Help. I am an employee in a California non-profit whose management is rumored to be embezzling money. In two years we have had over seven CFOs/controllers; we can't be audited because our books are intentionally divided among dozens of programs; we have a 90% yearly turn-over of management except for the top executive; the CEO blatantly violates our own policies by hiring family members to be executive assistants; the board meetings are held in strict secrecy; the board members are personal friends of the CEO; and no one has ever seen an agency-wide budget, yearly summary, etc. In short... we are in a mess! How does a little guy employee even begin to make a difference/ask for some accountability from upper management? Are there non-profit watch-dog agencies? Anybody been in a similar situation?
—– Posted anonymously to a nonprofit discussion board
The topic of how to deal with suspicions of wrongdoing in nonprofit organizations (signs of mismanagement, improper payments, insider self-dealing, conflict of interest, etc.) comes up frequently. This page includes two bits of advice on how to approach that problem: in the first case, the advice assumes that wrongdoing is occurring; the second offers more general advice for anyone who thinks there might be someting amiss.
Note: There's a discussion of the special problems that arise out of fraud or abuse in fundraising on the Abuses in fundraising page.
If you are seriously interested in taking action to change the situation you need to treat it very carefully. There are considerable personal risks, even if you are right that outrageous misbehavior is occurring. The risks are, of course, greater if your impressions turn out to be wrong, or cannot be substantiated.
As a protective policy, you should be very careful about saying anything in public that might damage the reputation of the organization or people who work there. This caution should include avoiding making any kind of damaging remarks in email or elsewhere online, since it is likely that someone who knows you can infer the identity of the organization you are talking about. If that person doesn't share your view of the situation, you risk both personal and legal challenges that at best would be time consuming and distracting and at worst might be personally devastating.
That said, there are still things you can do.
The first is to assemble whatever information you can get from official sources. Registered charities must file reports with both the federal government and (in most states, including California) local authorities.
The federal report is called Form 990. It is due each year on the 15th day of the fifth month after the end of the organization's fiscal year (extensions are allowed). Effective June 8, 1999, new regulations govern public access to copies of this form. The IRS offers summary of these regulations and other helpful information at http://www.irs.gov/charities/charitable/article/0,,id=182722,00.html
Basically, these rules mean that anyone can get copies of three recent years of the Form 990 for any recognized exempt organization. Note that the organization is not allowed to demand any information from the person making the request and (of course) it is not necessary that you ask for it yourself. Anyone who wants to remain anonymous can get help from a friend who won't be known to the people at the agency in question.
There are penalties for failing to follow these requirements, and the IRS will back up members of the public when resistance is reported.
There are state reports required as well. Usually there is an "annual report" to corporations officials which provides limited information about the operations of the organization and "campaign reports" and "registrations" required by charities regulators from any organization that does fund-raising from the general public. There is a list of these state charity officials online at http://www.nasconet.org/agencies
The second step will be to figure out what to do next. It is unlikely that any public reports will contain obvious evidence of misfeasance. You will still be interested in them for two reasons. First of all, failure to file them is itself a problem. If you find that they are incomplete or nonexistent, it may be possible to get officials to launch an investigation of the organization based on that fact alone. Secondly, if they contain information that is easily demonstrated to be false or misleading, that too is a good starting point for calling for official investigation. As an insider in the organization, you may have access to documents that are inconsistent with the filed reports. Bringing them to the attention of regulators would be easier than trying to document on your own the sorts of misbehavior you describe.
The state attorney general's office (See help the AG below) usually has general oversight responsibility over nonprofit corporations.
The AG is unlikely to be willing to intervene in an internal fight within an organization, though. So you need to be able to demonstrate that more is at stake than a disagreement about sound business practices or agency direction.
Also, you need not take these steps yourself. It may be more prudent, and more effective, to have someone who has no direct connection to the issue work with you to collect the information and evaluate what you find. Complaints about the behavior of nonprofit organizations do not, in fact, rank high on the list of concerns of state and federal officials. They are particularly cautious about becoming involved in internal squabbling; you can protect yourself and bolster your case by not getting directly involved.
Dave Horn, who was then an Assistant Attorney General in the Consumer Protection Division of the Office of the Attorney General for Washington State, wrote this advice about how to help the attorney general approach a possible case of fraud or abuse in a nonprofit.
All of us appreciate it when members of the public bring suspicious or unlawful activity to our attention. If you do so, here are some tips for making your complaint effective:
(The author added at the end of his message: "Speaking for myself and not necessarily the attorney general of Washington.")