Nonprofit Employees Commit Theft More Often Than You'd Think
Todd Wallack of The Boston Globe looked at documents filed with the IRS over the past seven years, and found more than 70 examples of fraud, diversion of assets and other losses at charities in New England.
Wallack is an investigative reporter and data journalist on the Globe’s Spotlight team. Nationwide, he found 1,100 examples of nonprofit fraud by employees.
NEPR’s Carrie Healy asked Wallack if he gets the sense that number is just the tip of the iceberg.
Todd Wallack, Boston Globe: Absolutely. I was able to download data from all the organizations that filled out the standard 990 annual information form with the IRS electronically. But there are lots of organizations that file different versions of the form, particularly smaller organizations, foundations.
Lots of organizations file paper forms, and the IRS only requires organizations to report really big diversions of assets often over $250,000 or at least five percent of their assets.
I've been getting tons of email from readers saying,"Oh, you missed this one, you missed that one." There's lots more cases out there.
Carrie Healy, NEPR: Why are nonprofits seemingly such easy prey for this kind of activity?
Private companies are often victims of fraud, as well. It's the problem that can plague any organization that's handling money, but nonprofit experts I talked to say there are a bunch of reasons why they think nonprofits are particularly vulnerable.
One is that they typically rely on volunteer board members. You often have leaders of nonprofits who are really passionate about their cause, but may not have an MBA or financial expertise, and may be less attuned to this.
There's a lot of pressure on nonprofits to put every dollar into programs, plus it's hard to keep track of donations. If you buy something from a company and you don't get it, you're going to complain.
But if you make a donation, you don't expect anything in return -- so you're not going to complain. If that donation disappears, you're never going to know.
Over the course of your reporting, did you encounter pushback from some of the nonprofits that ended up in the reporting, who maybe didn't want negative publicity about their losses and loss of public trust?
Yeah, absolutely! When I started contacting nonprofits, a number of them said, "Please don't write about it." It's clear a lot of organizations don't want their names in the paper, and when I started looking through names of organizations, many had never been prosecuted. Many had never had articles written about them.
There is a particularly recent example that is in your neck of the woods: Art Media Foundation, which is now known as The Artist Book Foundation, in North Adams. They said in October 2016 they found their treasurer stole $107,000.
There are a lot of cases that people don't know about. Some people in the nonprofit world said nonprofits are very wary about making this news public, because they are worried the donors will get upset and stop giving. And with a nonprofit, their reputation is everything.
When I read the piece, I remembered reading about many of the organizations in the news. What actually happens, though, in the end, to the organization, and to the perpetrators?
It varies a lot. There's not one answer. There’s a school in Vermont that was able to get back all the money it lost. The Southern Vermont College had a former chief operating officer steal over $800,000, and was able to ultimately recover $1 million.
There are other cases where organizations haven't been able to get any money back.
Is there going to be a sequel to this?
I don't know. Unfortunately this is a problem, and there are lots more organizations every day that find, unfortunately, theft, as crazy as it sounds.
I talked to one person who said, "Who would do this? Who would rip off an organization that helps the homeless, or does other good work?" But unfortunately, it is something that nonprofits have to be wary of, and take steps to try to prevent.