A Teachable Moment in Charity Fraud

By Gary Snyder

The City of Austin has enacted rules to better scrutinize nonprofits, for good reason. The aftermath of $1.2 million embezzlement by Louanne Aponte, executive director of Family Connections, has reverberated throughout the city. The nonprofit closed in April 2010 after discovering it owed hundreds of thousands of dollars to the Internal Revenue Service and credit card companies. Aponte is also accused of stealing $183,000 from the Texas Association of Child Care Resource and Referral Agencies , where she served as volunteer treasurer, and about $6,700 from Hyde Park Christian Church , where she volunteered on the grants committee. Austin has enacted rules to better scrutinize nonprofits. Executive directors at nonprofits are reviewing their financial policies. And board members are flocking to classes to learn how to do a better job of overseeing how their organizations are run.
The city has changed the way the Austin/Travis County Health and Human Services Department handles its contracts with nonprofits. The department has hired an internal auditor to, among other things, help city staffers identify theft, fraud and other problems with contractors; ordered nonprofits to buy at least enough crime insurance to cover the loss of a city grant because of theft or fraud; and forced them to buy liability insurance to protect board members and officers from being held personally responsible for such crimes.
The city has also started verifying the licensing status of certified public accountants who perform audits for nonprofits. It now contacts auditors directly to confirm that documents submitted in their names are authentic and that they were presented to the board of directors. Investigators allege that Aponte forged audits to hide her theft, and Family Connections board members have said they received audit reports directly from Aponte rather than an auditor. The city is also requiring board chairmen to provide signed copies of minutes from a nonprofit's board meetings.