Nonprofits keenly aware of money trail

Bills

In the shadow of two recent, yet-to-be-concluded cases of
suspected embezzlement, several leaders from well-known local
charitable organizations are clear how they’re making sure
donations land in the right hands
– not in members’ pockets – and why stricter, multi-layered
financial controls are more important than ever. Full article
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Today’s breaking news:
In the shadow of two recent, yet-to-be-concluded cases of suspected embezzlement, several leaders from well-known local charitable organizations are clear how they’re making sure donations land in the right hands – not in members’ pockets – and why stricter, multi-layered financial controls are more important than ever.

“When you’re in the nonprofit world, you have to answer to your donors,” said Donna Pray, executive director for local nonprofit stalwart Gilroy Foundation. “I’m probably more meticulous here than I am with my own checkbook.”

The Foundation was thrown into controversy after it pulled the plug on a $70,000 grant to fellow nonprofit South County Collaborative in May when the latter group’s leaders opted not to contact law enforcement over documented claims that Gilroy Unified School District Board trustee Francisco Dominguez embezzled more than $52,000 from the Collaborative while acting as a consultant.

Dominguez maintains the missing money was the result of a billing error. The Santa Clara County District Attorney’s Office is still looking into the matter as of Thursday. No charges against Dominguez have been filed, according to Deputy District Attorney John Chase.

Pray said Gilroy Foundation’s finances are audited once a month by local accountant John Blaettler, who told the Dispatch he resigned as treasurer of the South County Collaborative in March after leaders did not reach out to law enforcement regarding the suspected embezzlement.

“We were shocked that another nonprofit could be victimized,” Pray said. “We have all our gates properly closed, and we’re making sure that never happens here.”

In another financial fracas, the District Attorney’s office charged former Gilroy City Councilman and mayoral candidate Craig Gartman May 27 with felony grand theft for allegedly stealing more than $9,000 from a private Memorial Day Parade fund while acting as the group’s co-chairman from 2002 until 2008. The fund did not have a tax-exempt, 501(c)3 status while Gartman ran the parade. Gartman, who pleaded not guilty June 21, had complete control of the parade’s checkbook, according to court documents. His next court hearing is set for Aug. 19.

Regardless of the outcomes of those cases, local nonprofits should see them as a wake-up call, representatives from several groups said.

“If there’s any organization out there that is aware of the happenings in this area and they haven’t changed, they aren’t doing their due diligence,” said Kevin Heath, president of the Gilroy Arts Alliance. “That’s another chance for an organization to say, ‘Are we doing everything correctly?'”

Linda White, fundraising chair for the Gilroy Historical Society, said stories of other groups’ recent embezzlement accusations prompted her organization to reassure its 137 members their donations would end up where they were intended. She said the organization is determined to show it was operating “on the up and up.”

“The books are open. Anyone can come in and look at them,” White said.

The Society also included a section called “Financial Plain Speaking” in its June newsletter, which stated the organization files annual reports with the IRS, State Franchise Tax Board, State Attorney General’s Division of Charitable Trusts and the California Secretary of State.

“We know that our credibility as an organization depends on our honesty and transparency; nonprofit groups who depend on others for income must be held to a higher standard,” read an excerpt from the Historical Society’s newsletter. “Our financial records are open for inspection by members or donors, and we provide a financial report at our annual meeting. Members and donors are also welcome to attend our monthly board meetings and ask questions at any time.”

Eileen Cavallaro, the Society’s treasurer, said any expense check written for more than $100 requires two signatures – Cavallaro, president Connie Rogers, or, if one of them is absent, a member of the group’s board of directors.

“We’re not that big an organization,” Cavallaro said, adding that finances and “usually minimal purchases” are discussed at monthly board meetings.

There are a handful of simple measures groups can take to keep a diligent eye on finances, said Kurt Michielssen, who is a senior vice president at Santa Barbara Bank & Trust, Gilroy Economic Development Corporation board chairman, Rotary Club fundraising director and the Gilroy Chamber of Commerce’s 2010 Man of the Year recipient.

Organizations should insist that multiple members have access to group checkbooks or bank accounts, hold monthly financial status meetings and allow outside parties to regularly review and audit financial statements, Michielssen said.

“We have other people looking over our shoulders, if you will, to make sure it’s appropriate,” he said, referring to a bookkeeping service that reviews EDC expenses. “Nothing should be hidden.”

The Gilroy Arts Alliance makes similar attempts, Kevin Heath said, adding that two signatures are required for every expense check, and a group of four board members, including Heath, have signing power.

The group’s treasurer, Dia Hoshida, brings in a third-party accountant to check the figures each month, Heath said. He said members are encouraged to bring up any discrepancies with Hoshida or during monthly board meetings.

“We have a fiduciary responsibility that any money that comes into us is funneled to the correct direction. The Gilroy Arts Alliance has the most double and triple checks of any financial organization I’ve ever seen,” Heath said.

Other local groups, such as Gilroy’s Rotary Club, are members of a much larger, international web of nonprofits. Membership and fundraising efforts are part of a rewarding process, local Rotary President Deanna Franklin beamed, but with the enjoyment comes strict scrutiny. And rightfully so, Franklin said.

“You have to have the checks and balances in place. It’s the smart thing to do,” she said. “If you’re on a board, it’s your fiduciary responsibility. You have to be able to answer (financial questions) without batting an eye.”

Franklin said Gilroy Rotary’s finances are reviewed by independent accountant Paul Vanni, the group’s board of directors and an executive team, made up of Franklin, vice president Hamdy Abbass and secretary/treasurer Brad Nye.

“It’s pretty much an open book,” she said.

Franklin, who is a branch manager at Rabobank in Gilroy, said she felt her bank experience had come in handy.

“I want to see everything,” she said. “And we’re doing it legitimately.”

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