Wednesday, June 17, 2015

Mid-June Nonprofit Imperative E-Newsletter



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…
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”

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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 
Readers, weigh in as to what you think…please continue the tips (they are very helpful) gary.r.snyder@gmail.com
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
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Email: gary.r.snyder@gmail.com; 248/324-3700;
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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