2006: A Memorable Year
As the New Year gets under way, the nonprofit world goes down a winding road. Will the past foretell the future? There has been some good and some bad news. From a record year in donations to a probable best in volunteering to a banner year in malfeasance to a higher profile before the federal and state regulators, the charitable sector has gotten the attention of many.
Many of the stories seem more fiction than the wildest novel. An executive director fired two her agency founders to share the wealth of the agency with her daughter, husband and many other relatives. In just ten days, eight schools in one state had almost $500,000 of the student’s money stolen. Many of our stalwart charities continue to be role models in lack of transparency and accountability. And the nation’s political leadership has mixed charities, money and politics into a miserable cocktail.
Some examples of those that we have entrusted our contributions and have failed us are Pastors, Congressman, attorneys, state Senators, police officers, firefighters (including chiefs), doctors, theatre producers, school superintendents, school principals, and accountants have all been convicted of some misdeed. Hundreds of them are in jail.
Others in positions of trust within the charitable sector that have let us down and have been convicted are executive directors, chief financial officers and bookkeepers, board presidents, treasurers and other officers of nonprofits, and trustees of foundations. Billions of dollars have been lost to their misdeeds.
Ill-gotten gains or goodness and growth….the awards please…
All in the Family Award goes to the Five Rivers Community Development Corporation board of directors who walked away from their responsibilities and, when caught, walked away from the troubled agency by resigning. Beulah White, executive director, hired her family and close friends in various positions. The board failed to monitor the spending of the agency’s money and the selling of other assets. All left the agency when an expose in the local newspaper pointed out irregularities. The agency closed its doors with the federal and state government looking into questionable practices. Hundreds of thousands of dollars gone!
The Poor Leadership Award is shared by two institutions. The first is the American Red Cross. Despite its 4 star rating, 2006 was a memorable year. The Red Cross was fined another $5.7 million for violating blood safety rules and failing to comply with a 2003 agreement to correct such practices. Previously, the FDA fines total almost $10 million. The Red Cross has been working on “persistent and serious violations” for 17 years. So what did the Red Cross board do? The board promoted the Executive Vice President of Biomedical Services (blood bank) to the agency’s top position. The nation’s leading nonprofit for fixing American’s lives is broken. Punch drunk with donations it has been under investigation numerous times regarding the way it spends the donor’s money. An example: paying off a previous CEO $1.9 million. Congress is working on fixing the agency.
There is nothing more critical to effective stewardship than governance, oversight and transparency. But apparently the leadership of the nonprofit sector has no interest in such challenges. The indifference and denial of the charitable sector leadership has allowed them to do nothing rather than to step up and say “enough is enough”. How many billions of dollars must be misappropriated before something is done? Apparently, the dismissive approach by the sector and agency leadership believes that this ongoing malfeasance has not yet caught the public’s eye. That may be true, but it has gained the attention of Congress and various other regulatory agencies. They are proposing tighter authority over nonprofits. This could be devastating to 80% of the charities---the smaller ones.
The Confidence Challenge awards are reflected in a few surveys.
An overwhelming majority of the respondents of the U.S. Roman Catholic dioceses (85%) have reported cases of embezzlement in the last five years.
In the latest count of last year study from 1998-2001-- religion related scams have totaled $2 billion. This is up from the previous study of 5 years which amounted to “only” $450 million.
Confidence in charities is minimally rebounding in the latest 2005 survey with 69% of the public having a great deal or fair amount of confidence. This is far below the 90% approval in 2001.
Our Partner/Provocateur Award goes to our overseer, the government in all its forms and its increased interest in how the sector functions. The IRS audited 7,079 nonprofit organizations in the fiscal year, which ended September 30, 2006, an increase of 40 percent over the previous year. With several corruption investigations on the use of nonprofits as conduits for political influence ongoing, incoming Congressional leadership has agreed to a moratorium on earmarks, until budget reforms are passed. The IRS is continuing to monitor the activities of churches and charitable organizations in partisan political involvement. And lastly, the Senate Finance Committee and other congressional committees plan to continue monitoring the sector after having hearings on the American Red Cross, museums, educational institutions and other nonprofit organizational abuses.
All this without even mentioning the dozen or so state investigations. More to come….
Gary Snyder
www.garyrsnyder.com
Many of the stories seem more fiction than the wildest novel. An executive director fired two her agency founders to share the wealth of the agency with her daughter, husband and many other relatives. In just ten days, eight schools in one state had almost $500,000 of the student’s money stolen. Many of our stalwart charities continue to be role models in lack of transparency and accountability. And the nation’s political leadership has mixed charities, money and politics into a miserable cocktail.
Some examples of those that we have entrusted our contributions and have failed us are Pastors, Congressman, attorneys, state Senators, police officers, firefighters (including chiefs), doctors, theatre producers, school superintendents, school principals, and accountants have all been convicted of some misdeed. Hundreds of them are in jail.
Others in positions of trust within the charitable sector that have let us down and have been convicted are executive directors, chief financial officers and bookkeepers, board presidents, treasurers and other officers of nonprofits, and trustees of foundations. Billions of dollars have been lost to their misdeeds.
Ill-gotten gains or goodness and growth….the awards please…
All in the Family Award goes to the Five Rivers Community Development Corporation board of directors who walked away from their responsibilities and, when caught, walked away from the troubled agency by resigning. Beulah White, executive director, hired her family and close friends in various positions. The board failed to monitor the spending of the agency’s money and the selling of other assets. All left the agency when an expose in the local newspaper pointed out irregularities. The agency closed its doors with the federal and state government looking into questionable practices. Hundreds of thousands of dollars gone!
The Poor Leadership Award is shared by two institutions. The first is the American Red Cross. Despite its 4 star rating, 2006 was a memorable year. The Red Cross was fined another $5.7 million for violating blood safety rules and failing to comply with a 2003 agreement to correct such practices. Previously, the FDA fines total almost $10 million. The Red Cross has been working on “persistent and serious violations” for 17 years. So what did the Red Cross board do? The board promoted the Executive Vice President of Biomedical Services (blood bank) to the agency’s top position. The nation’s leading nonprofit for fixing American’s lives is broken. Punch drunk with donations it has been under investigation numerous times regarding the way it spends the donor’s money. An example: paying off a previous CEO $1.9 million. Congress is working on fixing the agency.
There is nothing more critical to effective stewardship than governance, oversight and transparency. But apparently the leadership of the nonprofit sector has no interest in such challenges. The indifference and denial of the charitable sector leadership has allowed them to do nothing rather than to step up and say “enough is enough”. How many billions of dollars must be misappropriated before something is done? Apparently, the dismissive approach by the sector and agency leadership believes that this ongoing malfeasance has not yet caught the public’s eye. That may be true, but it has gained the attention of Congress and various other regulatory agencies. They are proposing tighter authority over nonprofits. This could be devastating to 80% of the charities---the smaller ones.
The Confidence Challenge awards are reflected in a few surveys.
An overwhelming majority of the respondents of the U.S. Roman Catholic dioceses (85%) have reported cases of embezzlement in the last five years.
In the latest count of last year study from 1998-2001-- religion related scams have totaled $2 billion. This is up from the previous study of 5 years which amounted to “only” $450 million.
Confidence in charities is minimally rebounding in the latest 2005 survey with 69% of the public having a great deal or fair amount of confidence. This is far below the 90% approval in 2001.
Our Partner/Provocateur Award goes to our overseer, the government in all its forms and its increased interest in how the sector functions. The IRS audited 7,079 nonprofit organizations in the fiscal year, which ended September 30, 2006, an increase of 40 percent over the previous year. With several corruption investigations on the use of nonprofits as conduits for political influence ongoing, incoming Congressional leadership has agreed to a moratorium on earmarks, until budget reforms are passed. The IRS is continuing to monitor the activities of churches and charitable organizations in partisan political involvement. And lastly, the Senate Finance Committee and other congressional committees plan to continue monitoring the sector after having hearings on the American Red Cross, museums, educational institutions and other nonprofit organizational abuses.
All this without even mentioning the dozen or so state investigations. More to come….
Gary Snyder
www.garyrsnyder.com
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