On Page 6 of the federal Form 990 that many large nonprofit groups file each year, a question asks: “Did the organization become aware during the year of a significant diversion of the organization’s assets?” A diversion is considered significant if it exceeds $250,000 or 5 percent of the organization’s receipts or assets. For many groups, this box is the place to report embezzlement and fraud. The Post’s study identified more than 1,000 organizations that have disclosed a diversion since 2008. Read related article.
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Nonprofits that disclose diversions are instructed to include an explanation on Schedule O of the disclosure form. The forms reveal a number of ways that assets were diverted — as well as lapses in disclosures.
Alliance for Excellent Education
With its investment in funds linked to Bernard L. Madoff’s securities business, the Alliance for Excellent Education reported that it had fallen victim to one of the largest financial schemes on record. Madoff pleaded guilty to fraud and was sentenced in 2009 to 150 years in prison.
In a statement to The Post, the alliance described the diversion as a “paper” loss on an initial investment of $3.45 million, much of which has been recovered. View disclosure form.
Council of State Administrators of Vocational Rehabilitation
Even if fraud was reported in a particular year, it may have begun years earlier. The council reported its discovery of employee embezzlement in its fiscal 2009 disclosure (filed in 2010), even though assets had been diverted since 2003. In 2010, a former administrative assistant for the council, Kymberli Rand of Brunswick, Md., pleaded guilty in federal court to wire fraud in the incident and was sentenced to 30 months in prison.
Other organizations reported details of one episode of embezzlement through multiple years of disclosure forms as internal investigations revealed more information. View disclosure form.
Virginia Scholastic Rowing Association
The association, which operates regattas for high school students, reported that its former treasurer had embezzled between $152,000 and $223,000 and that the association had received partial restitution. Association records indicate the organization discovered unexplained expenditures for car repairs, flowers, airfare, admission to Walt Disney World and Redskins tickets.
Lela W. West of Woodbridge pleaded guilty to embezzlement charges in Prince William County and in 2012 was sentenced to five years in prison, with all but eight days suspended. The association's president said the total lost may be higher than original estimates, perhaps as much as $500,000. View disclosure form.
American Board of Opticianry
Filing instructions direct nonprofits that have had diversions to explain the nature of the diversion and the “pertinent circumstances,” including amounts or property involved, and any corrective actions taken. Many organizations checked the box indicating they had diversions but provided few or no details. The American Board of Opticianry included only this “need explanation” note on its Schedule O.
A spokesman for the group said the omission appeared to be an oversight. In 2011, a former executive director of the organization, Hugh Michael Robey of Bowie, was sentenced to a year in prison for participating in a scheme that Fairfax prosecutors said took about $1.7 million from the nonprofit and a related association. View disclosure form.
The Post's analysis identified more than 1,000 nonprofits that had reported a diversion since 2008, most of them public charities, as defined by U.S. tax code.
Number of groups
Median reported tax year revenue
SOURCES: GuideStar, federal financial disclosures, staff reports.
A Washington Post analysis identified more than 1,000 nonprofit organizations that have reported a “significant diversion” of assets since 2008, when a question about such losses first began being phased in on federal Form 990 disclosure reports.