Charity Governance

ACORN: “THIS IS ANOTHER FINE MESS YOU’VE GOTTEN US INTO, OLLIE”

DATELINE: November 16, 2008, Chicago

Last week, the Catholic Campaign for Human Development (CCHD), the national anti-poverty program of the U.S. Conference of Catholic Bishops, cut off its funding for ACORN, the controversial organization that was in the news during this just-completed election season because of allegations over voter registration fraud.  According to a November 13, 2008 press release CCHD cut off funding because of a major case of embezzlement which “raised serious concerns over ACORN’s financial accountability, transparency, governance, and organizational integrity.”  The press release then indicates that the allegations over voter registration fraud intensified CCHD’s concerns over ACORN's activities.  CCHD therefore extended its funding cut-off to any ACORN organizations.  We are not sure what the second cut-off adds to the first.  Maybe the first cut-off was similar to...

HERE WE GO AGAIN: BUSINESS MANAGER CHARGED WITH STEALING $259,000 FROM CHURCH

DATELINE: March 27, 2008, Chicago

Hey, why worry about financial controls? They cost money, they add administrative burden, and you like spending time on mission rather than accounting. The reason can be found in Flossmor, Illinois, a suburb of Chicago. Yesterday, Eric Herman of the Chicago Sun-Times reported that Beverly Houston had been arrested and charged with stealing over...

MERRILL LYNCH OFFERS A MAJOR LESSON FOR NONPROFIT BOARDS

Dateline: November 5, 2007, Chicago

The vast majority of nonprofits cannot relate to Merrill Lynch's $8.4 billion loss for its third quarter. Most would say, "If only we had that type of money to lose." Despite the disparate numbers, Merrill Lynch's problems have great relevance to nonprofit boards, as should be apparent to anyone who reads the excellent article by reporters Graham Bowley and Jenny Anderson appearing in yesterday's New York Times—Where Did the Buck Stop at Merrill?, Oct. 4, 2007. Bowley and Anderson focus less on the astronomical losses and more on...

BETTER PROCUREMENT PROCEDURES MIGHT HAVE PREVENTED ALLEGED THEFT AT QUEEN’S MEDICAL CENTER

DATELINE: October 23, 2007, Chicago

Jim Dooley of the Honolulu Advertiser reported last week on an interesting fraud allegedly perpetrated by an employee against The Queen's Medical Center. Fraud at Hawaii Hospital Alleged, Oct. 17, 2007. As is all too typical, we aren't talking about nickels and dimes here unless you think...

THAT RECENT UNPLEASANTNESS: MYTHS PERPETUATED BY THE LUCILE PACKARD FOUNDATION FOR CHILDREN’S HEALTH

DATELINE: October 9, 2007, Chicago

We saw an article several weeks ago reporting that the Lucile Packard Foundation for Children's Health was the victim of a $350,000 employee theft. We wondered whether there was a major internal control failure, and then we moved on. Then we read a fuller account by Andrew Valencia in the Stanford Daily. Worker Steals Funds from Kids Charity, Oct. 2, 2007. Valencia reports that the foundation...

THE B WORD HAS NOW ENTERED THE MILWAUKEE PUBLIC MUSEUM’S LEXICONN

Dateline, March 23, 2007, Chicago

On January 23, 2004, the committee was briefed on the 2003 financial audit by MPM’s previous outside audit firm. Two observations by the auditors provide early signals of concerns. First, the auditors noted that MPM had experienced net losses for two consecutive years. Second, the firm stated the “liquidity issues and cash flow management has required management’s attention.”  Within two months of this discussion, MPM’s banks were in the process of placing a general lien on all of MPM’s assets.

          From:  Interim Audit conducted by Milwaukee County Department of Audit (June 2005)

We haven’t heard anything about settlement negotiations with former Milwaukee Public Museum CFO Terry Gaouette lately.  There was supposed to be a hearing in the criminal proceedings on March 6, 2007, but nothing was reported by the Milwaukee Journal-Sentinel.  We also haven’t heard much about the much-ballyhooed fundraising campaign that has now been underway for at least a year.  And now we know why.  Apparently...

NEW YORK ATTORNEY GENERAL AND A NEW YORK CRIMINAL COURT JUSTICE ALL BUT GUARANTEE MORE FRAUD AT NEW YORK CHARITIES

Dateline, March 14, 2007, Chicago

Several years ago, two employees of the Whitney Museum escaped prison sentences after stealing over $800,000 from the museum’s ticket windows—one employee was responsible for the bulk of the thefts. Now we have Charles Rosen, the former executive director of the Gloria Wise Boys and Girls Club, and Jeffrey Aulenbach, the charity’s former deputy executive director.  According to Timothy Williams and Cassi Feldman of the New York Times, both pled guilty to grand larceny and obstructing government administration.  See Ex-Leaders of Bronx Charity Avoid Prison in Fraud Case, Mar. 14, 2007.  Rosen also pled guilty to forgery.

Yesterday, Bronx Supreme Court Justice John N. Byrne...

THE MILWAUKEE PUBLIC MUSEUM: THE NIGHTMARE HAS BEGUN, BUT FOR WHOM?

Dateline: January 15, 2007, Chicago

Last Friday (January 12, 2007), Kenneth Kerznar, the former chairman of the Milwaukee Public Museum’s endowment committee, gave testimony in the first day of the preliminary hearing for Terry Gaouette, the former Chief Financial Officer of the museum, who has been charged with several felonies for his alleged role in the financial collapse of the museum.  We were not at the hearing, but Dave Umhoefer of the Milwaukee Journal-Sentinel does a nice job of summarizing the proceedings.  Dave Umhoefer, Testimony Casts Blame on Museum Officer: But Hearing Also Helps Former Finance Chief, Milwaukee Journal-Sentinel, Jan. 12, 2007. 

The nightmare that we predicted has begun.  Obviously Gaouette is experiencing a bad dream that he would love to wake up from.  But we can’t help but speculate on the cost of the trial to the museum.  We are already hearing conflicting testimony, which keeps the story alive on the front page of the paper.  It can’t help the museum's fundraising efforts. 

Milwaukee sounds a little bit like Italy,...

THE MILWAUKEE PUBLIC MUSEUM: D & O INSURANCE PAYS OFF FOR INDICTED FORMER CFO

Dateline: December 21, 2006, Chicago

Dave Umhoefer of the Milwaukee Journal-Sentinel reported in a December 7, 2006 article that Terry Gaouette is using a $5 million directors’ and officers’ liability insurance policy to finance his defense against criminal charges that are rooted in the 2005 collapse of the Milwaukee Public Museum.  See Dave Umhoefer, Museum Insurer Covering Ex-CFO: Gaouette's Already Been Repaid $77,760 For Legal Bills in Criminal Case, Milwaukee Journal-Sentinel, December 7, 2006.  Every director and officer of a nonprofit should take a close look at Umhoefer’s story.  The lesson is clear... 

DAVID WREN REPORTS THAT FIVE RIVERS COMMUNITY DEVELOPMENT CORP HAS CLOSED DOWN: THE LIVIN' IN SOUTH CAROLINA JUST GOT A LITTLE SMALLER

Dateline: November 28, 2006, Chicago

Reporter David Wren of the Myrtle Beach Sun News hammered the final nail into the coffin that has become the Five Rivers Community Development Corp when he wrote his latest story, Five Rivers Closes Down Amid Scandal: Investigation Will Continue; ’05 Tax Return Filed, Sun News, Nov. 19, 2006.  Wren has been following developments in this story closely, with an entire series that is well worth everyone’s time.

Is it any surprise?  Not really, if you read...