Nonprofit
Imperative
…your nonprofit browser
September 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:
City
University of New York;
National Vietnam Veterans Foundation
Breaking the Silence:
Firefighter Support Services; BBB Wise Giving
Charity Check
Up:
American Red Cross; Nonprofit Hospital
A
Thought or Two:
Principle For Charities To Live By
Nonprofit
News-In Case You Missed It:
Leonardo DiCaprio Foundation; Louisiana Flood Victims …more
Political/Official Chicanery:
MI;
PA; WA; OK; TX; CA; MN; MS; KS …more
What Do You Think?
·
To do good, donors must do their homework
· Give without being taken
In
response to a flurry of charity frauds in upstate New York, Onondaga County District Attorney Bill Fitzpatrick said: “Don’t trust anybody…and that means
having rules in place, where there are checks and balances when it concerns
money. …“You’ve got to have a system where multiple people review accounts,
checks,” he said. “You can’t have one person with check-writing authority. All
checks need to be countersigned by at least two people. And there have to be
periodic audits by outside agencies.”
-------------------------------------
“the IRS was well aware of the serious nature
of the Hershey school’s troubles (Hershey Trust)…. the IRS has yet to take any visible
action to investigate. It’s time the Hershey School scandal was put to
rest.” (Pablo
Eisenberg in Chronicle of Philanthropy)
---------------------------------
Skunk of the Month…
“They came to
do good and they did very well indeed (for themselves).”
Skunk of the Month is the 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:
University and Prosecutors Are Looking For $500,000 Donation
The City University of New York is investigating a recent $500,000 donation to its
Foundation, which was intended to bolster the humanities and arts at its
flagship school, may have been improperly diverted. Federal prosecutors are
also looking at a $500,000 donation spending of propriety, because such funds
are typically earmarked for research. It is
reported that the foundation had paid
for some personal expenses of the president, Lisa S. Coico, (who makes more than $400,000 a year) bought $65,000 worth
of furniture, paid a $20,000 security deposit on a Larchmont home and went
through $51,000 in other expenses such as
fruit baskets, housekeeping services and rugs when she took office in 2010.
According to documents reviewed by The Times and others, City College faculty
members learned in July — about a month after the donation — that the fund had
been depleted.
“We are deeply concerned about the practical,
ethical and legal implications of the situation,” the department leaders wrote
on Aug. 9. “Funds dedicated to a certain purpose in a binding legal agreement
between the college and the donor have been removed for purposes unknown to us,
and we believe, to the donor.” (nytimes.com)
Hopefully, The First of Many Poorly Managed Vet Charities Closed
An
infamous charity for veterans has buckled under the pressure of a CNN
investigation and closed its doors for good.
The National Vietnam Veterans Foundation came under fire earlier in the summer when it was featured
on Jake Tapper’s “The Lead.” Tax records uncovered by the network revealed that
just $122,000 in cash was dispensed to veterans in 2014 despite donations of
$8.5 million.
Tax
returns showed the CEO sent his brother; “emergency” funds; and $70,000 in “other” expenses
and $21,000 in unnamed “awards.”
According to the charity’s most recent 990, the
organization allocated just 8.3% of their expenses to its programs; on average, charities rated by
Charity Navigator spend 80.3% on programs.
This organization has earned 6 consecutive zero star ratings from Charity
Navigator.
Breaking the Silence:
Firefighter
Support Services of Wyandotte (MI), which claimed to raise money for
firefighters and fire victims but spent 90 percent of the money elsewhere, will
shut down in the next 60 days under a settlement, Michigan Attorney General
Bill Schuette said in a statement.
As part of
the settlement, the directors of the charity will also pay $144,000 over the
next three years and agree never to work as directors or officers of a charity.
Three-fourths
of the settlement will go to the Southeast Michigan Chapter of the American Red
Cross fire relief fund, and the remaining will go to pay for the cost of the
investigation.
The charity and its Southfield-based fundraiser,
Associated Community Services, raised $4.2 million from donors, but never made
any of the promised grants of any substance to families who had been burned out
of their homes.
Only about $5,585 — or one-tenth of 1 percent of
the $4.2 million — went to fire victims.
Key Charities Lack Transparency
Well-known nonprofits should raise a red flag for donors due to their
lack of transparency, according to the charity ratings group BBB Wise Giving Alliance. A group of 10
major charities that failed to disclose information beyond what’s publicly
available in the Internal Revenue Service’s Form 990, such as policies for
assessing the impact of their programs and whether their fundraising appeals
provide a specific description of the program activities for which funds are
sought.
BBB Wise Giving
evaluates charities on 20 standards related to their
governance, finances, results reporting, and fundraising practices —
information the ratings group deems critical for donor decision-making.
Here’s the full list
of organizations BBB Wise Giving Alliance said deserved a "red flag."
- City
Year
- Dana-Farber
Cancer Institute
- Fred
Hutchinson Cancer Research Center
- John
F. Kennedy Center for the Performing Arts
- Local
Initiatives Support Corporation
- National
Fish and Wildlife Foundation
- NeighborWorks
America
- Pact
- Teach
for America
- United
States Holocaust Memorial Museum
The U.S. Holocaust Memorial Museum, responded to BBB Wise
Giving Alliance’s criticism by deciding to no longer participate in its
evaluation."
Charity Check Up:
Red Cross, Once Again, Being Reevaluated
Louisiana Gov. John Bel Edwards’s office said the
state may “re-evaluate” its partnership with the American Red Cross following
complaints from people attempting to volunteer and donate materials for flood
victims, according to The
Advocate. Volunteers’ comments to the Baton Rouge newspaper echoed claims on
social media that the charity was turning away offers to help at shelters or
provide meals and medical materials for people displaced by the disaster. The
Red Cross is managing or assisting at 19 shelters and said it had served about
250,000 meals and snacks since launching its relief.
Red
Cross spokeswoman Nancy Malone said some frustrated volunteers were confusing
the charity with local partner groups and that there were liabilities to
accepting cooked food that did not come from certified vendors. "It has to
be about coordination. We are held accountable to state regulations," she
said.
“We
recognize the enormous task the Red Cross undertakes to help, and we are tremendously
grateful to the many volunteers who jumped to our aid in the aftermath of this
historic flooding. However, the governor has expressed several concerns with
the Red Cross’s response to this storm," said Richard Carbo, a spokesman
for Mr. Edwards. "Going forward, the state intends to reevaluate its
partnership with the Red Cross to ensure displaced citizens of any future
disaster receive the best support possible.”
Update:
New York State has seen its Red Cross chapters cut from 35 in 2008 to 10 in 2015.
“The response time is enormous,
compared to what it used to be,” ARC spokesperson Caves said. “When we had a
local Red Cross, it was within a half hour. Now it’s usually anywhere from an
hour to two hours.”
“We had a strong
volunteer base locally,” Diane Caves, who is the deputy director of
emergency management in a 26-county region, said.
“When they closed our
local Red Cross, there was a disconnect. They lost a lot of the local
volunteerism for whatever reason…it was very quick. It was abrupt and very
unexpected. That tore apart some relationships. There were some hard feelings.”
Jay Bonafede, who oversees communications for the Red Cross
of Western New York, sees something different. “All of these changes have
really had no effect on our services in the community,” Bonafede says. (nonprofitquarterly.org)
Nonprofit Hospital Board Conflicts Give Bad
Appearance
Based on IRS data, it was found that nonprofit
hospitals have representatives of corporations with which they do business on
their boards of directors far more often than other nonprofits. In fact, in
2014, of the more than 2,300 nonprofit hospitals in the country, almost half
(or 46 percent) had at least one trustee with business ties, direct or through
a relative, to the hospital. This is a much higher proportion of trustees with
potential conflicts of interest than in nonprofits as a whole—where the rate is
seven percent.
The practice of doing business with board
members is problematic for any number of reasons and should be avoided whenever
possible. There is no absolute rule against such a setup, so long as there is
proper disclosure and deals are at market rate, but the article points out that
the potential for violating the public trust or creating the perception that
there are private interests at play makes the practice far less than ideal.
At 270 of the hospitals reported on, the deals
were worth at least $1 million each.
Some have banned engaging in business contracts
with board members so that their community can have full confidence that the
board was acting in the community’s best interest. The ban has posed no problem
in recruiting the most qualified board members. (Wall Street Journal, (nonprofitquarterly.org)
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)
Appreciate
Open Debate
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News
Nonprofit
News…
In
Case You Missed It:
1. The U.S. Department of Justice was filing a
complaint with the U.S. District Court on the charitable Leonardo DiCaprio
Foundation. While the complaint does not target DiCaprio it raises
questions about its lack of transparency often required (or offered in this
case) for the specific structure the actor has chosen for his endeavor and the
$3 billion misuse of funds (source)
2. Two men face federal indictment
for his alleged involvement in a $2.1-million multistate investment scheme designed
to match donors with charities. (freep.com)
3. Donations to assist victims of flooding
in the Baton Rouge area so far lag behind the responses to other recent
large-scale natural disasters, highlighting the need for nonprofits to have
more reserve funds at hand before catastrophes strike — and be ready to quickly
get the public’s attention to help boost fundraising. Increased media attention
over the past few days has hastened gifts for those affected, according to
people leading fundraising efforts, but it’s unlikely support will reach that
seen after Hurricane Sandy rocked New York City and much of the Atlantic
seaboard in 2012 or when Hurricane Katrina led to major flooding in New Orleans
in 2005. (philanthropy.com)
4. Government watchdog groups — all of them champions
of heightened transparency, campaign finance reform and other Democratic
priorities — are warning of potentially "very serious" conflicts of
interest if the Clinton Foundation continues as business as usual with Clinton
in the White House. They are urging the adoption of tough new firewalls to
eliminate any perception that Clinton Foundation donors could use their wallets
to gain undue access to a Hillary Clinton White House. Larry Noble, general
counsel at the Campaign Legal Center, agreed. He warned that the State
Department saga, even with no direct evidence that donors were given special
access, has created "a very serious perception problem" that
threatens to undermine the public's faith in the government and its
institutions. Barring foreign and corporate donations to the Clinton Foundation
is a start, he said, but that alone won't counteract appearances that the game
is rigged. (thehill.com)
5. A federal complaint filed in Maryland comes several
months after Reveal, which airs on NPR stations around the country, produced a
series of articles and broadcasts that purported to uncover fraud in Planet
Aid's work in Malawi, a southeast country in Africa ranked as one of the
poorest in the world. They reported this past May
that "50 to 70 percent of the U.S. government grant money was being
siphoned away." In response to a lawsuit by Planet Aid, Reveal disputes
that the story was reported dishonestly. Planet Aid says Reveal's reckless
reporting has already cause it problems. In addition to hemorrhaging donors,
DAPP-Malawi also lost funding from Unicef.
6.
The
Wounded Warrior Project seems to be sticking with accounting practices that
have led to scrutiny in recent months, with critics noting potentially inflated
program spending and understated fundraising expenses. The organization continued
to report as program spending large portions of expenses on mailings and
television advertisements that contain fundraising appeals and messages that
the charity says help it achieve its mission, according to financial filings
recently released. Such accounting has been questioned by observers
of the nonprofit, including Iowa Republican Sen. Charles
Grassley. (philanthropy.com) UPDATE: The Wounded Warrior Project announced that it will lay off several
executives and dozens of other employees and will cut some of its services as
officials say donations have fallen this year amid a storm of negative news
stories, according to reports and a statement from the organization. Wounded Warrior will cut about 15 percent
of its roughly 600 employees, chief executive Michael Linnington told Stars and Stripes, adding that the nonprofit has lost a
lot of support over the past year amid sustained news coverage that has been
critical of its spending polices. ((philanthropy.com) FURTHER UPDATE: CEO Linnington announced that
the Wounded Warrior Project (WWP) lost between $90 million and $100 million,
representing 25 percent of donations, since all the scandal about the
organization started rolling out in January.
HERE WE GO AGAIN: The Avondale (AZ) Police Department arrested a man in
connection with an embezzlement scheme that targeted a veterans group.
Investigators said Kirk Davis, president of Pat Tillman
Memorial Veterans of Foreign Affairs Post 40, is accused of stealing over
$100,000 from the VFA accounts over the last two years since he became
president.
7.
The Washington
Post reached out to dozens of charities, and took to Twitter, asking
followers for leads that Donald Trump has donated millions to charity, as he
said. Despite the Washington
Post exhaustive efforts, no one has been able to come
close to accounting for the $8.5 million Trump publicly pledged over a 15-year
period. New York Attorney General Eric Schneiderman has opened an investigation
into the Donald J. Trump Foundation "to make sure it's complying with the
laws governing charities in New York.
8.
At the University of
Louisville Foundation… the school's Board of Trustees voted to sue
the foundation unless it accedes to demands to clean up its act. Board of
Trustees Chairman Larry Benz told reporters after the nearly unanimous vote
that the foundation has become “an eyesore for the community” and that its
“shenanigans … will end today.” The resolution allows the university
to sue the foundation, an independent nonprofit organization, if it doesn't
take several steps, including submitting to a forensic accounting
examination by a nationally recognized firm selected by the university.
We flagged these few
examples of charity misdeeds:
1.
Pink Hearts Funds (MS) $235,000
2.
Children and Family Services/
Children's Charitable Services (AL) $2 million
3.
CODAC Behavioral Services (AZ) $11,000
4.
A&F (Always and
Forever) horse rescue $7000
5.
Gary Professional Firefighters Association Local
359 (IL) $30,000
6.
AFSCE (OK) $75,000
7.
Bay Area Recycling for
Charities (MI) $33,000
8.
Agape House for Mothers
and Sierra Young Family Institute (MN) $480,000
9.
Children and Family
Services and Children’s Charitable Services unknown (FL; AL; AK; IN; OH; TN) (source)
10. Narragansett Regional High School unknown (MA)
11. Newman Catholic Student Center---
UNC-Chapel Hill $150,000
12. Park Road Montessori School (NC) $15,000
13. United Auto Workers Local 2317 (IN) more than
$100,000
14. The Second Chance Foundation (PA) $160,050
15. North Valley Hockey and Sports Complex (CA) $34,000
16. Detroit Public Schools $61,000
17. Success
Preparatory Learning Center (CO) unknown
18. Local
2406 of the American Federation of State, County and Municipal Employees (OK) Unknown
19. International Union
of Bricklayers and Allied Craftworkers Local 6 (Illinois) $300,000
20. Veterans
Administration Credit Union (MI) more than $2.3 million
21. Michigan Community Resources
(M) $77,000
22. Cystic
Fibrosis Foundation (MD) $300,000
23. Cancer Support Services (AZ) $40,000
24. Grace
Lutheran Church (WI) $100,000
25. Fresno Caltrans (CA) $15000
Political/public official chicanery (just a few):
1.
The former police chief
of Shelby (MI), fired in January amid allegations of financial wrongdoing, was
arraigned on six criminal charges, including embezzlement of an estimated
$70,000.
2.
Philadelphia’s
top finance official issued a report questioning the use of hundreds of
thousands of dollars by a City Hall-affiliated nonprofit during former mayor
Michael Nutter’s tenure, The Philadelphia Inquirer and Philadelphia magazine write. Controller Alan Butkovitz alleged in a news
conference that Desiree Peterkin Bell, a Nutter adviser who chaired the Mayor’s
Fund for Philadelphia, used a $200,000 reserve account within the nonprofit “as
if it were a special slush fund,” approving expenditures for travel,
receptions, and other items without oversight by the organization’s board.
3.
A longtime Skagit
County (WA) sheriff's deputy has been fired after an investigator said he
admitted embezzling from the Pacific Northwest Police Detection Dog Association,
a nonprofit organization for which he served as treasurer.
4.
A former Bunkerhill
Township (MI) treasurer has been charged with embezzling public funds and
township officials aren't sure how much might have been taken. A forensic audit
said more than $24,000 was missing from two township accounts.
5.
Pushmataha County (OK)
Commissioner was accused of $40,000 in misappropriation, got $1500 in fines and
restitution and was placed on probation for 5 years. No jail time.
6.
The
former Chief Financial Officer for the Grand
Prairie Independent School district was arrested on a Federal Indictment by a
grand jury and charged with theft. Prosecutors allege
that Foster took $600,000 from the Grand Prairie ISD when she served as the CFO
from October 2014 to July 2015.
7.
A former assistant
engineer for the city of Santa Clarita was formally charged with having
embezzled more than $533,000 over a three-year period
8.
An investigation into
the embezzlement of $330,000, over 7 year period, from Fletcher Fire &
Rescue targeted only the agency’s office manager and no other arrests are
expected, a spokeswoman for the U.S. Justice Department said.
9.
Mills
Mayor Marrolyce Wilson has resigned her office, months after allegations arose
that she tried to stymie an investigation into possible $65,000 embezzlement by
the town’s treasurer.
10.
The former fire chief
in Middlebury was sentenced to three months in prison for embezzling $25,000,
officials said.
11.
A former interim
principal of El Camino High School in South San Francisco pleaded no contest to
felony embezzlement for stealing close to $10,000 from the school to pay back
gambling debt, according to the San Mateo County District Attorney’s Office. The principal has been sentenced to 45 days in
county jail and three years of supervised probation for taking money from the
school to pay gambling debts.
12.
She will serve five years in prison for
stealing more than $500,000 in
excise tax money from the Anson (MN) Town Office, where she was tax collector
for 33 years.
13.
Dozens of Southern California postal workers and
their associates have been charged with mail theft, embezzlement and an array
of other crimes as part of a sweeping investigation into criminal activity at
the U.S. Postal Service.
14.
A woman who had control
of the books at Bogue Chitto (MS) Volunteer Fire Department in Lincoln County for several years has been
indicted for using fire department funds for her personal expenses.
15.
A federal grand jury returned an indictment that
the former executive director of the Kankakee Valley Park District, with
defrauding the park district and a related not-for-profit organization for his
personal benefit.
16.
Former Lawrence (KS) Mayor Jeremy Farmer has been charged with taking more than
$55,000 from Just Food
17.
A former Pontotoc County
(MS) Sheriff’s Office deputy clerk turned herself in on embezzlement (of
$45,000) charges.
18.
A chief of the U.S. Air Force Fire
Service remains in his position as authorities investigate accusations of him
stealing $133,000 intended for charities and putting those funds toward vacations,
gambling and credit card debt.
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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