Charity Governance

THE SKY MAY BE CHICKEN, BUT WE HAVE SOME EGG ON OUR FACES

DATELINE:  March 24, 2011, Chicago

Yesterday we had a little fun at the expense of the California Attorney General (see that post, reproduced below).  A friend of the blog pointed out that we had overlooked an important California statute that severely limits the California Attorney General's power to investigate, institute court proceedings against, and sanction organizations formed as California religious corporations. 

As was true yesterday, we have yet to see any evidence of wrongdoing on the part of Family Radio or its president, Harold Camping.  Yet, we believe the issues we raised yesterday are as...

THREE CUPS OF TEA AND A CLASS ACTION LAWSUIT: DRINK THE TEA, DISMISS THE LAWSUIT

DATELINE: May 11, 2011, Chicago

Two Montana residents, Michele Reinhart and Jean Price have filed a lawsuit against Greg Mortenson, the author of Three Cups of Tea, and the Central Asia Institute alleging fraud on the part of both defendants and requesting that the lawsuit be certified as a class action.  Our initial reaction to the filing was that the claimed injury is a bunch of nonsense, but as we read the complaint, we realized the complaint raises some important issues.  Those issues don't change our initial reaction.

The federal district court judge who is assigned this lawsuit should...

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...

THREE CUPS OF TEA: A BIG YAWN

DATELINE: April 22, 2011, Chicago

We saw Julie Bosman's and Stephanie Strom's April 17, 2011 article in the New York Times following up on the 60 Minutes report that parts of Greg Mortenson's book, Three Cups of Tea, might have been fabricated.  'Three Cups of Tea' Author Defends Book.  We haven't read the book, but apparently Mortenson tells the story of his adventures in Afghanistan.   Those adventures led Mortenson to co-found the Central Asia Institute, an organization that builds schools largely for girls in Afghanistan and Pakistan.  Mortenson is the organization's executive director.

Bosman and Strom paint a picture of a charity and a leader that have...

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...

WHY THE SPORTS LEAGUES SHOULD CREATE A DONOR-ADVISED FUND FOR THEIR CHARITABLY-INCLINDED ATHLETES

DATELINE:  January 19, 2011, Chicago

Dallas Morning News reporter Scott Farwell has an excellent article in yesterday’s newspaper on athlete-sponsored charities.  Some Dallas Sports Stars’ Charities Waste Money, Inefficient.  The storyline, however, is...

WE GET WE GET THE GOVERNMENT THAT WE FUND: U.S. NAVY VETERANS ASSOCIATION

DATELINE: January 3, 2011, Chicago

Over a month ago we read several articles about Bobby Thompson, the U.S. Navy Veterans Association, and allegations of a massive fraud.  We were initially attracted to the story, hoping to gain more insight into internal controls, but the facts offer few such insights.  Apparently the charity in question was a shell, used to defraud members of the public.  There has always been fraud and unfortunately there always will be fraud.  Rather than perpetuating a fraud against a charity from the inside, this scam was directed at the public

Jeff Testerman and John Martin of the St. Petersburg Times have written a lengthy article offering some reasons why the alleged fraud may have been so successful—purportedly raising $100 million.  Navy Vets Made an Unchecked Rise Into Elite Circles (December 27, 2010).  Much of what Testerman and Martin report 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...