Tuesday, September 20, 2016

Nonprofit Imperative Monthly e-newsletter


Nonprofit Imperative
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    September 2016

The monthly newsletter dedicated to:
  • exposing the crisis in nonprofit fraud leadership…a crisis of pervasive and monumental waste, fraud, abuse, mismanagement, and malfeasance throughout the charitable sector which costs taxpayers and contributors tens of billions of dollars annually; and,
  • seeking reforms that will restore the public’s lost confidence in the sector.
What’s Included:
Skunk of the Month:
City University of New York; National Vietnam Veterans Foundation
Breaking the Silence:
Firefighter Support Services; BBB Wise Giving
Charity Check Up:
American Red Cross; Nonprofit Hospital
A Thought or Two:
Principle For Charities To Live By
Nonprofit News-In Case You Missed It:
Leonardo DiCaprio Foundation; Louisiana Flood Victims …more
Political/Official Chicanery:
MI; PA; WA; OK; TX; CA; MN; MS; KS …more
What Do You Think?
·       To do good, donors must do their homework
·       Give without being taken

In response to a flurry of charity frauds in upstate New York, Onondaga County District Attorney Bill Fitzpatrick said: “Don’t trust anybody…and that means having rules in place, where there are checks and balances when it concerns money. …“You’ve got to have a system where multiple people review accounts, checks,” he said. “You can’t have one person with check-writing authority. All checks need to be countersigned by at least two people. And there have to be periodic audits by outside agencies.”
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“the IRS was well aware of the serious nature of the Hershey school’s troubles (Hershey Trust)…. the IRS has yet to take any visible action to investigate. It’s time the Hershey School scandal was put to rest.” (Pablo Eisenberg in Chronicle of Philanthropy)
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Nonprofit think tanks are rife with conflicts of interest (New York Times)
Skunk of the Month…
        “They came to do good and they did very well indeed (for themselves).”

Skunk of the Month is the designation made by Nonprofit Imperative, the organization dedicated to eliminating waste, fraud, abuse and mismanagement in nonprofits and government. The Skunk of the Month award is given to charities and government officials who show blatant disregard for the interests and trust of contributors and taxpayers. This month’s example is:
University and Prosecutors Are Looking For $500,000 Donation
The City University of New York is investigating a recent $500,000 donation to its Foundation, which was intended to bolster the humanities and arts at its flagship school, may have been improperly diverted. Federal prosecutors are also looking at a $500,000 donation spending of propriety, because such funds are typically earmarked for research. It is reported that the foundation had paid for some personal expenses of the president, Lisa S. Coico, (who makes more than $400,000 a year) bought $65,000 worth of furniture, paid a $20,000 security deposit on a Larchmont home and went through $51,000 in other expenses such as fruit baskets, housekeeping services and rugs when she took office in 2010. According to documents reviewed by The Times and others, City College faculty members learned in July — about a month after the donation — that the fund had been depleted. 
“We are deeply concerned about the practical, ethical and legal implications of the situation,” the department leaders wrote on Aug. 9. “Funds dedicated to a certain purpose in a binding legal agreement between the college and the donor have been removed for purposes unknown to us, and we believe, to the donor.” (nytimes.com)
Hopefully, The First of Many Poorly Managed Vet Charities Closed
An infamous charity for veterans has buckled under the pressure of a CNN investigation and closed its doors for good.
The National Vietnam Veterans Foundation came under fire earlier in the summer when it was featured on Jake Tapper’s “The Lead.” Tax records uncovered by the network revealed that just $122,000 in cash was dispensed to veterans in 2014 despite donations of $8.5 million.
Tax returns showed the CEO sent his brother;  “emergency” funds; and $70,000 in “other” expenses and $21,000 in unnamed “awards.”
According to the charity’s most recent 990, the organization allocated just 8.3% of their expenses to its programs; on average, charities rated by Charity Navigator spend 80.3% on programs. This organization has earned 6 consecutive zero star ratings from Charity Navigator.
Breaking the Silence:
Firefighter Support Services of Wyandotte (MI), which claimed to raise money for firefighters and fire victims but spent 90 percent of the money elsewhere, will shut down in the next 60 days under a settlement, Michigan Attorney General Bill Schuette said in a statement.
As part of the settlement, the directors of the charity will also pay $144,000 over the next three years and agree never to work as directors or officers of a charity.
Three-fourths of the settlement will go to the Southeast Michigan Chapter of the American Red Cross fire relief fund, and the remaining will go to pay for the cost of the investigation.
The charity and its Southfield-based fundraiser, Associated Community Services, raised $4.2 million from donors, but never made any of the promised grants of any substance to families who had been burned out of their homes.
Only about $5,585 — or one-tenth of 1 percent of the $4.2 million — went to fire victims.
Key Charities Lack Transparency
Well-known nonprofits should raise a red flag for donors due to their lack of transparency, according to the charity ratings group BBB Wise Giving Alliance. A group of 10 major charities that failed to disclose information beyond what’s publicly available in the Internal Revenue Service’s Form 990, such as policies for assessing the impact of their programs and whether their fundraising appeals provide a specific description of the program activities for which funds are sought.
BBB Wise Giving evaluates charities on 20 standards related to their governance, finances, results reporting, and fundraising practices — information the ratings group deems critical for donor decision-making.
Here’s the full list of organizations BBB Wise Giving Alliance said deserved a "red flag."
  • City Year
  • Dana-Farber Cancer Institute
  • Fred Hutchinson Cancer Research Center
  • John F. Kennedy Center for the Performing Arts
  • Local Initiatives Support Corporation
  • National Fish and Wildlife Foundation
  • NeighborWorks America
  • Pact
  • Teach for America
  • United States Holocaust Memorial Museum
The U.S. Holocaust Memorial Museum, responded to BBB Wise Giving Alliance’s criticism by deciding to no longer participate in its evaluation."
Charity Check Up:
Red Cross, Once Again, Being Reevaluated
Louisiana Gov. John Bel Edwards’s office said the state may “re-evaluate” its partnership with the American Red Cross following complaints from people attempting to volunteer and donate materials for flood victims, according to The Advocate. Volunteers’ comments to the Baton Rouge newspaper echoed claims on social media that the charity was turning away offers to help at shelters or provide meals and medical materials for people displaced by the disaster. The Red Cross is managing or assisting at 19 shelters and said it had served about 250,000 meals and snacks since launching its relief.
Red Cross spokeswoman Nancy Malone said some frustrated volunteers were confusing the charity with local partner groups and that there were liabilities to accepting cooked food that did not come from certified vendors. "It has to be about coordination. We are held accountable to state regulations," she said.
“We recognize the enormous task the Red Cross undertakes to help, and we are tremendously grateful to the many volunteers who jumped to our aid in the aftermath of this historic flooding. However, the governor has expressed several concerns with the Red Cross’s response to this storm," said Richard Carbo, a spokesman for Mr. Edwards. "Going forward, the state intends to reevaluate its partnership with the Red Cross to ensure displaced citizens of any future disaster receive the best support possible.”
Update: New York State has seen its Red Cross chapters cut from 35 in 2008 to 10 in 2015. “The response time is enormous, compared to what it used to be,” ARC spokesperson Caves said. “When we had a local Red Cross, it was within a half hour. Now it’s usually anywhere from an hour to two hours.”
“We had a strong volunteer base locally,” Diane Caves, who is the deputy director of emergency management in a 26-county region, said.
“When they closed our local Red Cross, there was a disconnect. They lost a lot of the local volunteerism for whatever reason…it was very quick. It was abrupt and very unexpected. That tore apart some relationships. There were some hard feelings.” Jay Bonafede, who oversees communications for the Red Cross of Western New York, sees something different. “All of these changes have really had no effect on our services in the community,” Bonafede says. (nonprofitquarterly.org)
Nonprofit Hospital Board Conflicts Give Bad Appearance
Based on IRS data, it was found that nonprofit hospitals have representatives of corporations with which they do business on their boards of directors far more often than other nonprofits. In fact, in 2014, of the more than 2,300 nonprofit hospitals in the country, almost half (or 46 percent) had at least one trustee with business ties, direct or through a relative, to the hospital. This is a much higher proportion of trustees with potential conflicts of interest than in nonprofits as a whole—where the rate is seven percent.
The practice of doing business with board members is problematic for any number of reasons and should be avoided whenever possible. There is no absolute rule against such a setup, so long as there is proper disclosure and deals are at market rate, but the article points out that the potential for violating the public trust or creating the perception that there are private interests at play makes the practice far less than ideal.
At 270 of the hospitals reported on, the deals were worth at least $1 million each.
Some have banned engaging in business contracts with board members so that their community can have full confidence that the board was acting in the community’s best interest. The ban has posed no problem in recruiting the most qualified board members. (Wall Street Journal, (nonprofitquarterly.org)

A Thought or Two:
RAY DALIO at Bridgewater Associates shares some thoughtful fundamental life principles that are certainly applicable to today’s charitable environment. We will present one principle each newsletter. (principles)

Appreciate Open Debate

Does somebody keep forwarding you this newsletter? Get your own copy. It's free! Sign up here. Send tips/stories to Nonprofit Imperative. Follow us on our blog or on Twitter---Nonprofits News

Nonprofit News…
In Case You Missed It:
1.     The U.S. Department of Justice was filing a complaint with the U.S. District Court on the charitable Leonardo DiCaprio Foundation. While the complaint does not target DiCaprio it raises questions about its lack of transparency often required (or offered in this case) for the specific structure the actor has chosen for his endeavor and the $3 billion misuse of funds (source)
2.     Two men face federal indictment for his alleged involvement in a $2.1-million multistate investment scheme designed to match donors with charities. (freep.com)
3.     Donations to assist victims of flooding in the Baton Rouge area so far lag behind the responses to other recent large-scale natural disasters, highlighting the need for nonprofits to have more reserve funds at hand before catastrophes strike — and be ready to quickly get the public’s attention to help boost fundraising. Increased media attention over the past few days has hastened gifts for those affected, according to people leading fundraising efforts, but it’s unlikely support will reach that seen after Hurricane Sandy rocked New York City and much of the Atlantic seaboard in 2012 or when Hurricane Katrina led to major flooding in New Orleans in 2005. (philanthropy.com)
4.     Government watchdog groups — all of them champions of heightened transparency, campaign finance reform and other Democratic priorities — are warning of potentially "very serious" conflicts of interest if the Clinton Foundation continues as business as usual with Clinton in the White House. They are urging the adoption of tough new firewalls to eliminate any perception that Clinton Foundation donors could use their wallets to gain undue access to a Hillary Clinton White House. Larry Noble, general counsel at the Campaign Legal Center, agreed. He warned that the State Department saga, even with no direct evidence that donors were given special access, has created "a very serious perception problem" that threatens to undermine the public's faith in the government and its institutions. Barring foreign and corporate donations to the Clinton Foundation is a start, he said, but that alone won't counteract appearances that the game is rigged. (thehill.com)
5.     A federal complaint filed in Maryland comes several months after Reveal, which airs on NPR stations around the country, produced a series of articles and broadcasts that purported to uncover fraud in Planet Aid's work in Malawi, a southeast country in Africa ranked as one of the poorest in the world. They reported this past May that "50 to 70 percent of the U.S. government grant money was being siphoned away." In response to a lawsuit by Planet Aid, Reveal disputes that the story was reported dishonestly. Planet Aid says Reveal's reckless reporting has already cause it problems. In addition to hemorrhaging donors, DAPP-Malawi also lost funding from Unicef.
6.     The Wounded Warrior Project seems to be sticking with accounting practices that have led to scrutiny in recent months, with critics noting potentially inflated program spending and understated fundraising expenses. The organization continued to report as program spending large portions of expenses on mailings and television advertisements that contain fundraising appeals and messages that the charity says help it achieve its mission, according to financial filings recently released. Such accounting has been questioned by observers of the nonprofit, including Iowa Republican Sen. Charles Grassley.  (philanthropy.com) UPDATE: The Wounded Warrior Project announced that it will lay off several executives and dozens of other employees and will cut some of its services as officials say donations have fallen this year amid a storm of negative news stories, according to reports and a statement from the organization. Wounded Warrior will cut about 15 percent of its roughly 600 employees, chief executive Michael Linnington told Stars and Stripes, adding that the nonprofit has lost a lot of support over the past year amid sustained news coverage that has been critical of its spending polices. ((philanthropy.com) FURTHER UPDATE: CEO Linnington announced that the Wounded Warrior Project (WWP) lost between $90 million and $100 million, representing 25 percent of donations, since all the scandal about the organization started rolling out in January. 
HERE WE GO AGAIN: The Avondale (AZ) Police Department arrested a man in connection with an embezzlement scheme that targeted a veterans group.
Investigators said Kirk Davis, president of Pat Tillman Memorial Veterans of Foreign Affairs Post 40, is accused of stealing over $100,000 from the VFA accounts over the last two years since he became president.
7.     The Washington Post reached out to dozens of charities, and took to Twitter, asking followers for leads that Donald Trump has donated millions to charity, as he said. Despite the Washington Post exhaustive efforts, no one has been able to come close to accounting for the $8.5 million Trump publicly pledged over a 15-year period. New York Attorney General Eric Schneiderman has opened an investigation into the Donald J. Trump Foundation "to make sure it's complying with the laws governing charities in New York.
8.     At the University of Louisville Foundation… the school's Board of Trustees voted to sue the foundation unless it accedes to demands to clean up its act. Board of Trustees Chairman Larry Benz told reporters after the nearly unanimous vote that the foundation has become “an eyesore for the community” and that its “shenanigans … will end today.” The resolution allows the university to sue the foundation, an independent nonprofit organization, if it doesn't take several steps, including submitting to a forensic accounting examination by a nationally recognized firm selected by the university.
We flagged these few examples of charity misdeeds:
1.     Pink Hearts Funds (MS) $235,000
2.     Children and Family Services/ Children's Charitable Services (AL) $2 million
3.     CODAC Behavioral Services (AZ) $11,000
4.     A&F (Always and Forever) horse rescue $7000
5.     Gary Professional Firefighters Association Local 359 (IL) $30,000
6.     AFSCE (OK) $75,000
7.     Bay Area Recycling for Charities (MI) $33,000
8.     Agape House for Mothers and Sierra Young Family Institute (MN) $480,000
9.     Children and Family Services and Children’s Charitable Services unknown (FL; AL; AK; IN; OH; TN) (source)
10.  Narragansett Regional High School unknown (MA)
11.  Newman Catholic Student Center--- UNC-Chapel Hill $150,000
12.  Park Road Montessori School (NC) $15,000
13.  United Auto Workers Local 2317 (IN) more than $100,000
14.  The Second Chance Foundation (PA) $160,050
15.  North Valley Hockey and Sports Complex (CA) $34,000
16.  Detroit Public Schools $61,000
17.  Success Preparatory Learning Center (CO) unknown
18.  Local 2406 of the American Federation of State, County and Municipal Employees (OK) Unknown 
19.  International Union of Bricklayers and Allied Craftworkers Local 6 (Illinois) $300,000 
20.  Veterans Administration Credit Union (MI) more than $2.3 million
21.  Michigan Community Resources (M) $77,000
22.  Cystic Fibrosis Foundation (MD) $300,000
23.  Cancer Support Services (AZ) $40,000
24.  Grace Lutheran Church (WI) $100,000
25.  Fresno Caltrans (CA) $15000
Political/public official chicanery (just a few):
1.            The former police chief of Shelby (MI), fired in January amid allegations of financial wrongdoing, was arraigned on six criminal charges, including embezzlement of an estimated $70,000.
2.            Philadelphia’s top finance official issued a report questioning the use of hundreds of thousands of dollars by a City Hall-affiliated nonprofit during former mayor Michael Nutter’s tenure, The Philadelphia  Inquirer and Philadelphia magazine write. Controller Alan Butkovitz alleged in a news conference that Desiree Peterkin Bell, a Nutter adviser who chaired the Mayor’s Fund for Philadelphia, used a $200,000 reserve account within the nonprofit “as if it were a special slush fund,” approving expenditures for travel, receptions, and other items without oversight by the organization’s board.
3.            A longtime Skagit County (WA) sheriff's deputy has been fired after an investigator said he admitted embezzling from the Pacific Northwest Police Detection Dog Association, a nonprofit organization for which he served as treasurer.
4.            A former Bunkerhill Township (MI) treasurer has been charged with embezzling public funds and township officials aren't sure how much might have been taken. A forensic audit said more than $24,000 was missing from two township accounts.
5.            Pushmataha County (OK) Commissioner was accused of $40,000 in misappropriation, got $1500 in fines and restitution and was placed on probation for 5 years. No jail time.
6.            The former Chief Financial Officer for the Grand Prairie Independent School district was arrested on a Federal Indictment by a grand jury and charged with theft. Prosecutors allege that Foster took $600,000 from the Grand Prairie ISD when she served as the CFO from October 2014 to July 2015.
7.            A former assistant engineer for the city of Santa Clarita was formally charged with having embezzled more than $533,000 over a three-year period
8.            An investigation into the embezzlement of $330,000, over 7 year period, from Fletcher Fire & Rescue targeted only the agency’s office manager and no other arrests are expected, a spokeswoman for the U.S. Justice Department said.
9.            Mills Mayor Marrolyce Wilson has resigned her office, months after allegations arose that she tried to stymie an investigation into possible $65,000 embezzlement by the town’s treasurer.
10.         The former fire chief in Middlebury was sentenced to three months in prison for embezzling $25,000, officials said.
11.         A former interim principal of El Camino High School in South San Francisco pleaded no contest to felony embezzlement for stealing close to $10,000 from the school to pay back gambling debt, according to the San Mateo County District Attorney’s Office.  The principal has been sentenced to 45 days in county jail and three years of supervised probation for taking money from the school to pay gambling debts.
12.         She will serve five years in prison for stealing more than $500,000 in excise tax money from the Anson (MN) Town Office, where she was tax collector for 33 years.
13.         Dozens of Southern California postal workers and their associates have been charged with mail theft, embezzlement and an array of other crimes as part of a sweeping investigation into criminal activity at the U.S. Postal Service.
14.         A woman who had control of the books at Bogue Chitto (MS) Volunteer Fire Department in Lincoln County for several years has been indicted for using fire department funds for her personal expenses.
15.         A federal grand jury returned an indictment that the former executive director of the Kankakee Valley Park District, with defrauding the park district and a related not-for-profit organization for his personal benefit.
16.         Former Lawrence (KS) Mayor Jeremy Farmer has been charged with taking more than $55,000 from Just Food
17.         A former Pontotoc County (MS) Sheriff’s Office deputy clerk turned herself in on embezzlement (of $45,000) charges.
18.         A chief of the U.S. Air Force Fire Service remains in his position as authorities investigate accusations of him stealing $133,000 intended for charities and putting those funds toward vacations, gambling and credit card debt.

Readers, weigh in as to what you think…please continue the tips (they are very helpful) gary.r.snyder@gmail.com
Nonprofit Imperative gathers its information principally from media sources...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however there is money missing. These incidents include only a fraction of the estimated $40 billion of charity crimes. On rare occasions, there may be duplicates.
We’re noticed: Cites in various media:
Featured in print, broadcast, and online media outlets, including: Charity Navigator, Washington Post, National Enquirer, The Patriot-News, Vermont Public Radio, Miami Herald, New York Times, National Public Radio, Huffington Post, The Sun News, In Touch, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, msnbc.com, Marie Claire, Ethics World, Tactical Philanthropy, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, Responsive Philanthropy Magazine, , Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, American Chronicle,  Palm Beach Post, Detroit Free Press, Oakland Press, Nonprofit World, Socially Responsible Business Forum, PNNOnline, Ohio Nonprofit Resources, Nonprofit Good Practice Guide, Nonprofit Startup Guide, Nonprofit Blog,  National Coalition of Homeless Newsletter, The Michigan Nonprofit Management Manual, MichiganNonprofit.com, CORP! Magazine, Crain’s Michigan Nonprofit, ncrp.org, PhilanTopic, Nashville Free Press, Nonprofit Law Blog, Seniors World Chronicle, Carnegie Reporter, Assoc. of Certified Fraud Examiners Examiner, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, VPR News, National Enquirer,
  • Silence: The Impending Threat to the Charitable Sector (Xlibris, 2011)
…”This book should be read by everyone. It will send a shiver down the reader's spine to think that people with little money to spare have given generously…”
  • Nonprofits: On the Brink (iUniverse, 2006)
  • The Michigan Nonprofit Management Manual, Governance Section
Our intent is to keep you informed.... You may be removed from our contact list and future mailings by emailing to garysnyder4@gmail.com with the word "remove" in the subject line.
Email: gary.r.snyder@gmail.com; 248/324-3700;
Gary Snyder is the author of Silence: The Impending Threat to the Charitable Sector (Xlibris, June, 2011) and Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. The book can be bought at amazon.com, barnesandnoble.com, Barnes and Noble (store)
© Gary R. Snyder, All Rights Reserved, 2016