Friday, June 10, 2016

Nonprofit Imperative Mid June E-Newsletter


Nonprofit Imperative
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June 2016

The 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:
Wounded Warrior Project: May Smith Trust…more
Breaking the Silence:
American Red Cross
Charity Check Up:
Hindu Temple
A Thought or Two:
Principle For Charities To Live By
Nonprofit News-In Case You Missed It:
Healing Arts Initiative; Donald Trump Charities…more
Political/Official Chicanery:
MI CA; ME; AK; RI…more
What Do You Think?
·       To do good, donors must do their homework
·       Give without being taken

In spite of what the Independent Sector has said for decades:…”(the charitable sector) doesn’t have one center of organization and imagination looking out at the far horizon to inspire and guide all of the component parts to get to a place together that none operating independently could ever get to on its own. It doesn’t have one voice to tell the rest of the world where it is headed and what it requires to get there. It has no coordinated analytical capability to help it understand its progress.” (Harvard Business Review)

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"Board members of the city’s nonprofits must take more responsibility and become better stewards of their organizations, says a new report released, the second self-examination of the sector to come out in the past month, a recently released report from the Human Services Council said.”
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Skunk of the Month…
        “They came to do good and they did very well indeed (for themselves).”

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:
More Congressional Talk…awaiting action
To his credit, Senator Chuck Grassley has brought to the public’s attention many abuses in the charitable sector. 
But change, in the past, has not been readily forthcoming (ie, American Red Cross, Smithsonian)
Now, Grassley and the Senate Judiciary Committee have been looking into the spending at the Wounded Warrior Project, specifically trying to make sense of the proportion of spending on veterans programs against the total budget. 
The organization provided the committee with the requested financial documents around a month ago, and Grassley yesterday sent a follow-up letter requesting further clarification.
WWP’s claims that it spends 80 percent of its expenses on veterans’ services.  Charity watchdog groups have estimated the percentage as low as 43 percent excluding fundraising related costs.
The committee questioned even the services themselves: “It appears the vast majority of the 94 percent of program services provided to veterans consisted of tickets to sporting events,” Grassley said in the letter. Grassley further questioned the characterization of placing $37 million over 2013 and 2014 into a trust fund as a program expense.
The senator finally ventured that, “Of the $242 million WWP spent on program expenses in FY 2014, it appears that approximately $150 million of it was not actually spent on veterans by WWP and a large portion of it was in-kind donations.”
The Grassley letter concluded with a set of further questions to be completed by June 1st, including a request for the independent review of spending practices commissioned by the board and copies of the fundraising materials against which the joint cost allocations were made.
Lets hope that the WWP response fully addresses the questions and that the committee concerns don’t get lost in the daily Finance Committee charge.
Update from recent Grassley email: Based on WWP's Consolidated Financial Statements, you claim that 80.6% of its total expenditures went to provide services for veterans. That includes free media as a program service to veterans as well as $40,916,885 on program service costs that were joint educational and fundraising solicitations. It is questionable “if these solicitations provide any benefit to veterans or provide direct support to WWP's mission.” Aside from attending sporting events, only a little amount was spent on program events that were Physical Health & Wellness. In total, when taking the aforementioned into account, of the $242 million WWP spent on program expenses in FY 2014, it appears that approximately $150 million of it was not actually spent on veterans by WWP and a large portion of it was in-kind donations.
A Grassley victory: Sen. Chuck Grassley of Iowa released the results of his 16-month-long inquiry into a Missouri non-profit hospital in the spotlight for aggressively suing low-income patients. Thanks to Grassley’s inquiry and persistence, Mosaic Life-Care approved debt forgiveness for 5,070 patients totaling $16.9 million. “Tax-exempt hospitals cannot be in business to profit off of poor people who may not know what form to file,” Grassley said in a speech on the Senate floor in announcing the results.  “That is not what Congress intended to happen when we created the tax exemption.  Now, thousands of people have a new lease on life, thanks to Mosaic’s meeting its tax-exempt responsibilities.
Trustee Raids Charitable Trust For $52 million
A former trustee for two charitable trusts was sentenced to 13-plus years in jail for spending $52 million of one of the organizations’ funds on aircraft, boats, and personal expenses over six months in the mid-2000s, The Boston Globe write. He used May Smith Trust money for a spending spree that included purchases of private jets, military planes and helicopters, a patrol boat, a yacht, and a $700,000 home. He was convicted in February on 11 felony counts in what federal prosecutors said was one of the largest cases of financial fraud in Alaska history. Philanthropy experts told the Globe inherited trusteeships remain commonplace.
Veterans, Again, Used For Personal Gain
Congressman Walter B. Jones (NC-3) sent a letter to Veterans Affairs Secretary Robert McDonald asking for the resignation of J. Thomas Burch, the Deputy Director in the Office of the General Counsel at the VA, who runs an allegedly fraudulent charity called the National Vietnam Veterans Foundation (NVVF). Yesterday, CNN reported that in the past five years, NVVF has taken in $29 million in donations and spent less than 2 percent on veterans. According to Charity Navigator, which audits thousands of charities in the United States, NVVF spends 90 percent of its over $8 million revenue on fundraising expenses, and is one of the most inefficient charities in the country.
Congressman Jones is “outraged that Mr. Burch receives a taxpayer-funded salary from the VA and drives a Rolls Royce to work while cheating veterans out of their money and the services he promises them. In 2014 he drew a salary of $65,000 as head of his "zero-star" charity while pulling down $127,000 in salary in 2014 VA Deputy Director.
According to Charity Navigator, they don't have an independent board of directors, they actually don't even have a comprehensive board of directors -- only three members on the board at this point in time and some of them are family. (CNN)
Add Two Celebrities To The Charity Fraud List
Former NBA player Kermit Washington—who had a 10-year career primarily with the Lakers and Trail Blazers but is best known for brutally punching Rudy Tomjanovich in the face—was arrested after being indicted for allegedly running a charity fraud scheme. According to the Department of Justice, Washington worked with lawyer and NFL Hall of Famer Ron Mix (who plead guilty to felony tax fraud charges) to siphon money supposedly destined for Africa into his own pocket. If convicted, he faces over 40 years in prison and a million dollar fine.
Breaking the Silence:
Red Cross Botched Response To Mississippi Flood
 “There wasn’t any coordination.” They were in the wrong place.
Red Cross’ response was “marginal at best” at the Mississippi flooding.

“The problem is their inability to develop tactical plans for their relief operations.”
It has been extensively reported that the Red Cross ’
botched responses to Superstorm Sandy in 2012 and its failure to follow through on promises after the 2010 earthquake in Haiti.
The Mississippi emails also show the effects of 
deep cuts to the charity’s network of local chapters made by CEO Gail McGovern, who has struggled to get the Red Cross on stable financial footing since she took over the charity in 2008. The Red Cross closed several Mississippi chapters since McGovern became CEO. The downsizing hasn’t been limited to local offices. Last month, a Red Cross senior vice president sent an email informing his staff that positions in the Disaster Cycle Services would be cut.
Mississippi emergency management officials said the state has suffered from the Red Cross’ cutbacks.
 (Source)
Further update: Rep. Bennie Thompson, D-Miss., the ranking member of the congressional committee that oversees the Red Cross, sent a three-page letter to the charity’s CEO demanding that she explain why the Red Cross struggled to respond to record flooding in Mississippi this spring. Thompson pressed Red Cross CEO Gail McGovern for details on the impact of its staffing cuts and how it plans to coordinate better with state emergency managers. (propublica.org)
Charity Check Up:
Hindu Temple Hit With Embezzlement
He led major renovations of a Flint-area (MI) Hindu temple and embezzled more than $400,000 while he was its director, according to authorities. Investigations revealed that the director was writing checks to himself and his businesses from the temple's account. He said his investigation into temple finances only went back six years due to the statute of limitations. He was the primary person in charge of temple finances
The executive also has another case open in Genesee County Circuit Court, where last year he pleaded no contest to two charges stemming from writing bad checks. A no contest plea is not an admission of guilt, but is treated as such for the purposes of sentencing. Sentencing in that case is pending a resolution in the embezzlement and larceny case, court records show. (source)
A Thought or Two:

RAY DALIO at Bridgewater Associates shares some thoughtful fundamental life principles that are certainly applicable to today’s charitable environment. We will present one principle each newsletter. (principles)

Have integrity and demand it from others. a) Never say anything about a person you wouldn’t say to them directly, and don’t try people without accusing them to their face. b) Don’t let “loyalty” stand in the way of truth and openness.

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Nonprofit News…
In Case You Missed It:
1.     Healing Arts Initiative—a Queens-based charity that provided performances and workshops for over 300,000 poor, disabled, and elderly New Yorkers—shut its doors after it failed to regain its footing from the discovery of a $750,000 embezzlement. Shortly after being hired last summer, the director, D. Alexandra Dyer, was disfigured in an attack that led to three arrests and the exposure of what prosecutors said was a $750,000 embezzlement scheme. In April, Ms. Dyer sued the board on behalf of the charity itself, claiming that the board’s negligence had enabled the thefts. Last week, the board fired Ms. Dyer and her chief financial officer, Frank Williams. The board said through a spokesman, Timothy Gilles, that expenses for program, payroll and administration had exceeded revenue for many months but that the board did not know the extent of the problem until this week because Ms. Dyer and Mr. Williams had withheld “crucial financial information.” Ms. Dyer and Mr. Williams said that they supplied all possible information and that the board ignored complaints about malfeasance for years.
2.     In January, Donald Trump skipped a GOP debate and instead held his own televised fundraiser for veterans. At the end of the night, Trump proclaimed it a huge success: “We just cracked $6 million, right? Six million. ”Now, Trump’s campaign says that number is incorrect. Campaign manager Corey Lewandowski said the fundraiser actually netted about $4.5 million, or 75 percent of the total that Trump announced. Lewandowski blamed the shortfall on Trump’s own wealthy acquaintances. He said some of them had promised big donations that Trump was counting on when he said he had raised $6 million. But Lewandowski said those donors backed out and gave nothing.
Update: Almost four months after promising $1 million of his own money to veterans’ causes, Donald Trump moved to fulfill that pledge — promising the entire sum to a single charity as he came under intense media scrutiny.
Another update: Florida Attorney General solicited a donation from Trump around the same time her office deliberated joining an investigation of alleged fraud at Trump University and its affiliates. The $25,000 donation came from a Trump Foundation apparently in violation of rules surrounding political activities by charities.  (source) In a strange twist, the AG says se tried to return the money but Trump would not accept it. “They rejected it and sent it back.”
3.     The Annual Fraud Indicator 2016 estimates that the cost of fraud affecting the voluntary sector was £1.86bn ($2.7bn) in 2013/14, or 2.5 per cent of the sector’s annual income and expenditure in the U.K.. In the U.S., it is at least three times that percentage. And guess what, no one cares!
4.     An early-childhood-education nonprofit headed by Diana Rauner, the wife of Illinois Gov. Bruce Rauner, has joined a coalition of charities suing her husband and several members of his administration over failure to pay off state human-service contracts, according to Crain’s Chicago Business.
5.     Fighting charity fraud could become more difficult under a bill that, if it becomes law, would prohibit the Internal Revenue Service from collecting the names of top donors to charities and other nonprofit groups, Reuters reports. Currently under consideration in the House of Representatives, the bill would protect the privacy of wealthy donors who make anonymous gifts to politically active groups and eliminate a decades-old IRS donor-disclosure requirement for a range of organizations, including hospitals, universities, and community and sports organizations. Critics of the proposal argue that it would negatively affect state regulators, who sometimes review charities' Schedule B forms for conflicts of interest, questionable movements of money, and in-kind donations between charities. "It's important forensic data to us state regulators," Hugh Jones, deputy state attorney general in Hawai'i, told Reuters. "It's evidence we can consider using in an investigation to determine whether a charity’s board has breached its fiduciary duty."
6.     Charity Navigator, a charity-rating website is changing the way it rates nonprofit groups, saying the new method gives donors a better picture of how a particular charity performs over time. Charity Navigator, which rates charities on a zero- to four-star scale, will start using the new rating system. The system changes the way the group assesses a charity’s financial health, but it leaves intact the way it rates a group’s “accountability and transparency,” the second major performance category. Charity Navigator is one of the more influential charity assessment organizations, rating about 8,000 charities. Many groups consider the rating “absolutely critical to attract new resources and donors,” said Elizabeth Ashbourne, executive director of the Partnership for Quality Medical Donations, which helps coordinate supplies and equipment for disaster relief operations. Michael Thatcher, president and chief executive of Charity Navigator, said website users would still see charities rated on an overall scale of zero to four stars. “Will the user experience be dramatically different?” he said. “I don’t think so.” But some underlying measures have been adjusted, based on a continuing analysis by Charity Navigator’s staff in collaboration with a task force made up of financial experts from the nonprofit world. The group also surveyed all the organizations it rates. The new ratings mean donors “can have even greater confidence in the financial health of the charities they choose to support,” Mr. Thatcher said. (nytimes.com)
7.     After facing 112 fraud and conspiracy charges in connection with diverting to his own companies $14 million in federal government funds meant for treating the poor and homeless, Jonathan Dunning left as CEO  of Central Alabama Comprehensive Health in Tuskegee in late 2008 but he still called the shots at that agency for years. Chief Financial Officer. Teri Mollica has pleaded guilty to fraud and money laundering charges involving millions of dollars.
8.     The Citizen of the Year in 2015 is under arrest, facing embezzlement charges. Oakdale (CA) police was in custody following allegations of embezzlement by the former former member of the Oakdale Youth Soccer League (OYSL) Board and coach.
9.     Move Minneapolis, a nonprofit sponsored by the city of Minneapolis to promote walking, biking, ridesharing and transit may have been falsifying accounts and misdirecting funds, according to an audit report made public at City Hall. The executive director of Move Minneapolis had been placed on unpaid leave. There were discrepancies in the payroll records, particularly regarding vacation and sick time and employees coming in and leaving early.

We flagged these few examples of charity misdeeds:
1.     World Ambassadors, Ltd. $500,000
2.     Firefighters Support Services, (MI) <$4.2 million
3.     Hunger Free Vermont $165,000
4.     Woodbrooke Estates Home Owners association (NY) $366,000
5.     Black Diamond Council of Girl Scouts (WV) $2300
6.     Second African Baptist Church (SC) $250,000
7.     Utility Workers Union of America Local 532 $50,000 to $100,000 
8.     Salt Lake City Firefighters Union Local 81 $37,000
9.     Hubbard Lake Fire Department (MI) $60,000
10.  Fake Charity (CO) $1 million
11.  Clarksville (TN) Salvation Army unknown
12.  Mid-Central Educational Cooperative (SD) over $1 million
13.  Camarillo Fiesta Association (CA) $26,000
14.  American Legion Post in Lancaster  (PA) $50,000
15.  University of Missouri-Columbia $716,000
16.  University of Rhode Island Institute for Int’l Sport $1 million
Political/public official chicanery (just a few):
1.            A former Mathison town marshal has been charged with five counts of felony embezzlement, $75,000, by a public official.
2.            Former Keeler Township (MI) Fire Chief appeared in court for a preliminary hearing. Both he and his wife are being charged with one count of embezzlement of more than $1,000 but less than $20,000 from a nonprofit or charitable organization.
3.            City officials have revealed that Placentia’s (CA) former finance services manager allegedly embezzled nearly $5 million from the financially fragile city – about $600,000 more than first believed.
4.            A former city employee in Westbrook (ME) is accused of stealing more than $100,000 in taxpayer money over the course of nearly a year.
5.            A longtime state employee has pleaded not guilty to swindling two Arkansas agencies out of more than $142,000 and giving the money to fake companies.
6.            The former financial director of the Child Abuse Council of Muskegon County has been arraigned on a felony embezzlement charge.
7.            Prosecutors filed embezzlement charges against the former Beaumont (CA) city manager, finance director and other officials, alleging that they siphoned as much as $43 million from city coffers over the past three decades.
8.            El Camino Real Charter High School in Woodland Hills (CA) charged more than $15,500 at an upscale restaurant to his school-issued American Express card. He acknowledged charging El Camino for personal travel, also. All amounting to more than $100,000 to the card.
9.            The former Dexter (MI) schools IT director who stole more than $300,000 from the district will serve six months in jail and two years probation.
10.         A Providence (RI) City Councilman is accused of embezzling $67,732 in aid from city agencies and city funds over the past decade.
11.         A former City of Petoskey (MI) finance department employee pleaded guilty to an embezzlement charge in which she admitted to stealing more than $189,000 from the city during the course of 30 years.
12.         An Oak Park (MI) treasury clerk who authorities say took up to $50,000 from the city has been charged with embezzlement and counterfeiting.
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 media sources...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. These incidents include only a fraction of the estimated $40 billion of charity crimes. 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, 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)
…”This book should be read by everyone. It will send a shiver down the reader's spine to think that people with little money to spare have given generously…”
  • 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.
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, 2016  
















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