Nonprofit Imperative
…your nonprofit browser
July 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:
American Red Cross;
Hershey Trust…more
Breaking
the Silence:
Donald Trump Charities
Charity Check Up:
Community Action
(MN)
A Thought or Two:
Principle For Charities
To Live By
Nonprofit News-In Case You Missed It:
Annual Giving Sets Record;
Moore Foundation…more
Political/Official Chicanery:
VA; FL; MA; MI; WV; VA…more
What Do You
Think?
·
To do good, donors must do their homework
· Give without being taken
IRS Toothless re Charities
The IRS Advisory
Committee on Tax Exempt and Government Entities, warns that a lack of funding,
loss of institutional memory, and a change in oversight strategy could render
the agency toothless. The report bemoans the IRS’s "stark shift" from
regulating tax-exempt organizations to a "nearly exclusive focus on tax
administration."
The report states that
the agency does not put enough effort into auditing the new forms, thus diminishing
its role as a gatekeeper. The study also criticized changes in the
advisory committee’s focus. Instead of delving into regulatory issues related
to those subject areas, the committee will focus exclusively on tax processing
tax documents more efficiently. (IRS Advisory Committee Report)
---------------------------------
…an estimated 11
percent of adults in this country – an estimated 25.6 million consumers – lost
money because of criminal activity, mostly for products and services. (Federal
Trade Commission (FTC) study looking at 17 types of fraud and its victims in
2011.)
________________________
Investigators and
prosecutors in several states say embezzlement investigations involving youth
sports have become common, almost always committed by unpaid board members who
are highly regarded in their communities. (nytimes)
-----------------------------------------
“One out of every three employee thefts involve organizations
in financial services or non-profit. Of the total number of embezzlements,
nonprofits had the second highest number of cases. (1% less than financial
services). (US-2016-Hiscox-Embezzlement-Study)
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:
Another Scathing Review Of The American Red Cross
Apparently members of Congress think
that the American Red Cross lied to them.
Let’s see what they will do!
POLITICO reports on a blistering Senate report on the American Red Cross raises fundamental questions
about the integrity of the country’s most storied charity and its stewardship
of donors’ dollars.
The report, which was released today by Sen.
Charles Grassley, R-Iowa, and contains nearly 300 pages of supporting
documents, found:
·
After the 2010 Haiti earthquake, the Red Cross spent tens of millions of dollars more than it has
previously acknowledged on internal expenses. The Red Cross told Grassley that
the money was largely spent on oversight to make sure the Haiti aid was used
properly. But Grassley’s office found that the charity “is unable to provide
any financial evidence that oversight activities in fact occurred."
·
Red Cross CEO Gail McGovern made false statements to Grassley’s
office about whether the charity cooperated with congressional investigators.
·
McGovern and her subordinates have kept the charity’s own internal
investigations and ethics unit “severely undermanned and underfunded.” The
charity is “reluctant to support the very unit that is designed to police
wrongdoing within the organization.”
There are “substantial and fundamental concerns
about (the Red Cross) as an organization,” the report concludes.
Grassley launched his investigation following
stories by ProPublica and NPR on Red Cross failures in providing disaster relief, including after the Haiti earthquake. The group raised nearly half a billion dollars after the
disaster, more than any other nonprofit. But our reporting found that, for
example, an ambitious plan to build housing resulted in just six permanent homes.
Red Cross
officials, including McGovern, have repeatedly told the public that the charity
retains 9 percent of donations to cover management and administrative costs.
But Grassley found that a full 25 percent of donations — or around $125 million
— were spent on fundraising and management, a contingency fund, and a vague,
catchall category the Red Cross calls “program costs.”
On top of
that 25 percent, the Red Cross sent the bulk of the donated money to other
nonprofits to do the work on the ground. Those other nonprofits then took their
own cuts for overhead costs — as much as 11 percent.
Pressed by Grassley’s investigators, the Red Cross could not
give an accounting of the oversight it says it did with the money from the
Haitian relief. After repeated requests by Grassley’s investigators over the
course of months, the Red Cross finally last month produced a document with a narrative description of oversight but no financial
details.
In general, the Red Cross itself doesn’t know
how much money it spent on each project in Haiti because of a “complex, yet
inaccurate” accounting system, the report found.
The report concludes that the Office of
Investigations, Compliance, and Ethics was left so under-resourced that it is
“unable to perform its primary function; namely, to perform investigations,
ensure compliance, and maintain ethical standards.”
The report echoes confidential findings made
by consultants hired by the Red Cross, which were previously reported by
ProPublica and NPR.
Update: The Board of Governors of the American Red Cross
has doubled down on its support for CEO Gail McGovern, one week after Sen.
Charles Grassley released a withering report on the nonprofit’s spending and
openness.
"Gail McGovern is respected, admired, and
really has 100 percent confidence of the board," Bonnie McElveen-Hunter,
the board’s chairwoman, said in an interview Thursday. "Frankly, we think
the nation should be casting laurels at her feet." Ms. McElveen-Hunter
said the board learned of the report’s release from the media. She said the
governors support the senator’s recommendation that the charity beef up its
internal investigation unit, but "we respectfully and fundamentally
disagree" with his other findings. She said costs that the report
identifies as overhead were essential to delivering aid.
Latest
Update: Three weeks after
publishing a report critical
of the American Red Cross, Sen. Charles Grassley introduced a bill that would
grant the federal government clearer authority to access the charity’s records.
The "American Red Cross Transparency Act of
2016" would also require the charity’s-internal investigations unit to
report directly to the board, instead of the general counsel, which would make
it more independent.
The bill, S. 3128, is a direct response to what the
senator has characterized as the charity’s refusal to cooperate with an audit
by the Government Accountability Office about its disaster-response work.
The American Red Cross has a congressional charter that grants the head of the GAO authority to "review
the corporation’s involvement in any federal program or activity the government
carries out under law."
The charity asserted that the GAO could only access its
records regarding decisions that directly involve federal funds or work it does
in partnership with the Federal Emergency Management Agency, according to the
report by Sen. Grassley, a Republican from Iowa. The senator has accused chief
executive Gail McGovern of trying to thwart the GAO’s audit.
The new bill would make clear that the GAO has the right
to access any American Red Cross information about internal governance and
programs connected to "national preparedness," plus the right to
interview any board member, employee, or volunteer.
Adding staff members to the internal-investigations unit
is the only step that Board of Governors chair Bonnie McElveen-Hunter said the
board would take in response to Sen. Grassley’s report, according to an interview with The Chronicle three weeks ago.
The bill was referred to the Senate Judiciary Committee,
which Sen. Grassley chairs.
A spokesperson for the American Red Cross said the
nonprofit "will review the proposed legislation and make our views known
to Congress at the appropriate time."
Hershey Trust In
Disarray
The charitable trust that controls
Hershey Co. and its trustees are under scrutiny by Pennsylvania's attorney
general. The attorney general's office
is threatening to take the trustees to court if they don't make governance
reforms at the trust by the end of the month, according to people familiar with
the matter. Because of pressure from state
regulators, the trust could lose three longstanding board members, after losing
four members since December, including one last weekend.
A spokesman for the trust, one the
nation's richest charities, said the board is in talks with the attorney
general's office and hopes to reach a resolution.
The trust's board, which typically has 10 members, oversees an endowment that nearly doubled, when adjusted for inflation, between 2000 and 2014 to $12.1 billion, according to federal tax records, and outstrips that of many elite colleges.
The trust's board, which typically has 10 members, oversees an endowment that nearly doubled, when adjusted for inflation, between 2000 and 2014 to $12.1 billion, according to federal tax records, and outstrips that of many elite colleges.
But infighting and scandals have
plagued the trust's board for years.
In 2010, regulators announced an
investigation into the trust's 2006 acquisition of a golf course adjacent to
school property for $12 million -- more than twice the appraised value. The
school built a $5 million clubhouse, only to close the course a few years later
to build student housing.
Dozens of local businessmen and
doctors, including Hershey's chief executive at the time, benefited from the
deal because they owned shares in the golf course, according to an
investigation by the Philadelphia Inquirer.
The attorney general's office struck
a deal with the board in 2013, which required trustees to adhere to stricter
conflict-of-interest standards and limited base pay for board members to a
$30,000 retainer each.
Few other large charities pay their
board members, including Ivy League schools that manage multibillion-dollar
endowments.
In the year prior to the agreement,
four board members earned more than $250,000 from various Hershey boards,
including one who received more than $1 million in compensation, according to
the charity's tax returns.
Earlier this year, the
attorney general's office sent the charity a letter accusing it of failing to
adequately reduce compensation, among other concerns.
In addition, it called
for the resignation of three board members because they have served for more
than 10 years, including former chairman Robert Cavanaugh, who also sits on
Hershey's corporate board, and the trust's current chairman. None of those
three board members have resigned.
Around the same time,
regulators began digging into an internship then-chairman Mr. Cavanaugh helped
acquire for his son with a company client after other disgruntled board members
raised the matter, according to documents reviewed by The Wall Street Journal.
Mr. Cavanaugh didn't
respond to a request for comment.
Last year, four
trustees, two of whom have since resigned, wrote a letter to the board's head
of governance, saying the board had "been required to devote substantial
time, effort and trust resources on internal investigations, intrusion on
management and infighting." The divisiveness has "paralyzed us as a
board," they said. (source)
Breaking the Silence:
More On Trump’s
Charity Activities
In a 2009 deal to rent
a New York-area estate to Libya's then-dictator, Muammar Qadhafi, Donald Trump
assured a reporter that the money had all gone to charity, a claim that POLITICO has been unable to
verify and that his campaign is unwilling to confirm. The episode adds to a
series of unverified or exaggerated claims of charitable giving that have been
dogging the presumptive Republican nominee. Trump’s past promises that
the proceeds of his ill-fated vodka line, Trump Vodka,
and of his 2015 campaign book, “Crippled America,”
would go to charity are now also coming under scrutiny because of a lack of
evidence that he followed through on them.
More: According to the Washington Post, Donald Trump's pledges in connection with Trump University, Trump Vodka, his reality TV show, and other ventures could have yielded $8.5 million in gifts over the past 15 years. Other than Mr. Trump's $1 million gift last month to a veterans charity, the newspaper was able to document one direct donation from the mogul-turned-politician since 2008 — a contribution of $5,000 to $9,999 to the Police Athletic League of New York City.
More: According to the Washington Post, Donald Trump's pledges in connection with Trump University, Trump Vodka, his reality TV show, and other ventures could have yielded $8.5 million in gifts over the past 15 years. Other than Mr. Trump's $1 million gift last month to a veterans charity, the newspaper was able to document one direct donation from the mogul-turned-politician since 2008 — a contribution of $5,000 to $9,999 to the Police Athletic League of New York City.
More, more: Donald Trump used funds from his
foundation to cover his $12,000 winning bid for a piece of sports memorabilia
at a Florida charity auction four years ago, a payment tax experts say might
violate Internal Revenue Service rules, The Washington Post writes. IRS rules on “self-dealing” bar the “furnishing of
goods” by private foundations to their own officials. Other news articles are being prepared that examine
some other purchases by the Trump Foundation that appear to benefit mostly
Trump.
Charity Check Up:
Family Affair; Stole Hundreds of Thousands From Poor
Residents
While chief executive
officer for 24 years of the Community Action of Minneapolis and earning a
salary of $180,000 plus bonuses and other allowances was indicted on charges he used taxpayer grants on lavish trips, personal purchases and
political activity pleaded guilty in federal court this week. “Bill Davis stole from those in need to line
his own pockets. The evidence of fraud was overwhelming, and the defendant’s
guilty plea to all of the charges against him is a just result,” said U.S.
Attorney Andy Luge. His son, Jordan, is a Minneapolis police officer. Jordan
Davis is also charged and is scheduled to go to trial.
Community Action's mission was to
provide poor residents with heating and nutrition assistance. But it was
shuttered not long after the allegations against Davis became public in a
scathing state audit.
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)
Do
not worry about looking good---
worry
about achieving your [agency”s] goals
Does
somebody keep forwarding you this newsletter? Get your own copy. It's
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News
Nonprofit
News…
In
Case You Missed It:
1. Charitable giving reached $373.3 billion in 2015,
up 4 percent from the previous year, according to estimates from "Giving
USA," an annual report on American philanthropy. The giving total set a
record for the second year in a row as contributions further eclipsed
prerecession levels. However, the results for 2015 were not quite as strong as
in the previous year, when giving surged 6.1 percent.
2. Billionaire hedge-fund manager Louis Bacon's foundation said
Tuesday that it was the charity allegedly victimized in what authorities say
was a fraud scheme orchestrated by another Wall Street executive, The
New York Times reports. Mr. Bacon
said his Moore Charitable Foundation, which supports conservation efforts, put
$25 million into an alleged phony investment vehicle promoted by Andrew
Caspersen, then with private-equity firm the Park Hill Group. The Moore foundation said it "detected
irregularities in a proposed follow-on deal” and notified investment bank PJT
Partners, Park Hill's parent company, and cooperated in its investigation of
the matter.
3. A subsidiary of healthcare giant Kaiser
Permanente has filed a lawsuit in California accusing a former employee
responsible for investigating insurance fraud claims of embezzling $7 million.
The suit by Kaiser Foundation Health Plan accuses Michael Albert Quinn of
submitting invoices for investigative services that were not performed or were
not justified over a 16-year span after he joined the company in 1998.
4. A federal jury has convicted the former
CEO of two nonprofit health clinics in Alabama of diverting $14 million in
federal funding to private companies he formed to contract with the clinics.
Jonathan Dunning is the former CEO of Birmingham (Ala.) Health Care and Central
Alabama Comprehensive Health in Tuskegee.
5. Police are currently investigating the
Brazilian sports federations for allegedly pocketing Olympic investments worth
$9 million.
6. Directors of the Milton Hershey School for
impoverished children in Pennsylvania have collectively been paid $6.9 million
over the last three years and charged hundreds of thousands of dollars in
travel costs to the organization, according to documents obtained by The
Philadelphia Inquirer. Financial and spending decisions by the $12 billion Hershey Trust, which
oversees the private school and holds majority control of the giant namesake
chocolate company, have repeatedly drawn regulatory and media scrutiny. The Pennsylvania attorney
general’s office sought to curb board members’ compensation and spending in
a 2013 agreement that ended a state investigation of the organization. In-house
expense reports for the last two and a half years include $362,000 for travel,
meals, and hotels, including an $18,000 tab for a weekend board meeting at the
Waldorf-Astoria in New York and at least 60 limousine rides, many from airports
in Philadelphia and Baltimore to the trust’s offices in central Pennsylvania. (see more on Hershey Trust above)
7.
A Philadelphia jury
delivered a guilty verdict for Rep. Chaka Fattah, who was convicted on 29
separate federal charges related to bribery, money laundering, fraud and racketeering. The jury convicted Fattah on money laundering
charges related to his borrowing of $1 million from a donor during his
unsuccessful campaign for Philadelphia mayor. Fattah later repaid part of the
loan by using funds from charitable and federal grants received by his
nonprofit, the Educational Advancement Alliance.
8. Police are currently investigating the Brazilian sports
federations for allegedly pocketing Olympic investments worth some $9
million dollars. These investments were reserved for Olympic athletes’
training, travel and overall preparation for the event. They are also are
inspecting former sports minister Ricardo Leyser’s knowledge on the matter, yet
he denied the allegations, Reuters reported. The suspected embezzlement
also includes funds meant for buying equipment and improving training sites for
the Rio 2016 Olympics, which are scheduled to start on Aug. 5.
We flagged these few
examples of charity misdeeds:
1.
World Ambassadors, Ltd.
$500,000
2. Firefighters Support Services, (MI) <$4.2 million
3.
Rhode Island
Association for Cardiac Children $186,000
4. Community Action (MN) $140,000
5.
North Valley Hockey and
Sports Complex (CA) $400
6.
Big Brothers Big
Sisters of the Tri-State (TN) $26,000
7.
Metropolitan Community
Church (OR) $70,000
8.
Domestic Violence Resource
Center (NM) $45,000
9.
Haslett School
District Band Boosters (MI) $30,000
10. Salem Chapter of the Disabled American Veterans
(VA) $24,000
11. Knights of Columbus (MI)
<$20,000
12. Care and Share Food Closet (ME) $20,000+/_
13. First Baptist Church (TN) $30,000
14. Northwest Lake County Senior Center (MI) <$20000
Political/public official chicanery (just a few):
1.
A senior official in
charge of a high-profile program at the Department of Veterans Affairs (VA) is
the focus of a law enforcement probe into a potential conflict of interest with
her husband’s business and possibly other matters, the Project On Government
Oversight (POGO) has learned.
2.
U.S. Rep. Corrine Brown has been indicted on public corruption charges and is
expected to arraign in federal court in Jacksonville, two U.S. law enforcement
officials said. Prosecutors
say One Door's director, Carla Wiley, presented her organization as an
education charity starting in 2011 but never obtained tax-exempt status or
filed state or federal tax returns, even as it solicited about $800,000 in
donations. Between 2012 and 2016, as Wiley withdrew or transferred to her own
accounts more than $140,000, the group issued just one scholarship for about
$1,000, authorities said. While documents in Wiley's case didn't mention Brown
by name, prosecutors alleged that $150,000 in charity funds had been used for
events hosted by or in the honor of an unnamed
public official
3.
Claudia Viles was a fixture in the
government of the central Maine town of Anson for 42 years, elected and trusted
to collect taxes – often in cash – with no hesitation, or oversight, until
hundreds of thousands of dollars were discovered missing. She was found guilty
on 13 counts related to the theft of $500,948.
4.
Former Erwin Township Clerk was
sentenced in Gogebic County Circuit Court (MI) to 30 days in jail
for embezzling money from the township.
5.
The
former director of Macon County’s Board of Elections was sentenced to six months in prison for embezzling $69,000 public
funds.
6.
The
village of Bethlehem (WV) is seeking justice after losing approximately
$126,000 due an alleged case of embezzlement. Former village clerk Andrea Lee
McDonald, 69, faces felony charges for alleged fraudulent schemes and
conspiracy to commit larceny.
7.
A former social services worker who pleaded guilty to embezzling
more than $200,000 from an account intended for needy families was sentenced to
serve two years and three months in prison. Pamela Elaine Basham, the former
assistant director of Montgomery County Social Services, will also have to pay
$224,291 in restitution.
8.
Longtime political
insider, lobbyist and nonprofit operator Melonease Shaw will face a court
hearing next week for allegedly misappropriating hundreds of thousands of
dollars — funds that were meant for a city-based nonprofit-Transitional Work
Corporation.
9.
A former Roanoke nonprofit worker, found guilty last year in the loss of $10,000 that should have gone to
homeless people, has now been convicted of embezzling an additional $4,200
during the same period.
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.
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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