founder of InvestLinc, an investment and wealth-management company, flew into that African nation in the summer of 2005. On the agenda: taking Zambia's first lady on a tour of several institutions financed by his charity, World Orphans. Unfortunately, the orphanages seemed not to exist. Nor could Wiseman locate the supervising pastor, to whom he had wired almost $70,000 over the past year. After half a dozen phone calls failed to clear things up, Wiseman made his apologies to the president's wife and headed anxiously back to Chicago.

The Zambia debacle was especially troublesome because World Orphans had recently begun soliciting outside donations. What if this wasn't an isolated situation? Wiseman wondered. How could he pitch his organization to donors if it was beset by fraud? So he hired a veteran philanthropist, Paul Myhill, who visited 53 of the charity's 400 sponsored orphanages and compiled a detailed report. It painted a grim portrait. Many of the orphanages were poorly maintained or were being used as old-age homes. Some had never been built. Wiseman estimates about half the projects Myhill visited did not fit the mission statement. About 20 turned out to be outright frauds.

Many entrepreneurs reach a point in their lives when, having tackled the problems of customers, employees, and industries, they are tempted to take on the world's ills. Inspired by the likes of Bill Gates and George Soros, some launch philanthropies aimed at providing aid to developing nations. They assume that the skills responsible for their for-profit successes will translate easily into the nonprofit realm.

But philanthropy presents a unique set of challenges, particularly in the poor countries that need it most. World Orphans' grantees, for example, live in places like Sierra Leone, Bangladesh, and Sudan, often with limited access to telephones and the Internet. Performing due diligence and enforcing accountability in remote, rural areas can be enormously time-consuming and expensive. "To do a really good job and be on top of things, you'd be spending 50 cents of every donated dollar," says Wiseman. Even electronic funds transfers--those grand enablers of global commerce--couldn't help Wiseman when World Orphans tried to buy land for orphanages in Mozambique and was asked to pay for it with cattle.

"It can be extremely frustrating for someone who is used to doing things in the developed world," says Melissa Berman, president of Rockefeller Philanthropy Advisors, a nonprofit that helps private clients and foundations. "In the developing world, it can take years just to start an operation."

Starting World Orphans didn't take Wiseman years. But getting to the point where the group actually was having an impact took more than a decade. In 1992, he was flush from selling his fashion label, BUM International. (He launched InvestLinc the same year.) Wanting to give back, Wiseman, his wife, and several others started a charity to establish Christian-oriented orphanages in developing countries. Funded chiefly by the founding partners, World Orphans opened two or three homes a year through 1998; by 2005, it was opening 100 new facilities a year. The organization reviewed applications from local churches, charities, and others; the ones it chose to fund were responsible for overseeing construction and management. Wiseman spent only one day a week on the charity, leaving the bulk of operations to co-founder Bob Roosen and six full-time employees.

In at least one way, the charity followed the same trajectory experienced by successful small companies: As soon as it hit a growth spike, the systems began breaking down. In 2004, World Orphans received an application from a senior pastor at a church in Lusaka, Zambia, to build a home for 30 orphans. The clergyman claimed to have a doctorate from an American seminary and listed two references: a professor at the seminary and a pastor from a small American church. World Orphans staff members called the pastor and e-mailed the professor, who provided glowing recommendations. But somehow, no one bothered to Google the name of the seminary.

The application was approved, and World Orphans wired the pastor $8,500. In the months that followed, the organization sent another $60,000 to fund seven additional homes. But the doctorate, it turned out, came from a diploma mill, and the references were phony. The grantee pocketed the money and disappeared. "When you're trying to help, you really want to believe what they're telling you," says Wiseman.

Reading Myhill's report, Wiseman realized that running a charity--particularly at a remove of 8,000 miles--requires the same rigor as running a company. So he replaced the CEO, hired three more staff members to focus on due diligence, and brought on an executive with 15 years of experience as a fraud investigator. He also overhauled the grant process. Applications are now 45 pages--up from five. And they must come through trusted partner organizations in the United States--typically charities such as New Hope International or Operation Mobilization. Those partners administer the money. Local grantees don't touch it.

Now, World Orphans is starting to ramp up again. It has funded five new facilities in the past five months. Staff members have visited those locations and found, to their relief, that all five do exist. After returning all donations targeted to the troubled orphanages, the organization is once more aggressively soliciting outside funds. Even amid the setbacks, Wiseman hasn't lost faith in the mission. In one sense, he points out, the characteristics that make people like him successful in business really do translate easily to their charitable lives. "Entrepreneurs aren't scared of making mistakes," he says. "We make our mistakes. And we learn from them."