2014-04-18

Nonprofit Imperative

…Your nonprofit browser

April 2014

Follow us: NonprofitsNews; Nonprofit Imperative Blog

The twice-monthly newsletter dedicated to:

exposing the crisis in nonprofit fraud leadership…a crisis of pervasive and monumental waste, fraud, abuse, mismanagement, and malfeasance throughout the charitable sector which costs taxpayers and contributors tens of billions of dollars annually; and,

seeking reforms that will restore the public’s lost confidence in the sector.

What’s Included:

Skunk of the Month:

Archdiocese of Detroit and the “Angel Fund”.; Gambling Addiction

Charity Check Up:

Charity Malfeasance in Canada, Too

A Thought or Two:

St. Vincent de Paul (WA)

Nonprofit News-In Case You Missed It:

Portola Valley (CA) School Foundation; Fiesta Bowl; Five Rivers Community Foundation; …more

Political/Official Chicanery:

PA; TX; GA; CO; NC; OK; AL; AL; RI; SC…more

What Do You Think?

The charity world will not be destroyed by those who do evil, but by those who watch them without doing anything.

-------------

Charities using professional fundraisers to raise money in Michigan received only 38 cents of every dollar raised through those campaigns last year, according to a report from Michigan Attorney General Bill Schuette.

Skunk of the Month…

Skunk of the Month is the twice-monthly designation made by Nonprofit Imperative, the organization dedicated to eliminating waste, fraud, abuse and mismanagement in nonprofits and government. The Skunk of the Month award is given to charities and government officials who show blatant disregard for the interests and trust of contributors and taxpayers. This month’s example is:

“They came to do good and they did very well indeed.”

Could Embarrassment Have Killed A $17 million Fund

An unknown person has donated $17 million since 2005 to help less fortunate people through the Archdiocese of Detroit (MI) and the “Angel Fund”. This person’s generosity paid for necessities like rent, medicine and overdue utility bills.

Because of incompetence or sheer embarrassment the fund ended. The decision is just weeks after the Angel Fund’s existence was publicly revealed because of alleged fraud by a Detroit priest, according to the Detroit Free Press

For over three years, a Detroit priest would fill out false applications for grants from the Angel Fund. The fraud involved a sum between $1,000 and $20,000, according to the charges.  After catching the perpetrators the donor was disappointed and the charity was frozen.

The donor’s decision had nothing to do with the alleged fraud, according to the Archdiocese. The fund’s end “cuts back seriously on what we can do,” Sister Jolene Van Handel, a pastoral minister at Detroit’s Nativity Catholic Church, said. However, the publicity could be one reason for the decision that undermined the fund’s under-the-radar service.

Gambling Addiction Hurting Charities

Despite that the former treasurer of the Depew Saints Hockey Club (NY) took and subsequently repaid her 4 year $90,000 embezzlement from her children’s league and after leaving her position as club treasurer, she sent letters to several Depew-area businesses requesting donations for the club from January 2010 to last April and kept the money to support her gambling habit.

State Supreme Court Justice told Teresa A. Fusani he went light on her sentencing because she apparently has become rehabilitated from her gambling addiction as well as becoming an exemplary citizen. She was sentenced to weekends in jail for four months followed by five years’ probation and 500 hours of community service.

Gambling has had a huge impact on charities though fraud. Did this perpetrator get off easy?

Nonprofit Imperative has dozens examples of charity fraud caused by gambling addiction amounting to over $13 million

A Charity Check Up:

Big-Time Charity Malfeasance in Canada, Too

The Portland Hotel Society’s top managers stepped down under pressure from government officials over the spending reports. Auditors said that the Portland Hotel Society’s spending of nearly $26-million in annual taxpayer funds to run housing and addiction services—including Canada’s only supervised-injection site for drug users—was subject to lax oversight, allowing the charity’s leaders to charge lavish travel, dining, and other costs to the organization at a time when it faced financial problems. Managers and directors expensed more than $69,000 over three years on restaurants, and more than $300,000 on travel to Vienna, Paris, Istanbul, New York City, Los Angeles, Banff and Ottawa, among other locations. Hotel rooms of up to $880 per night were charged for trips to the United Kingdom and Austria, including flowers, alcohol and spa services.

There were also more than $8,658 in limo fees in 2013, a trip to Disneyland in Anaheim, a $5,832 cruise for a PHS manager, a $917 baby shower and a $7,025 “celebration of life” for a deceased employee.

The PHS is in a “weak financial condition” and could have trouble paying its obligations. The society would have run a $2.07-million deficit in the last fiscal year if not for a one-time cash infusion

A Thought or Two:

The devastation of a charity by fraud

St. Vincent de Paul is a Catholic charity dedicated to serving needy people. The Tacoma office is now missing a half-million dollars.

Executive Director Charlie Thompson described the theft as embezzlement, and an "inside" job that may have spanned a decade.

Last summer, the charity's board discovered some bills weren't being paid, including $200,000 to a garbage company. Thompson said, “Items were disguised as payments to a regular vendor, one that you would expect to be paying, but they were rerouted into personal accounts.”

Two of St. Vincent’s employees were fired and the authorities were called.

The fallout has been layoffs.  St. Vincent had to let more than 40 percent of its staff, a total of eleven people, go.

It had to close one of three thrift stores it operated in January.  Insurance will cover some of the losses.

Thompson said there's a chance of getting restitution if someone is prosecuted for the theft.  He said the FBI is investigating.

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.
The investment account of the Portola Valley (CA) Schools Foundation, which was defrauded of $182,500 over the fall of 2013, has been made whole by the foundation's fraud-protection insurance.

2.
The Fiesta Bowl's chief executive, John Junker, was sentenced to eight months in prison for leading a campaign-finance scandal that ensnared the college-football organization he transformed from a low-key, postseason bowl game into one of the country's biggest sporting events. The Fiesta Bowl's former chief executive became the sixth former or current employee to be sentenced in a scheme in which bowl employees were reimbursed for making political contributions to those running for local, state and federal ­offices. The contributions went to high-profile politicians, such as U.S. Sen. John McCain and Gov. Jan Brewer. Prosecutors have said there was no indication that any of the candidates knew the contributions were tainted. Other expenses included throwing Junker a birthday party in Pebble Beach, Calif., and trips by Junker and others to strip clubs.

3.
A Linden (NJ) woman was sentenced to nearly six years in federal prison for her role in the theft of $7 million worth of HIV and cancer medications from a charity then distributed the medicines to patients who could not afford them.

4.
A Colorado woman who allegedly convinced her young son he had cancer is accused of scamming more than $25,000 out of her family and the local community. She allegedly told her 6-year-old son -- along with the community -- that he was diagnosed with cancer in September 2012. Money collected by Nguyen through school fundraisers and other donations was used to finance a trip to Disneyland. "We don't have any reason to believe that anyone other than her knew the truth." "The little boy believed he had cancer. The rest of the family believed he had cancer. "When investigators issued a search warrant of her home on Thursday, they said they found $23,000 in cash. Police say she then admitted that her son doesn't actually have cancer.

5.
How novel; fully discharged restitution is an anomaly and enforcement seldom happens but… A probation revocation hearing in Georgetown could determine whether Dayo White – the former chief financial officer of Five Rivers Community Development Corp. – will be headed to prison for failing to pay restitution for money she illegally took from the nonprofit agency. White and her mother, Beulah White, pleaded guilty in March 2009 to a combined six felony charges related to their theft of public money from Five Rivers, which was supposed to help low-income people find jobs and buy homes. Both women were given five-year suspended prison sentences and placed on probation for a five-year period. They also were ordered to pay a combined $65,617.17 in restitution, including interest. Beulah White, the nonprofit agency’s executive director, repaid the $3,500 she owed and her probation expired this week. Dayo White, however, still owes $31,146 – about half of the $62,117.17 she was ordered to repay five years ago. The restitution the Whites were ordered to pay amounts to a little more than 1 percent of the $5 million Five Rivers received in state and federal grants and other funds during its 10-year history.

6.
Some of Australia’s best-known charities have signed an open letter urging Tony Abbott to abandon plans to scrap the national regulator. They said the launch of the commission in 2012 was a “major step forward in creating a regulatory environment that works for the not-for-profit sector rather than against it”. “In little over one year of operation, the ACNC has built a strong, positive reputation by establishing the first public national register of charities, registering more than 2,600 new charities, responding to over 70,000 requests for information from charities and the broader community, investigating and resolving over 200 complaints against charities, and monitoring the extent of red tape and level of public trust and confidence in our charities,” the letter said.

7.
Among 66 foundations that provided seven years of data, assets in 2013 were still 16.6 percent below the total $223.7-billion reported in 2007. Grant making last year among those organizations was 6.5 percent lower than in 2007 according to the Chronicle of Philanthropy survey.

8.
A Los Angeles County judge signaled that Department of Water and Power union chief Brian D'Arcy will have to turn over records showing how two nonprofit trusts he co-directs used $40 million in ratepayer money. The nonprofits — the Joint Training Institute and the Joint Safety Institute — were created more than a decade ago after a grueling round of job cuts at the city-owned utility. The institutes were charged with improving relations between labor and management, and have received up to $4 million per year. Judge James Chalfant in his ruling noted that the DWP managers had provided "no supervision" and "little control" over the nonprofits' spending and therefore shares the blame for the controversy. "This failure is serious and has resulted in well-warranted public scrutiny as to how $40 million of public funds was spent," Chalfant wrote.

9.
With 11 of the worst offenders [among charities soliciting funds from the public] across the nation, Florida is taking charge. It is instituting a public-access charitable database.

10.
The Atlanta Journal-Constitution and U.S. Senator Charles Grassley are calling for a look into hospital compensation and whether compensation incentives are properly designed. For example, one hospital reportedly paid $5.3 million in salary, a bonus and cash retirement benefits to its chief executive in 2011.  His bonus of $1.2 million was attributed to his having “met every goal in his incentive plan, including targets related to quality of care and ‘stakeholder satisfaction.’”  However, the hospital’s attorney declined to identify the specific goals achieved. (see #11)

11.
U. S. Sen. Chuck Grassley of Iowa, in 2010, sought oversight measures for nonprofit hospitals. “These reforms were the culmination of a review of nonprofit hospitals I began in 2005 that revealed that the practices of many nonprofit hospitals were virtually indistinguishable from their for-profit counterparts,” Grassley writes in a letter to IRS Commissioner John Koskinen. He is now asking the Commissioner to give him an update as to their implementation.

12.
New York officials say they will appeal a state judge's ruling against the $199,000 salary cap intended for executives at the Health Department's nonprofit contractors. State Supreme Court Justice Thomas Feinman finds the department overstepped its authority and that the Legislature has rejected similar proposals. Gov. Andrew Cuomo more than two years ago issued an executive order to limit administrative costs and executive pay at state-funded service providers, noting one chief executive was drawing a $2.2 million salary. The lawsuit was brought by the Agencies for Children's Therapy Services, an association of 33 agencies in New York City and Long Island providing early intervention and special education services.

13.
Atlanta archbishop apologized for building a $2.2 million mansion as his residence. He bowed to criticism from local parishioners and said he would consider selling the new home in Buckhead, Atlanta’s toniest neighborhood. The Tudor-style mansion, stretching nearly 6,400 square feet, includes two dining rooms and a safe room.   In Newark, N.J. donations were withheld after they learned the archdiocese was spending at least $500,000 to expand his retirement home, adding an indoor therapy pool, fireplaces, and an office library. Last week, Pope Francis removed German bishop Franz-Peter Tebartz-van Elst after he spent $43 million on a new residence and related renovations.

14.
A professor at Morgan State University in Baltimore was convicted April 1 in connection with a scheme to defraud the National Science Foundation and his students, the Baltimore Sun reported.  He was accused of fraudulently obtaining $200,000 in grants from the NSF’s Small Business Technology Transfer program in 2008 and 2009 and applying for an additional $500,000 through the same program. Prosecutors claimed he falsified expenditure reports and time sheets and used the funds for personal expenses, including paying his mortgage and credit card bills and paying his wife about $11,000, though she did no work for the NSF. He also had oversight for another $100,000 in U.S. Department of Defense grants that were supposed to be distributed to students working on contracts, but he falsely told students they needed to return part of the stipends to him. Students returned about $36,000 in grants, which he deposited in his own bank account.

15.
China lawmakers are passing laws requiring charitable organizations to publish their financial information and issue new standards for the annual inspection of charitable organizations after the Smile Angel Foundation (SAF) had embezzled more than 50 million yuan ($8.09 million) of its donations and that its co-founder, actor-turned-businessman Li Yapeng, had failed to donate 1 million yuan ($161,000) of funding capital as he promised.

***

From the The Nonprofit Finance Fund:

The economic recovery is leaving behind many nonprofits and communities in need:
• 80 percent of respondents reported an increase in demand for services, the 6th straight year of increased demand.
• 56 percent were unable to meet demand in 2013 -- the highest reported in the survey's history.
• Only 11 percent expect 2014 to be easier than 2013 for the people they serve.

Nonprofits are working to bring in new money; in the next 12 months:
• 31 percent will change the main ways in which they raise and spend money.
• 26 percent will pursue an earned income venture.
• 20 percent will seek funding other than grants and contracts, such as loans or other investments.

Forty-one percent of nonprofits named "achieving long-term financial stability" as a top challenge, yet:
• More than half of nonprofits (55 percent) have three months or less cash-on-hand.
• 28 percent ended their 2013 fiscal year with a deficit.
• Only nine percent can have an open dialogue with funders about developing reserves for operating needs, and only six percent about developing reserves for long-term facility needs.

Nonprofits are taking wide-ranging steps to survive and succeed. In the past 12 months:
• 49 percent collaborated with another organization to improve or increase services.
• 48 percent invested money or time in professional development.
• 40 percent upgraded hardware or software to improve organizational efficiency.
• 39 percent conducted long-term strategic or financial planning.

Respondents said that more than 70 percent of their funders requested impact or program metrics.
• 77 percent agreed that the metrics funders ask for are helpful in assessing impact.
• Only one percent reported that funders always cover the costs of impact measurement; 71 percent said costs were rarely or never covered.

We flagged these few examples of nonprofit mischief

1.
Tacoma-Pierce County St. Vincent De Paul Society (WA) $500,000

2.
Pitt County Board of Education (Carolina) $38,000

3.
Sullivan County Humane Society  $7,200

4.
Xavier University Preparatory School/ St. Katharine Drexel Preparatory High School (LA) $85,000

5.
San Marcos Chamber of Commerce (CA) $62,000

6.
Mobilization, Optimization, Stabilization and Training Trust (KS) $400,000

7.
Big Brothers Big Sisters of the Bluegrass (KY) $430,000

8.
<span style='background: white; color: blue; font-family: Arial; font-size: 11.0pt; letter-spacing: -.1pt; mso-fareast-

Show more