Nonprofit Fraud:Examples and Solutions

http://www.amazon.com/Silence-Impending-Threat-Charitable-Sector/dp/1462875386/ref=sr_1_1?s=books&ie=UTF8&qid=1314368005&sr=1-1

Silence: The Impending Threat to the Charitable Sector is a high-stake and explosive investigative work about charity misdeeds. As you read this, there is a noteworthy charity fraud being perpetrated.

Scandals threaten to destroy the reputation of the charitable sector. These scandals threaten to destroy the reputation of powerful organizations and their leaders.

Charity malfeasance is an addiction of epic proportions. Charity leaders and regulators, by their silence and denial, are enablers.

Because the misdeeds are kept secret, there was no public outcry. The secrets are now being exposed. The sector needs a new paradigm, and Silence makes hundreds of suggestions as to how to turn it around.

This exposé is based on the largest repository of charity fraud anywhere. Many trusted leaders are exposed including board members, presidents, superintendents, chief executive officers, accountants— and more. They embezzled, forged, extorted, and falsified records; they self-dealt, negligently managed assets, and had multiple conflicts of interest.

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Three Layers of Nonprofit Fraud At This Parish

by Gary Snyder

As if things couldn’t get worse at the St. Thomas More parish in Troy (MI). Troy police and the archdiocese are investigating whether Rev. Edward Belczak, the pastor at the church embezzled or mismanaged $429,000. According to the archdiocese, investigators are trying to figure out whether Belczak padded his salary, paid a ghost employee $240,000 over the last six years and mishandled collections for Mother's Day and Father's Day, among other allegations.

The removal of Belczak has shocked many in metro Detroit who knew him as a charismatic man who grew the parish into one of the biggest Catholic churches in Oakland County. He was pastor there for 30 years before his removal last week.

Now two other investigations are under way. The pastor bought a half-million-dollar condo in Florida from his longtime church administrator in Wellington, Fla., for $500,000. The amount paid was $50,000 more than the administrator initially paid and is currently worth $370,000. In addition to paying the mortgage, as the owner, Belczak would have to pay taxes that ranged from about $8,500 to $10,500 a year over the last six years, according to records with the Palm Beach County Constitutional Tax Collector. Last year, the tax bill for the condo was $8,460.73. Its highest rate since Belczak bought it was $10,525.46, in 2008. It is unclear how Belczak paid for the home or maintained it. In metro Detroit, priests earn about $27,500 to the mid-$30,000 range, depending on years of service.

According to an expert, "That raises all sorts of conflicts of interest and other problems. So it raises eyebrows."

The other embezzlement investigation focuses on a travel group, which organized church trips. Investigators are looking into whether Belczak may have accepted $25,000 in residual commission checks to the travel group that should have been deposited or recorded in parish accounts. (DetroitFree Press)

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Nonprofit Fraud: An Easy Catch; A $722,000 Theft

by Gary Snyder

The Virginia FFA Association - formerly known as the Virginia Future Farmers of America - is a youth leadership organization that provides programs and experience to students interested in agriculture education. The Virginia FFA Foundation is a separate nonprofit, with a separate governing body, from the Virginia FFA. The organization’s foundation collects money from businesses, organizations and individuals, and those funds support FFA activities.

The foundation’s volunteer treasurer admitted to state police that he took $722,849 from foundation accounts without authorization and placed the money in a personal account for his own business. The foundation's treasurer until approximately June 1, was the only person authorized to write checks. Where was the board?

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Lance Armstrong Dropped From Another Charity

by Gary Snyder

Another charity co-founded by Lance Armstrong said it has dropped the former cyclist. The latest affiliated organization to cut ties with Mr. Armstrong in the wake of official doping allegations and his public confession. Athletes for Hope, a six-year-old group based in Bethesda, Md., took down Armstrong's photo from its website after a Jan. 17 interview with Oprah Winfrey in which he admitted doping. The move comes two months after Mr. Armstrong separated from Livestrong, the cancer charity he founded. Athletes for Hope began as a collaboration between three principals: Mr. Armstrong, tennis star Andre Agassi and women's soccer star Mia Hamm. 

The group's funding has declined in recent years, according to tax filings. A multiyear grant that totaled more than $2 million from the W.K. Kellogg Foundation ran out early last year.  He said the group's fundraising difficulties reflect a weak economy. Livestrong gave Athletes for Hope $50,000 in 2012 and will consider additional grants in the future.

Athletes for Hope has close ties with associates of Mr. Armstrong. Mark Levinstein, a lawyer who has represented the former cyclist, is a board member. Bill Stapleton, Mr. Armstrong's longtime agent, and Doug Ulman, the president of the Livestrong Foundation, also serve on the board. All have retained their roles. (WSJ)

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Lance Armstrong's Charity-Livestrong-Is Hurting

       Despite protestations to the contrary, the Livestrong charity is hurting. 

     

      Lance Armstrong apologized to the staff of his Livestrong cancer foundation and putting Livestrong at risk by using performance-enhancing drugs during a career in which he seven times won the Tour de France. A survivor of testicular cancer and founder of the charity, Armstrong had stepped down as its head after the USADA report became public. 

      A fact sheet on the foundation’s website notes that the organization raised $48 million in 2012, but its 2013 operating budget is projected to be only $38.4 million, a 10.9 percent reduction from its 2012 budget. Although its total revenues have been increasing, that is due to increasing amounts of “other revenues” attributed to licensing fees and the sale of products. 

      Meanwhile, contributions and grants declined from a shade less than $41 million in 2009 to $29.7 million in 2010, $24.7 million in 2011, and $23.4 million in 2012. To maintain a high operating budget, the foundation is probably drawing on its hefty fund balance, which had grown from $90.6 million at the end of 2010 to $103.4 million by the end of 2011. It is hard to imagine that Livestrong won’t suffer more in terms of lost contributions as more details come out. (h/t Rick Cohen, NPQ)

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Fraud hotline most effective tool

Confidential reporting hotlines can uncover fraud in half the time as other safeguards, according to an article in the Bennington Banner. Certified fraud examiner Christopher Rosetti said confidential reporting was proven in the business world to be the most effective tool at combating fraud, abuse, and waste. Rosetti said contrary to creating distrust, a confidential reporting system reinforced unity because most people are honest and ethical -- and willing to step forward, at least anonymously.

Citing a biennial survey by the Association of Certified Fraud Examiners (Rosetti sits as chair on that association's foundation), the fraud expert said the average organization lost about $6 a day per employee to fraudulent behavior. 

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

Nonprofit Fraud: Salvation Army, again

by Gary Snyder

A former bookkeeper for the Salvation Army in Santa Rosa joins a growing list (see: http://nonprofitimperative.blogspot.com/2012/11/nonprofit-fraud-is-salvation-army.html) of employees lining their pockets from the Christian charity. Investigators believe the bookkeeper took the money from a “Season of Sharing” fund that provides emergency cash to people who need help covering bills during times of need. She worked about a year at the charity and is suspected of stealing $50,000 during that time.

Police allege that she cut checks for herself as well as family members and friends who then cashed the checks on her behalf. The bookkeeper told others the checks were payroll advances. She appeared to have used the money to pay bills and forged checks to pay rent.

Officers arrested her at her home on suspicion of grand theft and forgery. She was later released on $25,000 bail.

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)

A Note of Thanks

Dear Subscriber:

2012 has been a very eventful year.  Some, in part, because of YOU. 

• Record Amount of Embezzlement Documented. As a result of tips from readers, Nonprofit Imperative has documented record nonprofit fraud. In just a three-week period, NI recorded $308 million embezzled from over 100 agencies. These small, medium and large charities and governmental organizations represent just a small cross-section of those that have been impacted. The Association of Certified Fraud Examiners suggests that it represents only 5% of the pillage from all organizations. A 2011 study noted that nonprofits, including religious organizations, experienced the most embezzlement cases of all industry categories, only behind financial institutions. 
• The Internal Revenue Service Recognizes the Magnitude of the Charity Fraud Problem. An IRS survey announcement stated that there is overwhelming evidence that there is "significant diversion" of charitable assets. The study also noted the lax enforcement with only 29% of the perpetrators resulting in charges; 3% paid full restitution; only 16% ended in incarceration or probation. 
• Authorities Around the World Acknowledge Charity Fraud As An Issue; Except in the U.S. Just last week, The National Fraud Authority in the UK rolled out a survey of fraud in the charity sector in order to gain a better understanding of the problem. This as a result of an increase of serious incidents of fraud by more than 75% in 2009-10. Other countries around the world are also monitoring the problem as well. Canadians are worried about charity fraud with 66% of them concerned about it. Other countries addressing the charity fraud problem include Israel, Italy, South Africa, and New Zealand. The USA has shown no such interest. 

Despite the unwillingness of those in leadership positions to acknowledge that there is a problem, we will continue to put a spotlight on this serious scourge. We will, with your continued input, send out our twice-monthly e-newsletter, keep updating our popular blog, respond to investigative reporters and electronic media and assist state and federal regulators.

We wish you a great New Year.  

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, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)