Friday, July 17, 2015

Mid-July Nonprofit Imperative E-Newsletter



Nonprofit Imperative
Your nonprofit browser
July 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:
New Regs.; IRS Fails; Charter School Problems…more
Charity Check Up:
Smithsonian Institution
A Thought or Two:
Tips From Preventing Red Cross “Issues”
Nonprofit News-In Case You Missed It:
Charity Giving Up; Grassley (Again) Seeking American Red Cross Failures…more
Political/Official Chicanery:
IA; CA; NM; NY; IO; OK; PA…more…more
What Do You Think?
·       To do good, donors must do their homework
·       Give Without Being Taken

Breaking the Silence:
With fraud rife in conflict and disaster zones, aid charities are under pressure to be open about corruption but one third of the world's 25 biggest aid charities declined to make their fraud data public in a Thomson Reuters Foundation investigation…Five of the biggest NGOs said they had not experienced any diversions of funds during this period…Mercy Corps said it had been defrauded in its Afghanistan program in 2011, when a staff member absconded with funds worth $257,670…World Vision International, the largest humanitarian NGO in the world in expenditure terms, said $1 million of its resources went missing between 2009 and 2013…Care International, Oxfam GB, Plan International, Norwegian Refugee Council, ActionAid, Handicap International, Concern Worldwide, Médecins sans Frontières (MSF), the American Jewish Joint Distribution Committee and the Danish Refugee Council all reported losses…International Rescue Committee, Christian Aid and International Medical Corps said they do not share fraud data publicly…Action Against Hunger (ACF) International, Catholic Relief Services, Feed The Children, Samaritan's Purse, and Global Communities failed to respond to the question on fraud (source)

... “lax oversight is out of step with the times and is an invitation to corruption... this secrecy can’t go on, and it won’t. There has been a push in recent years to hold nearly every sector of American life to tougher standards of accountability… reforms will make much difference without strong watchdogs to oversee philanthropy and nonprofits. It’s time to create a new federal bureau to police this sector, much as Britain has a national Charity Commission. State law enforcement officials must also do a better job of enforcing state-level laws… All the powerful institutions in American life need vigilant oversight, and philanthropy is no exception.” (NY Times)

“As presidential candidates find new ways to exploit secret donations from tax-exempt groups, hobbled regulators at the Internal Revenue Service appear certain to delay trying to curb widespread abuses at nonprofits until after the 2016 election."  New York Times

“Less than 20 percent of organizations victimized by fraud last year recovered all the money lost.” (source)

…nonprofits face a critical need to address fraud from the top (source)
Almost 200,000 Charities In CA Are Threatened
The California Attorney General wants to propose regulations with teeth that forces the tens of thousands of noncompliant charities operating in California to comply with registration requirements.
The California Department of Justice estimates that there are 52,000 charities within California that have not complied with proposed regulations. Moreover, it is estimated that there are at least 130,000 additional non-California charities operating in the State that have not complied.
The hammer may be coming.
The proposed regulations, if adopted, will mean such charities will need to suspend activities and fundraising if they are delinquent in their registration, and if suspended or revoked, their board members will be subject to personal liability and their assets subject to forced divestiture. (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).”
IRS Failed Attempts For Charity Oversight
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.
Schools Fail Outside Scrutiny
Walton Family Foundation’s billion-dollar effort to find a way to innovate and improve public schools was hijacked leaving a trail of profiteering and financial crimes, political corruption, lawsuits blocking audits. A study shows stunning lack of transparency and accountability, according to a new report, Cashing in on Kids.
·       In New York, a Walton grantee that has received $3.6 million has been lobbying state legislators for seven years to block audits of charter schools
·       In California, having received more than $31 million since 2004, successfully lobbied that state’s Legislature in 2011 to defeat a proposal that would have required the schools to the same public safety standards as public schools.
·       The record of financial fraud and undue enrichment stretches from coast to coast. The chief financial officer of The Brighter Choice Foundation, a Albany, New York, charter group that received more than $9.4 million, was arrested and charged with embezzling more than $200,000. In Washington, D.C., a city official on a board charged with financial oversight of charters, was arrested and charged with taking $150,000 from the trustees of one school under its jurisdiction. In the Miami, Florida, region, Academia Corp., a chain that runs more than 60 schools and received more than $1.1 million in grants, was exposed by The Miami Herald for “millions of dollars of profiteering” in transactions tied to buying and leasing school buildings.
·       More here
Another Cancer Charity Investigated
The Tennessee secretary of state’s office is investigating a cancer nonprofit with family ties to four other charities that were sued in May by the federal government on allegations they bilked donors of $187 million, according to a person familiar with the matter.
The group being investigated is the American Association for Cancer Support Inc., of Knoxville. Two of the four charities mentioned in the suit—one of the largest-ever involving a charity—have agreed to shut down. The American Association for Cancer Support wasn’t named in the suit and continues to operate. (WSJ)
This is but another of many “cancers” on the charitable sector. Others were.
Charity Check Up:
Smithsonian Continues To Be Less Than Transparent.
With a checkered past  (here, here, herehereherehere  hereherehere ), the Smithsonian gets caught again. Dr. Willie Soon of the Harvard-Smithsonian Center for Astrophysics failed to disclose the source of his support. A climate-change skeptic, Dr. Soon may have been compromised by his funding sources. According to the Guardian, Soon has received more than $1.2 million from ExxonMobil, the American Petroleum Institute, the Southern Company, and the Koch family. He not only received the funding, but delivered research papers to a variety of professional or academic journals without disclosing his energy industry financial support. Additional funding came from anonymous donors, including contributions from the Donors Trust, which, too, has been strongly associated with the Koch brothers.
Update: The Smithsonian Institution said it would adopt tighter procedures to govern conflicts of interest involving its researchers, the latest development in a widening national discussion of scientific integrity. Details are still being worked out, but the Smithsonian said the new guidelines would seek to prevent outside funders, such as corporations, from exercising undue influence over the findings of its studies. The guidelines are also likely to require strict disclosure of funding sources, going beyond the requirements of most other academic institutions and scientific journals, the Smithsonian said.
A Thought or Two:
Warding Off Charity Fraud
Some Good Tips From Propublica.org: Earlier this month ProPublica published an investigation with NPR into the American Red Cross' failures in Haiti. Wonder whom should you send money?
There's no simple answer. And there is no one-stop shop that can answer those questions. But if you're willing to put in a bit of time, you can be a more informed donor and increase the chances that your money will reach those in need.
Here are a few tips, based on conversations with experts and reporting in Haiti:
·       Research before you give.
·       Take the time to read up on your group — this can be as simple as a few Google searches and checking out information compiled by various charity watchdogs. Have there been any issues with management? Has the group performed well in the past? Has it had problems? The answers to these questions can inform your choices.
·       If you do give, you can demand meaningful transparency.
·       Nonprofit organizations are generally required to make only broad disclosures about their finances. (The American Red Cross' annual tax return, for example, doesn't reveal anything at all about its Haiti program.)
·       But as a donor, you can ask the organization you're giving to make public, detailed disclosures about their spending.
As Haiti aid expert Jake Johnston pointed out,  you can also ask elected officials to exercise their own oversight of charities that raise money after disasters.
Local groups or those that have deep local ties can be the best option
One issue that came up again and again in our Haiti reporting is that the American Red Cross did not have significant experience working in Haiti, hindering its efforts to operate in the country. We also heard about groups — some large, some small — that had been in the country for decades and employed Haitians in top positions. They tended to be more successful.
As  Francois Pierre-Louis, a political science professor and former community organizer in Haiti added on Reddit, donors can "work with local organizations that are connected with the population. Too often these groups are not even recognized."
So if you're considering giving to a group, it's worth doing a bit of research to see what kind of experience it has in the country in question.
There are options beyond traditional charities.
While the idea remains the subject of much debate, some in the aid world are now advocating simply giving money to those in need.
Think beyond the next disaster
Jonathan Katz, a reporter who wrote the book on the troubled post-earthquake relief efforts in Haiti, argues that it's the time between disasters when the most important work has to be done. From his book:
"Poverty and a lack of local institutions create the shoddy conditions that make disasters deadlier than they have to be...Supporting efforts to give aid directly to local governments, and the goal of building local institutions that operate independently of foreign control, will go exponentially further than cargo planes of tarps and bottled water. It's true that we don't always know what locals will do with that assistance, but that's the point. It's up to them."

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Nonprofit News…
In Case You Missed It:
1.     Charitable giving rose for the fifth year in a row in 2014, rebounding past a prerecession peak to an estimated $358 billion, according to an annual report from the Giving USA Foundation. The report, “Giving USA 2015: The Annual Report on Philanthropy for the Year 2014,” shows that contributions rose in all categories — individuals, corporations, foundations and bequests — making up for ground lost during the economic downturn. After reaching $355 billion in 2007, giving dropped 15 percent to $303 billion in 2009, according to the Giving USA data, which is figured in inflation-adjusted dollars. The increase in individual giving, at $258.5 billion, accounted for 54 percent of the growth, up from $249 billion in 2013. Donations included several large gifts from the high-tech world, such as a $1.9 billion contribution from Bill and Melinda Gates to their foundation. Younger entrepreneurs also gave big. Sean Parker donated $550 million to his foundation and his donor-advised fund at Fidelity, and Jill and Nicholas Woodman gave $500 million and Jan Koum gave $556 million to the Silicon Valley Community Foundation.
2.     Sen. Charles Grassley is demanding the American Red Cross explain how it spent nearly half a billion dollars raised after the 2010 Haiti earthquake. In a letter to Red Cross CEO Gail McGovern, the Iowa Republican gave the venerated charity until July 22 to answer 17 detailed questions, many of which it has never addressed publicly. (ProPublica)
3.     Update: Weeks after The Post exposed a nonprofit for hiring Police Commissioner Bill Bratton’s longtime cronies, he is now facing a second inquiry into the charity. The NYPD’s inspector general is conducting a “preliminary review” focused on financial disclosures made by the New York City Police Foundation, which has spent at least $2 million to fulfill Bratton’s requests to hire old friends as NYPD consultants.
4.     A rabbinical court noted that the former chief financial officer of an Orthodox charity called Aish Hatorah New York owed the charity $20 million that he had allegedly stolen. Since the forensic accountant examined only a portion of the charity’s records for the 17 years during which the group’s CFO, a rabbi determined that it was “likely” that “approximately $20,000,000 was stolen from Aish Hatorah over the years.” That was the eye-popping ruling of the Rabbinic court. Arguments in civil court, however, noted that the ruling should be in the neighborhood of $21 million including interest.
6.     U.S. Senator Sherrod Brown introduced an amendment to the Every Child Achieves Act currently before the House and Senate that would “strengthen charter school accountability and transparency, prevent fraud, and increase community involvement.”
7.     Transitions: One, possibly two, controversial leaders are stepping down from their leadership posts: Diana Aviv, who has led Independent Sector for 12 years, will leave the nonprofit-advocacy organization on October 1 to take a new job as chief executive of Feeding America. Nancy Brinker, the founder of Susan G. Komen, has resigned from her paid position to assume an unpaid role as a top volunteer. There have been calls for Brinker to step down for years, but she stayed in her over $400,000 positions (receiving a 64-percent pay raise) while donations fell by at least 25% and participation at 3-day events declined 37%.
8.     Update:  the IRS Inspector General issued his report, which set forth the following conclusions: • “No evidence was uncovered that any IRS employees had been directed to destroy or hide information from Congress, the DOJ or TIGTA.” • “[T]he investigation did not uncover evidence that the IRS and its employees purposely erased the tapes in order to conceal responsive e-mails from the Congress, the DOJ and TIGTA.” (source)
9.     The Internal Revenue Service approved 94,365 applications from organizations seeking 501(c)(3) status in fiscal year 2014, more than double the number approved in the previous two years, according to the IRS’s 2014 Data Book. According to the National Center for Charitable Statistics, there are nearly 2 million nonprofit organizations registered in the United States
10.  According to a Nonprofit Finance Fund survey, 79 percent of nonprofits reported an increase in demand for service offerings in 2014.
We flagged these few examples of
1.     South Arsenal Neighborhood Development Corp. (CT) $205,000
2.     Communication Workers of American local union No. 7603  (ID) $136,000
3.     St. Patrick’s Seminary and University  (CA) $200,000+
4.     Medina (NY) Lake Ontario Youth Athletic League football program $6000
5.     21st Century Cooperative (IO) $1.4 million
6.     Ryder Funeral Home (MA) $550,000
7.     Tripoli Shrine Temple/Shriners Hospitals for Children $205,000
8.     Palma Ceia United Methodist (FL) $2.1 million
9.     New Hampshire Sheep & Wool Grower’s Association $17,000
10.  Fruitlands Museum (MA) $1.3 million
11.  Colonial Theatre (NH) $103,000
12.  Thompsonville Little League (CT) $8100
13.  Silas Bronson Library (CT) $170,000
14.  Western International High School  (MI) $10,400
15.  Esperanza Detroit (MI) over $100,000
16.  Culture and Heritage Foundation (PA) $800,000
17.  Nonprofit Nursing Home Group (LA, AK) $200,000
18.  Bristol Library Foundation (VA) $21,000
19.  Habitat for Humanity of Marion County (CA) $10,000
20.  Crisis Ministry of Davidson County (NC) $48,000
21.  Charles Pinckney Elementary School (SC) $6000
22.  St. Rita's Catholic Church (CA) $425,000
23.  Farmington High Cheer Backers (MI) $10,000
24.  Bob Woodruff Foundation $100,000
25.  Martin De Porres School (NY) $500,00
26.  Free Methodist Church (NV) $425,000
27.  Framingham (MA) United Soccer League $200,000
28.  St. Francis of Assisi School (NH) $150,000+
29.  Centra Health Credit Union (VA) $2 million;
30.  Chicana Service Action Center (CA) $1.8 million-$8.5 million
31.  Veterans:
·       Wounded Marine Careers Foundation (CA) $1.2 million
·       Wounded Wheels (VA) $90,000
Political/public official chicanery (just a few):
1.     The former city clerk of Garwin (IA) is facing charges after being accused of stealing $500,000 from the city.
2.     A former audiovisual technician for the Los Angeles Department of Water and Power pleaded not guilty to charges of misappropriating more than $4 million in public funds over an !8 year period.
3.     A former Curry County (NM) probation officer has been arrested for stealing money over a 3-year period.
4.     Three New York postal workers have been accused of playing the Grinch and stealing gifts destined for underprivileged children by rigging the Operation Santa program where they worked.
5.     The former city clerk of Garwin (CA) is facing charges after being accused of stealing $500,000 from the city.
6.     A former Calhoun County (CA) Veterans Affairs Director accused of embezzlement has entered a guilty plea.
7.     Update: State Sen. Rick Brinkley, facing an accusation that he embezzled more than $1 million while working for the Better Business Bureau in Tulsa, has resigned from his Senate committee chairmanships.
8.     California Congressman Dana Rohrabacher today accused his former campaign treasurer, Jack Wu, of embezzling more than $170,000 in campaign funds from the congressman's campaign committee. 
9.     The former director of finance at Jackson (MI) Public Schools has been indicted on charges of embezzlement, according to court records. He was arrested
10.  The Ojai Police Department launched an investigation. Police said that their investigation revealed $60,000 was embezzled from the Ojai Unified school district over a period of two years.
11.  The former treasurer of Pennsylvania's financially troubled capital city of Harrisburg pleaded guilty to embezzling from two non-profit groups.  The agencies that were hit were the Historic Harrisburg Association, where he was executive director for four years and which did business with the city and Capital Region Stonewall Democrats, where he was treasurer.
12.  A woman was sentenced to probation and ordered to pay restitution for embezzling up to $130,000 from Michigan State University. She was a former employee in MSU's College of Osteopathic Medicine. A second embezzlement charged was dropped.

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)

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