The Nonprofit That Blew Through Billions Of Taxpayer Funds

by Gary Snyder

NeighborWorks America, a nonprofit, distributes much of its money to counseling groups that dispense mortgage advice and sometimes financial aid.

Established by lawmakers in 1978, NeighborWorks became one of dozens of congressionally chartered charities and patriotic organizations such as the Boy Scouts of America and the American Red Cross. Like the other two venerable organizations it is in disarray.

The group reveals an organization in disorder -- with sweetheart contracts, document fudging and unexplained departures of top officials. Executives at the group awarded at least two large jobs to insiders without bidding, later justifying one of the contracts with a backdated memo, according to interviews with former employees, tax filings and previously unreported company audits. In addition case managers signed off on a multimillion-dollar technology deal to a recently formed contractor, which had board members in common with NeighborWorks and used the same law firm. The contractor overcharged by as much as 20 times, one of the audits said.

•         Quantum, a company run by a former NeighborWorks employee, was listed as receiving more than $900,000 in fees in just one year, making it one of NeighborWorks’ highest-paid consultants. Quantum’s address was a one-bedroom apartment, in Washington, owned by a former NeighborWorks software developer. Two executives signed a backdated memorandum. Senior officials began jobs at housing-related nonprofits shortly afterward the discovery of the problems.
•          NeighborWorks would need help processing applications. It signed a contract for technology services with Hope LoanPort Inc., a non-profit that had ties to both its own leadership and HUD. NeighborWorks paid Hope LoanPort about $20,000 per month for web hosting, according to the audit, which said the subcontractor charged other clients $2,000 to $2,700 for the same level of service. Other fees were eight to 22 times the rate the subcontractors billed others, an audit found. Hope LoanPort, which is still under contract to NeighborWorks, eventually billed more than $3 million over two years -- including costs that “would probably be considered inordinate,” wrote its internal auditor

Audits revealed irregularities but no fraud. Many of the principals have left. Despite little leadership, management shortcomings and no oversight, the organization may continue on as in the past.  (source)

The problems are remarkable similar to that of the American Red Cross, the sister congressionally-chartered organization. Both will continue with impunity because both are too large to be rejected.

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: Charity Navigator, Vermont Public Radio, Miami Herald, National Public Radio (NPR), Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), “Betrayal”, (a movie), NBC (on Charity Fraud…TBD), FOX2, ABC Spotlight on the News, WWJ Radio, Marie Claire, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, Charity Navigator, The Chronicle of Philanthropy, St. Petersburg Times, Board Room Insider, USA Today Topics, Accountants News, Newsweek.com, 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, 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, Finance and Administration Roundtable Newsletter, 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, msnbc.com, Worchester (MA) Telegram and Gazette, Carnegie Corporation of America, EO Tax Journal, Wikipedia: Non-profit Organizations; Parent: Wise Austin, Accountants News, Veterans Today, Answers.com, Far-roundtable, #Nonprofit Report, nonprofithelpnews, nonprofit news; National Enquirer, Northwest Herald, The HelpWise Daily, The #Nonprofit Report, Wikipedia (Nonprofit Organization), Answers.com, Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)