Charity Governance

DRAKE UNIVERSITY'S PRESIDENT MAY NEED TO GET HIS HEAD OUT OF THE BOOKS

DATELINE: August 25, 2011, Chicago

"Internal financial controls were circumvented by a veteran employee with knowledge of those controls"

So said Victoria Payseur, Drake University's vice president for business and finance, following revelations that a university employee allegedly embezzled $470,000 from the university over a five- or six-year period.  The employee, one Robert A. Harlan, worked for Drake University for over 20 years, according to the Des Moines Register.  'Betrayal' Felt at Drake After Report on Theft (April 21, 2011).  According to the police, the total theft may exceed $600,000.  According to the Register, Harlan apparently told police that he gave the money to...

THE NONPROFIT SCANDAL OF THE YEAR: THE FIESTA BOWL--PART IV, THE AUDITORS

DATELINE: April 1, 2011, Chicago

Well, we certainly aren't surprised.  In a March 31, 2011 editorial pertaining to the Fiesta Bowl (more aptly named the Fiasco Bowl) scandal, the Arizona Republic writes:

Hire real auditors. Another board imperative. There are a lot of stories yet to play out regarding the Fiesta Bowl, and here is one of them: How in the world could the Fiesta Bowl auditor not report to the board the kind of crazy spending by top management? The special investigative committee found that now-fired Chief Executive John Junker expensed nearly $5 million over the past 10 years, and just half of that amount could be itemized as legitimate expenses. Where was the auditor? Fix this.

Take Steps to Fix What We Can

We have no doubt that many members of the public are similarly scratching their heads, particularly because the Fiesta Bowl did have some very real auditors:  PricewaterhouseCoopers has handled the outside audit function since 2007, according to KMRC's report (p271).  Before that, it was KPMG (p271).  In theory, you can't get much...

THE NONPROFIT SCANDAL OF THE YEAR: THE FIESTA BOWL, PART I

DATELINE: March 31, 2011, Chicago

The likely winner of the coveted "Nonprofit Scandal of the Year" annual award is the Fiesta Bowl, which is the alter ego of four Section 501(c)(3) organizations--the Arizona College Football Champion, the Arizona Sports Foundation, Fiesta Events, and the Valley of the Sun Bowl Foundation-- acting in concert.  Pretty good feat given that it isn't even April. 

No doubt you've read the headlines.  The New York Times summed it up...

US CHARITIES AREN’T THE ONLY VICTIMS OF FRAUD

DATELINE: January 31, 2011, Chicago

The Form 990 asks U.S. charities to report whether they have experienced any material asset misappropriations.  To date, the IRS has failed to release statistics, which is unfortunate, but to be expected given that the question is a relatively new one.  However, we continue to urge the IRS or the Urban Institute to look at this data and make it available to the public.  Based on anecdotal evidence, fraud is...

A BRANCH OF THE MICKEY MOUSE CLUBHOUSE: VITO LOPEZ UPDATE

DATELINE: October 14, 2010, Chicago

Several weeks ago we wrote about the Ridgewood Bushwick Citizens Council, a Brooklyn, New York nonprofit closely associated with New York Assemblyman Vito Lopez.  Although Lopez is not an employee or director of the organization, the extensive newspaper coverage in several papers draws a close connection.  At that time, someone has just begin to open what has quickly become a can of worms.  Since then, the lid has been removed to reveal several alleged abuses of this nonprofit.

As just one example, Aaron Short of the Brooklyn Paper reported yesterday that Brooklyn Queens Family Respite, which is a subsidiary of the Ridgewood Bushwick organization, received $1 million in taxpayer money to aid seniors.  This is Supposed to be A Senior Center. It’s Actually Vito Lopez’s Clubhouse (Oct. 13, 2010).  You would naturally expect to see happy seniors on the ground floor of the organization's facility.  Instead the first floor is used as a...

REPORTER SURPRISED BY DEGREE OF FRAUD IN NONPROFIT SECTOR

DATELINE: August 25, 2010, Chicago

We recently spoke with a reporter who was writing a story about a misappropriation of funds from a Florida nonprofit.  She asked how prevalent fraud was in the nonprofit sector.  Our response:  Too prevalent!  As we provided her with both statistical and anecdotal evidence, we could sense her eyes widening. 

If she still doubts us, she only need look at yesterday’s Chicago Tribune.  Ex-Treasurer Theresa Carlquist of Downers Grove League is Charged with Stealing $100,000 (August 24, 2010).  Of course these are allegations, so there is the presumption of innocence.  But take a closer look at the some of the alleged facts... .  

CONNECTICUT ATTORNEY GENERAL DOESN’T LIKE ARBITRATION IN WESLEYAN DISPUTE

DATELINE: August 24, 2010, Chicago

On January 8, 2010, we wrote about the dispute between the Wesleyan and its former chief investment officer.  As we noted at the time, the civil allegations against Thomas Kannan were initially eye popping, but after examining the known facts, we thought that Kannan could...

CHURCH CONGREGATION LOST EXACTLY WHAT IT DESERVED: PRIEST ALLEGEDLY STEALS $1.3 MILLION TO FINANCE ESCAPADES IN NEW YORK CITY

I'm feeling rough, I'm feeling raw, I'm in the prime of my life, Let's make some music, make some money, find some models for wives...We're fated to pretend.

MGMT, Time to Pretend from Oracular Spectacular

DATELINE: JULY 7, 2010, Chicago

Some may feel that we are being a bit harsh today.  We, however, hearken back to a January 5, 2007 article by Laurie Goodstein and Stephanie Strom of the New York Times, which reported on a survey conducted by the Center for the Study of Church Management at Villanova University.  Embezzlement is Found in Many Catholic Dioceses.  Surveys were sent to the CFOs of all 174 Catholic dioceses in the United States.  78 responded.  Of those, 85% reported embezzlements over the prior five years.   Of those, 11% had experienced thefts of at least $500,000.  One-third of the reporting dioceses indicated that they had experienced thefts under $50,000.  Here's our more detailed coverage.

Now for the juicy stuff,...

FORMER DETROIT MAYOR FINDS HIMSELF IN HOT WATER AGAIN: A LESSON FOR NONPROFIT EXECUTIVES

DATELINE: June 23, 2010, Chicago

Former Detroit Mayor, Kwame Kilpatrick, finds himself facing a 19-count federal criminal indictment.  According to the Detroit Free Press, Kilpatrick is already serving a prison term for probation violations.  M.L. Elrick and David Ashenfelter, Ex-Detroit Mayor Kwame Kilpatrick Indicted by Feds on 19 Mail Fraud, Tax Counts (June 23, 2010).  The charges stem from allegations that Kilpatrick raided the Kilpatrick Civic Fund, a Section 501(c)(4) social welfare organization.  The organization was formed in 1999 to promote community activities enhancing Detroit neighborhoods, among other purposes.

Sadly, the allegations are similar to...

THE 2010 REPORT ON FRAUD FROM THE ASSOCIATION OF CERTIFIED FRAUD EXAMINERS: THE BEAT GOES ON

DATELINE: June 2, 2010, Chicago

We have written about nonprofit fraud in any number of posts during the last six years.  Unfortunately, we see no reduction in media headlines, or the amounts stolen, which often are in the $200,000 to $400,000 range.  Hopefully the IRS will release data from the 2008 Form 990 that quantifies the level of fraud reported by tax-exempt entities.  In the meantime, we have the ...