Wednesday, October 24, 2012

Nonprofit Fraud: Should You Give To Haitian Relief Efforts?

by Gary Snyder
There is ample evidence to suggest that giving to Haitian Relief efforts may be a waste of money.

At last glance the United Nations reports that only half of all of the funds pledged to rebuild Haiti after the 2010 earthquake that killed 316,000 of its people has been delivered. Among those who have not followed through—Venezuela and the United States, which together pledged $1.8 billion (they have disbursed just 24 percent ($223 million) and 30 percent ($278 million), respectively. Japan and Finland are among the few to have fully paid what they promised—$100 million and $6 million, respectively. The American Red Cross received about $486 million in donations following the earthquake, and has spent and signed agreements to spend $330 million on Haiti earthquake relief and recovery efforts in the first two years. Some of those who have moved slowly point to the lack of infrastructure in Haiti as part of the reason for slow payment of pledges. (link) (link) (link). The protracted humanitarian crisis continues. More recently, the World Bank estimates that few of the $400 million in housing, home repair and infrastructure are completed.

Conflicts have arisen where several have taken advantage of the good cause and the chaotic nature of the Haitian relief effort to collect huge amounts of money and line their own pockets.

Singer Wyclef Jean collected $16 million for his native country, Haiti. Six years after the nonprofit, Yele Haiti, was founded it closed its doors. The hip-hop star is under investigation after multiple charges against him for his questionable expenses. One newspaper suggested that Yele spent just $5.1 million on relief. Another suggested that Jean’s was paid for musical performances at a benefit concert. Another questionable expense was the $30,000 spent on ferrying of Lindsay Lohan to a fundraiser. The $256,580 shared by Jean and the Yele Haiti board is being investigated. The walled estate in which the charity put $600,000 in fix-ups is now deserted. The continuing investigation by the New York attorney general will ferret all of the improprieties. One charity effort down.

In 2010, Mitch Albom, the best selling author and sports columnist, approached Rev. John Heard and his charity, Caring and Sharing Mission, and offered to raise money for Haitian efforts. All has stopped in a legal dispute after Albom and his Hole in the Roof Foundation sunk nearly $500,000 on a school and orphanage project. Heard and his charity are seeking $2.5 million in damages. Two charity efforts down.

The nonprofit organization, Haitian American Foundation Inc., was swirling in allegations when its executive was charged with money laundering and racketeering.  Over $2 million seems to be lost and the agency is now defunct. Three charity efforts down.

A Haitian Clinic is in jeopardy with tens of thousands of dollars taken from the proceeds of fundraisers. The money allowed the group to keep the medical offices open to service the impoverished. The clinic’s future is in question. Four charity efforts down.

Make sure that you are confident that the charity that you donate to is honest. Exercise due diligence:
·      ensure the charity is effectively governed; is it transparent, accountable and fiscally responsible?
·      go to GuideStar, if available; and review the charity’s IRS 990 form; look at other watchdog websites such as Charity Navigator.
·      go to the charity’s website and scrutinize the annual report and try to see if there are conflicts of interest (such as family members on the board);
·      check the financial statements both at GuideStar and at website;
·      examine to see if programs are in sync with organization’s mission;
·      ask if the agency has internal financial controls in place to avoid fraud and misapplication of funds.

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics,, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)
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