Wednesday, July 22, 2009

Nonprofit Imperative

…. your nonprofit browser
June 2009
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What’s Included:

Skunk of the Month

Illinois Funeral Directors Association

Nonprofit News-In Case You Missed It
Charitable Giving Down; Ronald Reagan Presidential Foundation; Shriners Hospital Cuts
Political/Official Chicanery
Association Exec Pleads Guilty; Detroit and Grand Rapids area Schools Sheriff/Police Officer
Comings and Goings
What Do You Think?

Skunk of the Month…
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:

Are Funeral Homes Meeting Their Maker?
Siren: For the past several months there has been a major problem brewing in Illinois. It has nothing to do with the Governor or his predecessor. It has nothing to do with a politicos’ indictment.
It has to do with one of the largest scams in recent nonprofit history.
It has gained the attention of every major public Illinois official one way or another. According to the secretary of state it was illegal. The Illinois Comptroller wants payback. The Illinois House wants an investigation. The state attorney general wants the perpetrators in court.
The backdrop: A Merrill Lynch employee sold life insurance policies to finance a pre-need funeral trust. He received a commission and provided investment advice on the proceeds that went to the Illinois Funeral Directors Association. An IFDA subsidiary took a piece of the premium for overseeing the trust and its cut exceeded the legally allowed amount. The trust had deficits of $10.4 million in 2001, $39 million in 2006 and as much as $100 million at the present time. The state comptroller wants $10 million to pay for current funerals. Merrill Lynch has offered $18 million to release them from liability and that is not acceptable to many funeral directors. The funeral homes say they are losing an estimated $500,000 each. The undertakers are crying foul and pointing to the failure of the regulators to do their job. There is much at stake including dignified burials for the 40,000 Illinois residents that bought the plans. (The State Journal-Register)
It seems that at least two other states have similar problems and solvency is a risk there as well.

Nonprofit News-
In Case You Missed It:

1. Charitable giving in the United States fell by 5.7 percent last year after adjustment for inflation, the largest year-over-year drop and the steepest decline in the history of the survey. The Giving USA Foundation began tracking American philanthropy 53 years ago. Individuals donated $229.3-billion last year, a decrease of 6.3 percent, accounting for 82 percent of all charitable giving in 2008. Corporate giving fell 8-percent, accounting for 5 percent of all giving. Foundation grants decreased only slightly, 0.8 percent representing 13 percent of the total contributed to charity last year. (WP/Chronicle of Philanthropy)
2. Despite a ban on gifts to lawmakers and limits on campaign contributions, lobbyists and groups that employ them can spend unlimited money to honor members of Congress or donate to nonprofits connected to them or their relatives. Most of the money — about $28 million — went to nonprofit groups, some with direct ties to members of Congress. (USA Today)
3. Investigations have focused on employees' activities involving child pornography possession, identity theft and embezzlement at the Library of Congress. The Library of Congress is charged by Senator Charles Grassley that it is attempting “to influence and/or control" the Office of Inspector General’s investigation. (WP)
4. A longtime Reagan foundation donor is seeking a court-ordered accounting of his contributions, unspecified compensatory damages, and $100,000 in legal fees over misuse of about $200,000 of his donations to the Ronald Reagan Presidential Foundation. (Ventura County Star)
5. The National D-Day Memorial Foundation, which runs the $25 million National D-Day Memorial, “is on the brink of financial ruin,” the AP stated. The foundation’s president insists the memorial’s only chance of survival is to be taken over by the National Park Service or by a college or university. (WSJ)
6. A former payroll manager for the Brooklyn Museum has been charged with stealing more than $620,000 from the nonprofit institution. (
7. A former pastor who once headed a Christian retreat in Hagerstown (MD) pleaded guilty for filing a false application to secure nonprofit status, bank fraud related to $1.75 million and tax evasion. (The Daily Record)
8. A federal judge sentenced a former Austin-based American Cancer Society employee to three years and four months in prison for embezzling over $200,000 from the non-profit organization.
9. Follow up: Fired amid an uproar over her $1.2 million pay package, the former executive sued the Central Carolinas United Way and six current or former officers in April. She accused them of race, age and gender discrimination, among other things, and asked the courts to give her more than $300,000 remaining on her contract, as well as the lucrative pension that prompted the public outcry. The matter was covered in great detail in NI. (
10. The Shriners hospital system is considering a plan to close six of its 22 hospitals around the country that care for children regardless of parents’ ability to pay. The nonprofit hospital system’s endowment lost more than $3-billion in the past year, which prompted consideration of the closure plan. The organization needs to cut spending by 30 percent. (
11. The bookkeeper that stole $1 million from the Ann Arbor (MI) Amateur Hockey Association pleaded guilty to felony embezzlement. (Ann Arbor News)
12. No reference check: Even though she had two felony convictions in 2000 for food stamp fraud and obtaining aid for dependents, the City of Chattanooga hired Keele Maynor. Now the state is charging her with theft and fraud in addition to the federal charges of wire fraud. She pleaded guilty to federal charges after taking $80,000 by faking that she had cancer. (
13. The second largest foundation in America, Ford Foundation, plans to trim its costs by offering buyouts to one-third of its 550 employees following an almost 30-percent drop in assets last year. (Chronicle of Philanthropy)
14. Two administrators with a New York nonprofit, SBCC Management Corp., that manages low-income housing spent $200,000 using the nonprofit's platinum card for meals, clothes and flight tickets to Puerto Rico for New York State Assembly members, according to a federal indictment filed. (Court House News Service/NYT)
15. The former accounting officer at the Firelake Grand Casino in Shawnee (OK) has been sentenced to nearly three years in prison for embezzling $406,000 from the Citizen Potawatomi Nation. (AP)
16. Remember NI covering the $590 million 2006 convictions and sentences of former Baptist Foundation of Arizona executives? The Arizona Court of Appeals upheld the executives’ conviction. Both were charged with of fraudulent investments and real estate transactions and operating the foundation as a Ponzi scheme.

We flagged these few examples of nonprofit mischief
1. Fowlerville (MI) Agricultural Society <$20,000 (
2. Central Little League $11,996 (VA) (
3. Great Lakes Energy electric cooperative (MI) $2 million (Gaylord Herald Times)
4. Genesee (MI) High School $4500 (Flint Journal)
5. Grove City Food Pantry and Emergency Services (OH) $50,000 (Columbus Dispatch)
6. Oh Day Aki/Heart of the Earth Charter School (MN) $1.38 million (
7. Conyers Public Housing Authority (GA) $130,000 (
8. Warrenwood Elementary Parent-Teacher Association (AR) $10000 (
9. West Virginia University's Student Dental Hygienist Association $4000 (Pittsburgh-Post Gazette)
10. Conn. Commission on Culture and Tourism $133,000 (
11. Openhouse (CA) $20000 (The San Francisco Examiner)
12. Ranch Hope (NJ) $350,00 (
13. Lexington Area Chamber of Commerce/Community Service Center Inc., (NB) $42,000 (
14. Our Lady of the Sea (MI) <$90,000 (
15. Children's Center at Highland United Methodist Church (NC) $150,000 (
16. Brownsville General Hospital (PA) <$400,000 (Valley Independent)
17. Montana Synod of the Evangelical Lutheran Church $17,000 (
18. Epping Cub Scout Pack 136 (NH) $5000 (
19. Sacred Heart Catholic Church (KS) $74,000 (
20. Hawkins Elementary PTO (MI) >$20,000 (
21. West Stanly Colt Club Boosters (NC) unknown (

Political/public official chicanery (just a few):
1. A former accountant has pleaded guilty to stealing more than $450,000 from the American Society for International Law from 2004
to 2008 and $150,000 from the American Bakers Association between
1998 and 2004.
2. CBS News has learned the FBI is investigating a little-known not-for-profit organization called Commonwealth Research Institute. Commonwealth gets the same benefits as any other charity: it doesn't have to pay taxes. But its line of work may be surprising. It's a defense contractor. If Commonwealth were not a charity, it could owe roughly one-third of its profits in taxes. That could add up to millions, on more than $45 million dollars in government contracts. (
3. VA authorities have charged four people in one of the largest embezzlement cases in Prince William County and are accused of creating a company in 2004 designed to bid for contracts from the county's information technology office, where they worked. Authorities say $9 million was sent to that company. (AP)
4. As a result of sloppy bookkeeping at 189 of 194 of the Detroit school buildings, the tax-exempt schools may have lost about $1.7 million that was wrongly paid in sales taxes, some of which could result in criminal charges. In addition, the audits showed loans made to school officials using school funds, missing funds from activities, school funds diverted to personal accounts, principals writing and signing checks, untimely deposits and money taken home by staff.
5. A Grand Rapids, (MI) grand jury returned a two-count indictment charging a former school superintendent of the Montcalm Area Intermediate School District (MAISD) with engaging in a conspiracy to accept a bribe--- $60,000 in free goods and services--- from a vendor. (U.S. Department of Justice)
6. A Paso Robles (CA) Police officer and board president of the California Organization of Police and Sheriffs (COPS) and the Civic Development Group (CDG), and the telemarketing firm COPS contracts with, is charged that they engage in “unlawful, unfair, and fraudulent business practices,” by the CA. attorney general. CDG received 85 percent of each donation and COPS retained less than 15 percent. In 2006, no COPS funds were used to help children. Of the $11.4 million in donations received in 2007, only $500 went to help children. (Cal Coast News)
7. The executive director for the Conyers (GA) Public Housing Authority pleaded guilty of embezzling more than $130,000 of housing authority funds.
8. Rep. Joe L. Barton's foundation is giving less than a quarter of the foundation's money to charitable causes, tax records show. The foundation spent more on staff, fundraising and other overhead from 2005 to 2007 - nearly $130,000 in all - than it did on its single $90,000 contribution to a charitable cause. The congressman's daughter-in-law runs the foundation as an unpaid executive director. The top Republican on the House Energy and Commerce Committee has raised donations from the industries his committee oversees. (Washington Times)
9. A former Skowhegan (ME) police officer received a nine-month suspended sentence for forging a document and his wife, a former school board member who was on probation for embezzlement when the forgery occurred, also had been found guilty. She had been convicted in 2004 of embezzling money from a nonprofit organization dedicated to developing and owning low-income housing in Cumberland County, had paid $30,000 in restitution to that group shortly before the forgery occurred.
10. Former head of Florida's sheriffs association was arrested for giving employees bonuses from federal homeland security grants and other sources — and requiring a kickback in return. He put a mistress on the county payroll for a highly paid, no-show job. He received at least $114,000 in kickbacks over the last few years. He pleaded guilty last month. (AP)
11. Former state legislator and city councilwoman Renee Gill Pratt entered a not guilty plea to racketeering charges. She stepped down from her administrative job with Southern University in New Orleans just before she was indicted in an alleged scheme to take hundreds of thousands of dollars in grant money intended for charity and education. (The Louisiana Weekly)

Charity Check Up
On paper it all seemed plausible. Robert D. Felner was well regarded. He had secured a $694,000 earmarked grant from the U.S. Department of Education to create an elaborate research center to help Kentucky's public schools. Three years later the money was almost depleted and the tasks in the proposal unaccomplished. With only $96,000 remaining in the account, he implored officials to approve a $200,000 subcontract with a nonprofit organization in Illinois that had already received $450,000 from the grant. The Illinois group, Mr. Felner said, had been surveying students and teachers in Kentucky.
In actuality, according to a story in the Chronicle of Higher Education, the National Center on Public Education and Prevention, was simply a shell that funneled money into the personal bank accounts of Mr. Felner and an associate. In addition, Felner and his associate allegedly tricked three school districts into sending their payments to their fraudulent Illinois organization, whose name was very similar to a reputable Rhode Island center. (In Rhode Island: the National Center on Public Education and Social Policy. In Illinois: the National Center on Public Education and Prevention.) The Illinois money then flowed into the two men's bank accounts, prosecutors say. Mr. Felner owns four houses whose combined value is more than $2-million.
Prosecutors say the two men siphoned away not only the $694,000 earmarked grant, but also $1.7-million in payments from urban school districts. Mr. Felner and his associate now await trial on charges of mail fraud, money laundering, and tax evasion.
Our take: Mr. Felner charged almost $37,000 of his salary against the grant; there is no evidence that he worked on the grant and no one looked.
Federal regulations require that universities use "suitable means of verification that the work was performed"; it took two years (and just months after a whistleblower tipped off the federal government) for the college of education's associate dean for research to declare that he knew of no reports, articles, or other products that resulted from the grant.
The university had a “blind eye” toward Felner’s management practices; many were impressed with U.S. News & World Report ranking that was attributed to Felner’s arrival, so they coddled him. The university paid little attention to the dozens of faculty and student grievances against Mr. Felner — and especially to a 2006 faculty vote of no confidence in his leadership
The university has learned lessons from that episode. Late last year the faculty senate was invited to overhaul the grievance system. The university's auditor reported to the Board of Trustees about a long list of university-wide accounting and research-compliance reforms that would be put into place.
On the other hand, many are still asking about how complaints about Mr. Felner had been handled by the university's president and others. Sounds a lot like this other agency.

What do you think??? :
Don’t miss Gary Snyder’s latest contribution to the National Committee on Responsive Philanthropy website (
Nonprofit Imperative gathers its information solely from public documents...some of which are directly quoted. Virtually all cited are in some phase criminal proceedings; some have not been charged, however.

Recent (cites) Comings and Goings:
• Let the Crisis in Nonprofits Drive Change (
• Are Charities Ignoring a Spike in Nonprofit Fraud? (Chronicle of Philanthropy)
• A Large Uptick In Charitable Fraud Is Met With A Yawn (
• Funding Incompetence (
• An Assault on Charities (
• Nonprofit Hospitals Chase Debt (The Sun News)
• Is CEO Pay at Angel Food Ministries Excessive? (Atlanta Journal
• Five Rivers Outcome a Travesty (The Sun News)
• Where’s the Ire? (
• A rags-to-riches life, with painful detours (Atlanta Journal Constitution)
• Five Rivers leaders guilty on six counts (The Sun News)
• Angel Food chief has led up-and-down life (Atlanta Journal Constitution)
• The Best Charitable Watchdog Going Kaput (
• Five Rivers leaders guilty on six counts (The Sun News)
• Angel Food chief has led up-and-down life (Atlanta Journal Constitution)
• Our Students Deserve Better (
• National Religious Broadcasters March 7,2009
• Siphoning Off Sacred Funds (
• The Accountants and Regulators Role in the Current Collapse (
• Veterans Whine as Executives Dine (
• Government agency Monitoring: Indifference and Hush (
• The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), Ethics World, Aspen Philanthropy Newsletter, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics,, Responsive Philanthropy Magazine, New York Times, Portfolio Magazine, The Virgin Islands Daily News, NANKAI (China) BUSINESS REVIEW, National Religious Broadcasters newsletter, The Charity Governance Blog, 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,, CORP! Magazine, Crain’s Michigan Nonprofit,,
• Nonprofits: On the Brink (iUniverse, 2006)

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Email: :6584 Pleasant Lake Court, West Bloomfield, Michigan 48322, 248/324-3700; Website:
Gary Snyder is the author of Nonprofits: On the Brink (iUniverse, February, 2006) and articles in numerous publications. The book can be bought at,, Barnes and Noble (store) and (publisher).

© Gary R. Snyder, All Rights Reserved, 2009