Correction: At the end of the original post, we ran the Washington Post's list of local nonprofits reporting misappropriation of funds to the IRS. The Northern California Chapter of the U.S. Green Building Council appeared on the list. The group says it had no misappropriation of funds, and it did not report a misappropriation of funds. It reported the theft of some checks, but it says no money was lost. Its name has been removed from our list below.
Original post: An Oct. 26 investigation in the Washington Post on theft, fraud and embezzlement at nonprofits revealed huge losses by big and small nonprofits alike, across a range of services and missions. It also turned up nearly 50 local nonprofits that reported misappropriated funds, including Marin General Hospital, the Tides Foundation, Fort Mason Center and San Francisco Ballet. (See full list below.)
Since 2008, nonprofits have been required to report on federal Form 990 a "significant diversion" of assets totaling more than $250,000. The Post identified more than 1,000 nonprofits that reported diversions from 2008-2012, and while some involve legal exchanges, most are due to theft or embezzlement. Nonprofits are told to explain what happened on the form, but according to the Post, many provided few or no details, and many of these diversions have not been reported by the news media.
The amount of money involved is enormous. Said the Post:
The diversions drained hundreds of millions of dollars from institutions that are underwritten by public donations and government funds. Just 10 of the largest disclosures identified by The Post cited combined losses to nonprofit groups and their affiliates that potentially totaled more than a half-billion dollars.
The Tides Foundation, which makes grants to nonprofits working toward social change in the U.S. and abroad, explained what happened in March 2008 in its filing:
... Tides Foundation discovered that a long-time employee had diverted funds from Tides for personal use – approximately $45,000 per year for three years. This was accomplished through falsified documentation including falsified e-mails, invoices and progress reports from non-existent projects.
Marin General Hospital described in its filing how it fell victim in 2010:
... the Board of Directors of Marin General Hospital determined that the prior member of the organization, through its representatives, violated its fiduciary duty to Marin General Hospital by using its position of control to inappropriately divert assets totaling in excess of $100 million to its own accounts without the formal consent of the organization and without adequate consideration.
Joe Stephens, co-author of the Post story, was interviewed on "PBS News Hour" and talked about the Post's database of nonprofits that reported diversions. He said that just because a nonprofit has been victimized "doesn’t mean it’s a bad organization or they did anything wrong. But the experts say this should be a sign to donors, to supporters, to volunteers, if you see this on the form, go your group and say what happened, give us details and what have you done to make sure there is not a reoccurrence?"