Wednesday, November 6, 2013

Diversions of nonprofit assets - Congressional review likely

According to the Nonprofit Quarterly, the Washington Post's recent investigative piece, "Inside the hidden world of thefts, scams and phantom purchases at the nation's nonprofits," has captured the attention of Senator Charles Grassley (R-IA), the ranking member of the Senate Judiciary Committee and a long-time overseer of tax-exempt organizations.  The Post's article focused on the American Legacy Foundation and its less than full disclosure of what eventually amounted to a $3.4 million loss and a delayed call to investigators.  The Post found that over a four year period more than 1,000 nonprofit organizations reported on their annual Forms 990 that they had discoverd a "significant diversion" of assets arising from "theft, investment fraud, embezzlement and other unauthorized uses of funds."  As part of its investigative reporting, The Post, with the assistance of GuideStar, created a searchable database of nonprofits that have reported diversions.  The Post article lists numerous other nonprofit organizations, comprising public charities, trade associations, veterans' associations, and other tax-exempts, that have had discovered diversions and misappropriations of funds totalling in the millions; a truly disturbing revelation.

As Nonprofit Quarterly reported, much more exploration on this topic is needed including, but not limited to, internal financial control difficulties, challenges for smaller organizations, the frontline capabilities of state attorneys general, and the effectiveness of actions taken by affected organizations.  As NQ also concluded, Congress's review should include not only the source of these problems but also a focus on solutions.


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