Nonprofit
Imperative
…Your nonprofit browser
June 2015
The
twice-monthly newsletter dedicated to:
- exposing the crisis in nonprofit
fraud leadership…a crisis of pervasive and monumental waste, fraud, abuse,
mismanagement, and malfeasance throughout the charitable sector which
costs taxpayers and contributors tens of billions of dollars annually;
and,
- seeking reforms that will restore
the public’s lost confidence in the sector.
What’s
Included:
Skunk of the Month:
American Red Cross; Milton Hershey School
Charity Check Up:
Tampa Bay Rescue
Squad
A Thought or Two:
Warding
Off Charity Fraud; NYPD
Nonprofit News-In Case You Missed It:
Employee Theft; Foundation
Trustee Fees …more
Political/Official Chicanery:
MI; FL; KY; CT; MO; LA; CO; OH; NC; ND;
CA; NV; AZ; PA; WV; UT; NC; HI; NY…more
What Do You
Think?
·
To do good, donors must do their homework
· Give Without Being Taken
…. Nonprofit
fraud…can be catastrophic to the organization, their reputation and continued
operation. Further, fraud at a nonprofit significantly impacts the
organizations ability to raise donor money due to the perceived loss of confidence
in how the nonprofit manages their business and dollars raised…Early due
diligence and proactive intervention may be the key to preventing a large
scale, organizationally damaging, embezzlement which loots valuable donations,
crushes your brand and closes your nonprofit’s doors! (source)
“Less than 20
percent of organizations victimized by fraud last year recovered all the money
lost.” (source)
Skunk of the Month is the twice-monthly 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:
“They
came to do good and they did very well indeed (for themselves).”
Even
though… ‘much of the oversight responsibility for charities
rests with the I.R.S., which awards tax exemptions to charities and monitors
them for compliance. Few come under close scrutiny, however….
the tax agency’s oversight of
charities was dropping… Sham
[charities continue to be used’ to fleece well-meaning donors. But over the
last decade, efforts to tighten the way charities are regulated or coordinate
action between the Internal Revenue Service and state officials have largely failed either
because of regulatory indifference, political lobbying or lack of political
will (NYT) The Nonprofit
sector leadership doesn’t care either.
American Red Cross Is An Abysmal Failure
The
Red Cross says it has provided homes to more than 130,000 people. But the
actual number of permanent homes the group has built in all of Haiti: six.
After the earthquake, Red Cross CEO Gail McGovern unveiled ambitious plans to “develop brand-new communities.”
None has ever been built.
Aid organizations from around the world have struggled after the earthquake in
Haiti, the Western Hemisphere’s poorest country. But ProPublica and NPR’s
investigation shows that many of the Red Cross’s failings in Haiti are of its
own making. They are also part of a larger pattern in which the organization
has botched delivery of aid after disasters such as Superstorm Sandy.
Despite its difficulties, the Red Cross remains the charity of choice for ordinary Americans and
corporations alike after natural disasters. (please read this article: source) Udate: Based on the aforementioned media report alleging
the American Red Cross misspent the $500 million it raised to help victims of
the 2010 earthquake in Haiti has prompted another call for a congressional
investigation of the beleaguered organization.
A June 8 news release from
Democratic Rep. Rick Nolan of Minnesota states that he wrote a letter to the
House Oversight and Government Reform Committee saying "the allegations of
waste and mismanagement in Haiti are extremely disturbing, and I believe the
Red Cross should be accorded the opportunity to tell their side of the story to
Congress and the public." (The
Chronicle)
A Shameful Practice At The Milton Hershey School
Its assets are equivalent to the Ford
Foundation, three times the size of the largest American community foundation,
the $12 billion Milton Hershey School is under scrutiny and it is
not good.
The avarice of some of the board members is shameful:
One drew over $500,000 a year for his service on several Hershey boards,
especially since the overwhelming majority of charity trustees and directors
across the U.S. receive absolutely no payment. Yet this kind of greed pales
when compared to the high-stakes use of the school’s assets.
Hershey School explicitly kept secret from the
public and even their own professional associates — trust board members
maneuvered to divert a significant portion of Hershey assets to a local
development scheme and enlisted hush-hush promises of endorsement from the
politically ambitious (judges, even the state attorney general) before the deal
was announced.
A $50 million transfer was just the beginning
of a series of other questionable actions, including a court-rejected 1999
effort to again divert significant funds away from the school. That didn’t stop
the trust, however, from paying $12 million — two or three times the appraised
value — for a troubled golf course owned by a board member and other local
investors and then building a $5 million clubhouse there.
The regulators who indeed do have authority
seem to have exercised it with great sensitivity to political pressure: Twice a
state attorney general proposed significant conditions to modify the structure
and behavior of the various boards and twice the top state regulator backed
away at the last minute, leaving only minor modifications in place such as a
still very generous ceiling on board compensation.
Of course the IRS has not intervened, and the
local court with jurisdiction seems inclined to give Hershey directors free
rein, possibly in deference to shared interests.
Pablo Eisenberg has argued that we need tougher and more robust regulation to correct abusive practices by nonprofit and philanthropic
organizations. That will require the allocation of the funds necessary to
protect the public interest, especially when abuses are reported by those who
ostensibly are served, by those in the larger community, and by the news media.
Charity Check Up:
Politician Gains Control of Charity and
Hundreds of Thousands of Dollars
The chief of the Tampa Bay Rescue Squad was apparently aware that a
captain of the unit was embezzling hundreds of thousands
of dollars from an orphan’s fund, Hope Children’s Home. The agency takes care
of abused kids and orphans and depends entirely on donations. The Tampa Fire Captain was the former treasurer of the organization. According to records that charities file with IRS, he embezzled more
than $373,000. When asked, he denied that he
embezzled the money. He nevertheless, resigned and told the board he did
inappropriate things, In spite of the virtual admission, his boss the
Tampa Fire Chief continues to defend his captain and his decision to keep him
on the job.
The hired investigator said the
missing money is a disappointment and that the ‘captain didn't need the money
he did this purely by greed.’
A Thought or Two:
Warding Off Charity Fraud
Nonprofits that receive support with strings attached —
such as government grants or donations earmarked for a specific purpose — are
less likely to be victims of fraud and embezzlement, according to an
examination of Internal Revenue Service filings.
While charities may prefer to receive gifts without such
stringent monitoring, the close attention paid by government or private donors
of restricted money helps prevent financial wrongdoing, researchers say.
Perhaps less surprising: The study, by a trio of researchers from the
College of William and Mary, Rutgers University, and the University of
California at Davis, found that several "good governance practices"
like financial audits and a conflict-of-interest policy, also helped reduce the
incidence of fraud.
The findings:
Recipients
of restricted donations were 20 percent less likely to fall prey to fraud.
Nonprofits
that underwent an audit and maintained administrative duties in-house rather
than hiring an outsider to do them were 35 percent less likely to see their
assets diverted illegally.
Asking
board members to review tax filings and publishing a conflict-of-interest
policy each lowered the chance of fraud by about 20 percent.
NY Police Nonprofit Have A Conflict of Interest?
NYPD Commissioner Bill Bratton
is using a nonprofit that funds crucial police programs to dole out cushy
consulting jobs to cronies — and springboard them onto the public payroll,
according to the New York Post. The
New York City Police Foundation has awarded more than $2 million worth of outside
contracts to study the NYPD and recommend improvements, sources said. The
consultants include at least six Bratton associates with ties going back as far
as his time with the Boston Police Department in the 1970s.
Former NYPD
officials accuse Bratton of using the foundation as a “piggy bank” to enrich
his pals and create “almost a shadow government”
Nonprofit
News…
In
Case You Missed It:
1.
Update:
Former longtime charity president Russell “Rusty” Brace pleaded guilty in
federal court to three felony counts related to the embezzlement of $4.6
million. He diverted donations then deposited checks totaling $4.6 million that
had been intended for the charity into his account through 2014 when he stepped
down as president of United Mid-Coast Charities.
2. Minnesota Attorney General Lori Swanson
sued the Epilepsy Foundation of Minnesota as she cracks down on the business
practices of billion-dollar thrift store retailer Savers. Swanson accused the
foundation of violating the state’s charities laws through its partnership with
Savers, saying it is misleading the public about the extent to which the used
goods they donate actually benefit the charity. The lawsuit, filed in Hennepin
County District Court, also accuses the Epilepsy Foundation of filing
inaccurate reports with the state because it does not identify Savers as a
professional fundraiser.
3. The
2015 Hiscox Embezzlement Watchlist: A Snapshot of Employee Theft in the US, a
comprehensive study of employee theft in the United States. US Organizations
with less than 500 employees experienced a median loss of $280,000 per year due
to employee theft across a wide range of industries. 80 percent of victim
organizations had fewer than 100 employees, and losses were suffered across a
wide variety of industries, with an average total loss of $842,403. Women
represented more than 60 percent of employee perpetrators, while the median age
of wrongdoers was 50. The embezzlers were also not confined to the finance
operations of an organization. In fact, more than 50 percent of actions were
committed by employees not in the finance or accounting function.
Just over half of all employee theft schemes
(53 percent) were perpetrated by employees in senior roles within the
organization. Organizations with a high concentration of employee theft were
non-profits (median loss of $202,775), municipalities (median loss of $293,717)
and labor unions (median loss of $41,599). (source)
4.
Trustee fees: A dated but thoughtful read. A
study—Foundation Trustee Fees: Use and Abuse— analyzes the tax returns of 238
foundations has revealed that in a single year. They spent nearly $45 million
on “trustee fees”—the bulk of which go to their own predominantly wealthy
boards of directors rather than to the charitable causes they were set up to
fund. Room for some discussion?
We flagged these few examples of
1.
Michigan Youth
Challenge Academy $65,000
2.
Southwest Middle
School (FL) $100,000
3. Fern Creek Optimist Club (KY) $15,000
4.
Waterbury library (CT)
$200,000
5.
BackStoppers/U.S.
Marshal’s Survivor’s Benefits Fund (MO) $19,000
6.
The Waterway Condo Association
(FL) $225,000
7.
Open World Services Inc
(LA) $150,000
8.
John Perry Golf Benefit
Tournament (MO) $18,000
9.
Summit Association of
Realtors (CO) $415,000
10. Hope
Children's Home (FL) $375,000
11. Stepney Elementary School PTO (CT) $45,000
12. Armed Forces Foundation unknown (a lot)
13. Monroe County Child Advocacy Center (MI)
$23,880
14. Bowling Green Bobcat Boosters Club (OH) $150,000
15. Gallatin Youth Football League $24,102
16. A&T University Foundation (NC) $400,000+
17. Dexter Community Schools (MI) up to $200,000
18. Switzer
Elementary parent-teacher organization (MI) $68,000
19. Magic City Youth Baseball (ND) $31,000
20. Laliberte Toy Fund $120,000
21. Lawrence Family Jewish Community Center (CA)
$500,000
22. Michigan State University's College of Osteopathic
Medicine $150,000
23. Valencia High (CA) Booster Club $15,000
24. Tofatolu Congregational Church (CA) $300,000
25. Twin Ridges Home Study Charter School (NV) $30,000
26. Amalgamated Transit Union's Local 1433, (AZ) $253,000
27. (meant
for) United Way (PA) $500,000
28. Marshall County Starting Points Center, Inc.(WV)
Unknown
29. Utah Pork Producers Association $300,000
30. Mt. Pisgah Church (NC) $70,000
31. Hawaii Centers for Independent Living $153,000
32.
Clubhouse of Suffolk/the Association for Mental
Health and Wellness/the Mental Health Association in Suffolk / Suffolk
County United Veterans (NY) up to $18 million
Political/public official chicanery (just a few):
1.
The former executive director of a
Chicago-based charity, the Organization of New City, pleaded not guilty to
using thousands of dollars in donations for personal expenses. He is charged
with theft of more than $100,000, and misuse of charitable trust funds,
according to court records and Attorney General Lisa Madigan’s office. The
agency helps low-income homeowners pay their mortgages on time to avoid
foreclosure, Madigan’s office said.
2.
A former Clay
Township (MI) clerk pleaded guilty to a
15-year felony. The case of former Titusville Area Leisure Services director
Michael Rice, who is charged with stealing more than $4,500 in city pool
earnings during his brief tenure in 2013, will proceed to Crawford
County Court.
3.
Former Lee Police Chief
Joseph Buffis is facing a fresh set of allegations by federal investigators
that he stole more than $30,000 from his church parish account and an
accusation comes on the heels of allegations that he siphoned
$120,000 from a police-sponsored charity designed to provide Christmas gifts
for needy children, plus skimmed an additional $8,000 from a police association
fund, prosecutors say. An office manager has
been sentenced to six years of probation for embezzling more than $34,000 from
the Fort Pierre Development Corp.
4.
A former Virginia
firefighter of the year will serve 12 months in jail for embezzling more than
$109,000 from the fire union.
5.
Oakland Private
Industry Council 2010 state audit showed that it mishandled nearly $1 million
in federal stimulus funds that the city had allowed the nonprofit to manage.
6.
An office manager has
been sentenced to six years of probation for embezzling more than $34,000 from
the Fort Pierre Development Corp.
7. Chicago Public School's CEO Barbara Byrd-Bennett
has resigned amid a federal probe of a $20 million no-bid contract between the
district and a training academy where she once worked as a consultant. the
school district confirmed that it had been served with federal grand jury
subpoenas
8. The former police chief of west suburban
Countryside was sentenced to more than two years in federal prison on for fraud
and money laundering (of $350,000) in a scheme connected to a non-profit
helicopter program he ran.
9.
Curtis Baker was placed
on three-years probation as a result of the plea agreement. The Oklahoma
Attorney General’s Office had accused Baker of embezzling money from the
Higgins Volunteer Fire Department, which is in Latimer County.
10. Oklahoma Senate President Pro Tem Brian Bingman announced on
Monday that Republican Sen. Rick Brinkley of Owasso resigned as assistant
majority floor leader, chairman of the Senate Pensions Committee and vice
chairman of the Senate Finance Committee. The Oklahoma State Bureau of
Investigation is looking into allegations that funds have been misappropriated
at the Better Business Bureau in Tulsa, where Brinkley worked for 15 years
before he was fired in April. The BBB alleged in a lawsuit last week that
Brinkley embezzled more than $1 million from the organization.
11. An employee of the L.A. Department
of Water and Power has been arrested on charges that he embezzled $4.4 million
from the utility over the course of almost 20 years. Thatcus "T.C."
Richard worked as an audio-visual technician until his retirement last year.
According to the DWP, he oversaw 140 contracts for audio-visual services,
dating back to 1993, which were awarded to companies owned by his close
friends.
12. A former Illinois health official was sentenced to
more than two years in prison for her role in a scheme to steal millions in
grant money
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 there is money missing. On rare occasions, there
may be duplicates.
We’re
noticed: Cites in various media:
Featured in print,
broadcast, and online media outlets, including: Charity Navigator, Washington Post, National Enquirer, The Patriot-News, Vermont
Public Radio, Miami Herald, New York Times, National Public Radio, Huffington Post, The Sun News, In Touch, Atlanta
Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC
Spotlight on the News, WWJ Radio, msnbc.com, Marie Claire, Ethics World, Tactical Philanthropy, Aspen Philanthropy Newsletter,
Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St.
Petersburg Times, Board Room Insider, USA Today Topics, Accountants News,
Newsweek.com, Responsive Philanthropy Magazine, , 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, The Michigan Nonprofit
Management Manual, 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,
VPR News, National Enquirer,
- Silence:
The Impending Threat to the Charitable Sector (Xlibris, 2011)
- Nonprofits:
On the Brink (iUniverse,
2006)
- The Michigan Nonprofit Management Manual, Governance Section
Our intent is to
keep you informed.... You may be removed from our
contact list and future mailings by emailing to garysnyder4@gmail.com with the word "remove" in the subject line.
Gary
Snyder is the author of Silence: The Impending Threat to the Charitable
Sector (Xlibris, June, 2011) and Nonprofits: On the Brink
(iUniverse, February, 2006) and articles in numerous publications. The book can
be bought at amazon.com, barnesandnoble.com, Barnes and Noble (store)
© Gary R. Snyder, All Rights Reserved, 2015
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