Nonprofit
Imperative
…your nonprofit browser
December 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 (once again); Triangle Aids Network; Sandy Hook Conviction…more
Breaking
the Silence:
Federal
And State Collaboration on Fraud
Charity Check Up:
AG’s Seeking Identity of Donors; $600,000 Mental Health
Agency Theft
A Thought or Two:
Principle For Charities To Live By
Nonprofit News-In Case You Missed It:
New Charity Giving Leader;
Goodwill; Vets Organization …more
Political/Official Chicanery:
VA; MS; SC; MI; NC; IL; CA; KS; IN …more
What Do You Think?
·
To do good, donors must do their
homework
· Give without being taken
---------------------------------
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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:ƒ
Senator Grassley: Red Cross
Continuing Investigation… Some Movement
Sen. Chuck Grassley, Chairman of the Judiciary Committee,
in July introduced legislation to give the congressional watchdog arm
complete access to American Red Cross records for oversight purposes and
improve the Red Cross’ internal investigative function. The American Red
Cross Transparency Act followed the results of a Grassley inquiry into the Red
Cross’ response to the 2010 Haiti earthquake. The inquiry found that the
Red Cross spent approximately one-fourth of the $487.6 million raised for the
relief effort on program management, fund-raising and other expenses; that it
tried to quash a Government Accountability Office review of its practices,
successfully limiting the scope of the review; and has a poorly staffed ethics
and investigations unit. This week, the organization notified Grassley
that it plans to increase its Office of Investigations, Compliance and Ethics (ICE) staff to five full-time employees from
three. Senator Grassley sent us the following comment on these
developments.
“It’s good news to have more staff in the investigations
unit, even if it’s a small increase. My inquiry found that the
investigations unit was poorly staffed and so mostly incapable of doing the
kind of work donors might expect. When there are concerns about program results
or spending, an investigations unit is the kind of entity that should be in
place to review those concerns. I’m disappointed that the Red Cross will
continue to keep the investigations unit under management control instead of
requiring it to report to the board of governors. More independence would
give the unit more teeth and so increase its effectiveness. Also, making
sure the Red Cross fully cooperates with the Government Accountability Office
is still an important goal. I intend to re-introduce my legislation in
the next Congress. The Red Cross is critical to disaster responses.
The American people rely on it, and Congress has a responsibility to help make
sure it functions well.”
The Red Cross is congressionally chartered and considered
a federal instrumentality, unique among tax-exempt organizations. The
federal taxpayers pay for some of the Red Cross’ work directly through federal
tax dollars for disaster responses and indirectly through the tax dollars
foregone to the Red Cross through its tax exemption and through tax deductions
donors take for charitable donations to the organization. The Judiciary
Committee has jurisdiction over federal charters.
Trump Foundation Admits Charity
Violation
President-elect Donald Trump’s charity has admitted that it
violated IRS regulations barring it from using its money or assets to benefit
Trump, his family, his companies or substantial contributors to the foundation.
According to a 2015 tax return posted on the nonprofit monitoring website
GuideStar, the Donald J. Trump Foundation acknowledged that it used money or
assets in violation of the regulations not only during 2015, but in prior
years.
The tax filing, first reported by
The Washington Post, doesn’t provide
details on the violations. The filing’s release comes as the New York attorney
general’s office investigates whether Trump personally benefited from the
foundation’s spending, including several purchases detailed in reports by The
Post.
The foundation’s admission in the tax filing isn’t the first
time it has run afoul of laws and regulations governing charitable
organizations. In October, the office of New York Attorney General Eric
Schneiderman, a Democrat, ordered the foundation to stop soliciting donations
after it was discovered that the charity had been accepting outside
contributions without the proper New York state registration.
The foundation also gave an improper $25,000 check to a
political committee supporting Florida Attorney General Pam Bondi in
2013.Charities are barred from engaging in political activities, and the
president-elect’s staff says the check he signed was mistakenly issued
following a series of inexplicable clerical errors. Earlier this year, the
Trump Foundation paid a $2,500 fine to the IRS over the check.
Texas Nonprofit Hit By Two Successive
Large Embezzlements
At the Triangle AIDS
Network (TAN) (TX) $312,000 was stolen by the ex-director. She admitted to stealing hundreds of thousands of dollars to
fund lavish gifts and goodies for herself and her children at the expense of
the medical care for the patients she oversaw, the board of directors and
support staff could hardly believe anyone was capable of such a heinous
crime.
Now another
culprit took advantage of the agency to pilfer tens of thousands of dollars
more from the nonprofit’s already busted coffers. The second theft of
reportedly between $60,000 and $160,000 occurred while the former executive was
facing punishment for her crimes against the agency.
The longtime
president Jeff McManus, who had been at the helm of the nonprofit for decades,
said he has resigned from the agency amid the latest fiasco.
The new Executive said: “these abuses have a tremendous
impact on people who need the services.”
(source)
Sandy Hook Charity Conviction
…“to help raise funds for increased
school safety, families of victims, memorials to teacher heroes, awareness, and
prevention in schools across America” was
the mission of the Sandy Hook charity, 26.4.26 Foundation. Instead of
using all of the donated funds to support its purported mission, the agency
founder used $28,657 of donated funds to enrich himself and to support his personal
training business, the court documents state. Federal officials arrested the
founder in Tennessee on six counts of wire fraud on February 13, 2015. He
pleaded guilty to one count of wire fraud on May 12, 2016.
Breaking the Silence:
Collaboration Between FTC and State
Charity Regulators
In May 2015, the
Federal Trade Commission (FTC) and state charity regulators from all 50 states
and the District of Columbia filed a historic civil suit against four alleged
sham cancer charities -- Cancer Fund of America (CFA), Cancer Support Services
(CSS), Children’s Cancer Fund of America (CCFA), and The Breast Cancer Society
(TBCS) -- and several of their executives, asserting that the charities engaged
in deceptive charitable solicitation practices by making false and misleading
claims in their appeals to donors. This was the largest joint action ever taken
by the FTC and state charity regulators. CCFA, TBCS, and their respective
principals reached an agreement with the plaintiffs at the time the complaint
was filed. CFA and CSS later agreed to a $75.8 million judgment and to dissolve
the organizations in March 2016.
The successful collaboration between the FTC and state charity regulators sent a clear message that both federal and state regulators will not tolerate deceptive fundraising practices. Moreover, charitable organizations that utilize gift-in-kind (GIK) programs should make sure that their valuation and ownership transfer of donated goods is proper and well documented, because such practices were at the center of the multi-state investigation. During the public session, regulators acknowledged that by working together, they were able to leverage resources and achieve an outcome that a single agency or regulator would not have been able to pursue on its own. Federal and state regulators are communicating more, sharing information with each other, and using technology to work together more efficiently and effectively. This means that, undoubtedly, there will be more multi-state cooperation among federal and state regulators to tackle perceived bad actors.
The successful collaboration between the FTC and state charity regulators sent a clear message that both federal and state regulators will not tolerate deceptive fundraising practices. Moreover, charitable organizations that utilize gift-in-kind (GIK) programs should make sure that their valuation and ownership transfer of donated goods is proper and well documented, because such practices were at the center of the multi-state investigation. During the public session, regulators acknowledged that by working together, they were able to leverage resources and achieve an outcome that a single agency or regulator would not have been able to pursue on its own. Federal and state regulators are communicating more, sharing information with each other, and using technology to work together more efficiently and effectively. This means that, undoubtedly, there will be more multi-state cooperation among federal and state regulators to tackle perceived bad actors.
Attorney Generals: Disclose Your
Donors
A tempest is brewing,
and the non-profit community is sounding an alarm. What started as a simple
overlooked regulatory requirement has blossomed into a battlefield as Federal
circuits from east to west are weighing the breadth of power state regulators
may wield when dealing with charities. The trouble started when some states
made the bold move to start enforcing their existing laws. More specifically,
the Attorneys General in New York and California started requiring non-profits
to disclose the identity of their donors before allowing solicitation
activities to occur.
Initially, two organizations filed suit to enjoin the states from collecting their donor information. The charities argued that being compelled to disclose this information would result in a chilling effect, reasoning that donors would shy away from making contributions, which would cause the charities to lose support. Early on in the litigation, courts held that the states had every right to the charities’ donor information and denied injunctive relief.
Then a third organization joined the fray with a similar plan, but in the midst of a wending judicial path, a different course was forged. The organization was granted a full trial and walked away with a win on the merits. While this signaled a temporary change in fortunes for the affected charities, the inconsistent judicial results have left all parties with more uncertainty than when they began. Now, this nascent line of jurisprudence is muddled, and it is up to either the courts or Congress to bring resolution and consistency to this sensitive Constitutional issue.
Initially, two organizations filed suit to enjoin the states from collecting their donor information. The charities argued that being compelled to disclose this information would result in a chilling effect, reasoning that donors would shy away from making contributions, which would cause the charities to lose support. Early on in the litigation, courts held that the states had every right to the charities’ donor information and denied injunctive relief.
Then a third organization joined the fray with a similar plan, but in the midst of a wending judicial path, a different course was forged. The organization was granted a full trial and walked away with a win on the merits. While this signaled a temporary change in fortunes for the affected charities, the inconsistent judicial results have left all parties with more uncertainty than when they began. Now, this nascent line of jurisprudence is muddled, and it is up to either the courts or Congress to bring resolution and consistency to this sensitive Constitutional issue.
Charity Check Up:
PA. Mental Health Services Hit With
$600,000 Theft Over 12 Years
A woman was arrested after she
allegedly stole from a Philadelphia nonprofit that serves children. She is
charged with theft and embezzlement.
She was the director of Health and Management at Northern Children’s Services (NCS), a nonprofit organization that provides mental and behavioral health treatment services for children. As director, she verified the accuracy of consultants’ invoices and submitted them for payment. The executive is accused of preparing consulting invoices for relatives and friends who were never consultants for NCS. She also allegedly prepared invoices for people who were consultants for NCS but for work they never performed. She then allegedly forged the names of the recipients to cash the checks.
She was the director of Health and Management at Northern Children’s Services (NCS), a nonprofit organization that provides mental and behavioral health treatment services for children. As director, she verified the accuracy of consultants’ invoices and submitted them for payment. The executive is accused of preparing consulting invoices for relatives and friends who were never consultants for NCS. She also allegedly prepared invoices for people who were consultants for NCS but for work they never performed. She then allegedly forged the names of the recipients to cash the checks.
Officials say she stole
approximately $607,067 from NCS between December of 2002 and April of
2014.
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)
Know when to stop debating and move on to agreeing
about what should be done
Does somebody keep forwarding you this newsletter?
Get your own copy. It's free! Sign up here. Send tips/stories to Nonprofit Imperative. Follow us on our blog or on Twitter---Nonprofits News
Nonprofit News…
In Case You Missed It:
1.
Fidelity Charitable Gift Fund, the nonprofit spinoff of big
asset-management company Fidelity Investments, knocked United Way Worldwide out
of the No. 1 spot in this year’s Philanthropy 400, The
Chronicle’s annual ranking of charities that raise the most from
private sources. This changing of the guard in American philanthropy is a sign
of how the competitive landscape and donor interests are evolving, marking the
first time an organization that primarily raises money for donor-advised funds
has held this top spot. United Way, a mainstay of American charity since its
founding in 1887, was pushed from the top rung for only the second time since
the Philanthropy 400’s 1991 debut. For years, the two organizations had been
neck and neck in the rankings. In 2015 Fidelity bolted far out front,
collecting $4.6 billion, a 20 percent increase from 2014. United Way saw
donations drop by 4 percent to $3.7 billion.
2.
The CEO of Goodwill
Omaha resigned in the wake of a World-Herald investigation showing that the charity’s top-dollar executive pay
has consumed the profits of its signature thrift stores, leaving scant dollars
for programs to help disabled and needy job-seekers. Frank McGree’s departure was surely welcomed
by donors upset by revelations of the charity’s profit-driven culture and big
spending on executive pay. But one prominent donor also stressed that Friday
was just a first step for Goodwill. Of about $4 million in profits generated by
Goodwill’s thrift stores last year, only $557,000 found its way into its job
programs, with the vast majority of program funding instead coming from outside
grants and contracts. The rest of the thrift profits were gobbled up by the
agency’s overhead expenses, including much executive pay.
3.
More than a third of
the fraud incidents reported last year by charities were committed by staff, trustees or volunteers, the Charity
Commission has revealed.
4.
New York’s Attorney General is barring an Albany pastor and his
wife accused of taking money from a charity they controlled from accessing the
organization’s finances. Attorney General Eric Schneiderman secured a
restraining order against Pastor Edward Smart and Marion Smart today. The
couple allegedly transferred $100,000 from the Israel Community Service Program
to their personal accounts. Schneiderman has also filed a lawsuit seeking
to remove the Smarts as directors and officers of the organization. The Smarts
and several other members of First Israel A.M.E., New York’s oldest black
church, were arrested in October for welfare fraud.
5.
Report: National
Vietnam Veterans Foundation, which also operated as the American Veteran
Support Foundation (the “NVVF”) spent
the majority of its millions in contributions on paying professional
fundraisers and insider expenses.
The charity is to permanently close and pay damages; the president and founder return severance, pay damages, issues an apology, and banned nationally from using charitable assets. (EO Tax Newsletter)
The charity is to permanently close and pay damages; the president and founder return severance, pay damages, issues an apology, and banned nationally from using charitable assets. (EO Tax Newsletter)
6.
The share of American
adults who volunteered in
2015 continues to inch downward, a trend that has unfolded over the past decade.
We flagged
these few examples of charity misdeeds:
1.
Northern Arizona
University $354,000
2.
Bingo Charity (MS) more than $370,000
3.
International Health Care Services
(IHCS) (MN) $10 million
4.
Pierce Middle School PTSA (MI)
<$20,000
5.
Michigan Community Resources <$100,000
6.
Pines Condo Association
(MI) <$20,000
7.
Chimes for Charity (TN)
unknown
8.
Fullerton Aquatics
Sports Team (CA) $266,000
9.
CT. Canine and Rescue $125,000
10. Buckhannon Work Adjustment Center Inc. (WV) $136,000
11. Harrison School District 2 Federal Credit Union
(CO) $79,000
12. LIFT3 Support Group Inc (CA) $53,000
13. Junior League of Rhode Island $76,000
14. YMCA (WA) $500,000
15. Elk Point Ambulance Service (SD) $10,000
16. Amalgamated Transit Union Local 1555 (CA)
substantial
17. Southwestern Michigan Community Ambulance Service
<$100,000
18. University of Rhode Island Institute $1 million
19. HEART Foundation/Heart Community Alliance (NY) $135,000
20. Partnership for Warrenton Foundation (VA) $8000
21. Veterans Health Administration Credit Union (MI) $2 million
22. Second African Baptist Church (GA) $200,000
23. Communications Workers of America, Local 3901 (AL)
$69,000
24. Calvert County church (MD) <$100,000
25. American Legion (CT)
$12,000
26. Roanoke County library (VA)
>$10,000
27. Heritage High School football team (VA) unknown
28. Goodwill Omaha (NB) $100s of thousands
29. Helpers Community Inc./Helpers of the Mentally
Retarded (CA) millions
30. Three Oaks Baseball Association (MI) <$20,000
31. Oregon Association for Career and Technical
Education (OR) up to $127,000
32. Air Warrior Courage Foundation (TX) $100,000+
Political/public
official chicanery (just a few):
1.
A former Virginia Tech employee is being investigated for
embezzling $127,000 from the university’s foundation and the Virginia Flower
Growers Association over a number of years, according to a
search warrant.
2.
Authorities say a
former New Albany (MS) municipal court clerk has been arrested and charged with
embezzlement.
3.
The former deputy tax
collector for Tallahatchie County (MS) recently pleaded guilty to a $20,000
embezzlement.
4.
The director of a now
defunct charity that is at the center of a fraud scandal involving U.S. Rep.
Corrine Brown won't be sentenced until next June. Carla Wiley pleaded guilty to conspiracy
to commit wire fraud ($200,000++) in March, in connection with the questionable
Virginia-based nonprofit One Door for Education Foundation.
5.
An Upstate South Carolina fire chief
turned himself in to authorities after being charged with embezzlement.
6.
A Branch County (MI)
receptionist has pleaded "no contest" to embezzlement after she was
caught pocketing hundreds of dollars in fake patient fees.
7.
Family Foundations Academy administrator
pleaded guilty to the embezzlement of over $161,000 from the charter
school. He entered the plea to three counts of federal program theft.
8.
A former Simpsonville (SC) fire chief was charged with embezzlement
after authorities discovered payroll records at Clear Springs Fire and Rescue
had been manipulated. He is the second Clear Springs fire chief charged with
embezzlement this year. In April, authorities arrested and charged Gregory
Keith Merritt with embezzlement of public funds value $10,000 or more and two
counts of misconduct in office, according to warrants.
9.
A former state police
sergeant is now charged with embezzling money from the Cadillac (MI) post,
accused of stealing nearly $10,000 from the evidence room.
10. Former Lexington (NC) Parks and Recreation Manager Matthew Swift
has been indicted on three counts of felony embezzlement for allegedly taking
over $21,000 from the Lexington Recreation Department Booster Club.
11. Federal prosecutors produced a 52
page indictment after more than a year of investigating Aaron Schock, a former
congressman who represented parts of Central Illinois including Peoria and
Springfield. There are serious accusations against Schock ranging from 2008 to
late 2015 of embezzling, stealing, misapplying and converting without authority
public funds for his own benefit.
12. A former Jackson (MI) Public
Schools principal confessed to embezzling more than $50,000 in school funds in
accepting a plea deal.
13. The city of Compton’s (CA) deputy treasurer was
arrested on suspicion of embezzlement, authorities said.
14. A former city clerk for the city
of Bennington (KS) has pleaded guilty in federal court in Topeka to $75,000
embezzlement, according to a statement from a U.S. Attorney.
15. A former Monroe County (IN) Jail administrated
pleaded guilty to embezzling more than $260,000 in county funds.
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,
- 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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