Three years ago, the Progressive Policy Institute realized that a senior manager had quietly used unauthorized checks, credit-card charges and cash withdrawals to drain about $100,000 from the Democratic think tank’s accounts, pushing the nonprofit group to the edge of insolvency, interviews and documents show.

Officials at the institute didn’t call police and didn’t alert donors, said Lindsay Mark Lewis, now executive director of the Washington-based organization. Instead, they took what charity governance specialists call a distressingly common approach for a nonprofit group: They agreed to forgo legal action in exchange for restitution.

“We had an agreement that as long as the payments were made, that we would not pursue anything else,” Lewis said.

The institute declined to publicly identify the manager. Elizabeth Kennedy, who was executive director in 2010, left about the time of the discovery, and the institute’s financial records state that she has since “repaid” tens of thousands of dollars to the institute. She declined to discuss the institute’s loss and, asked whether she had embezzled the money, said, “No comment.”

Since leaving the institute, Kennedy has gone on to work for nonprofit and political groups in Florida, serving as finance director at one, documents and interviews show.

Nonprofits report millions missing with little explanation

The institute’s loss was among more than 1,000 “significant diversions” of assets discovered during a Washington Post analysis of federal disclosure records filed by nonprofit groups across the country.

The Post’s analysis found that after such a discovery, some nonprofit groups issued public statements and some called in law enforcement. But many others mirrored the institute’s response, bypassing legal action in exchange for cash.

“A lot of organizations that have these problems shy away from prosecuting, because they don’t want the publicity and they don’t want donors to shy away from them,” said Chicago lawyer and charity consultant Jack B. Siegel. “Organizations look for every way possible to minimize the disclosure. It’s in no one’s interest at the charity to make it public.”

Charity fraud specialist Gary Snyder called public disclosure essential. “If people are allowed to walk away, they will just go somewhere else,” he said.

In the institute’s case, Lewis said the organization simply chose to focus on staying afloat and pursuing its policy goals.

In its federal filing, the think tank’s account of the loss was a terse, two-sentence reference in a lengthy document filed a year after the discovery, stating that an unnamed employee had embezzled “some” of its funds for personal use. Lewis said that until contacted by The Post, he did not realize that the institute’s accountants had included the reference and that the incident had not been made public elsewhere. The institute has since recovered all of the funds, he said.

Many of the diversions identified by The Post were described as acts of theft and fraud carried out by insiders, contractors and investment advisers. While the diversions totaled hundreds of millions of dollars, the newspaper’s investigation also found that many of the groups — like the institute — failed to divulge how much they had lost, even though federal filing instructions direct charities to disclose the amount of money or property involved.

Those findings, published last month, have spawned multiple state and federal inquiries. Sen. Charles E. Grassley (R-Iowa) has opened an investigation, and Sen. Tom Coburn (R-Okla.) asked the Government Accountability Office to look into the revelations.

The institute was far from alone in not reporting losses to law enforcement or filing suit.

AARP, the lobby for older Americans, reported that it lost $30,000 to an employee and $208,000 to a vendor. In a statement, AARP said that the employee “acknowledged her wrong doing without the need for lengthy legal proceedings” and that restitution was “the most prudent approach to meeting our fiduciary duty.”

Smaller groups took the same route, including the Mill Creek Athletic Association in suburban Atlanta, which operates youth sporting leagues and said it lost $128,000 to a former treasurer. President Kenneth Parker said association officials were concerned that the treasurer might “hit” another nonprofit group but “felt our duty was to our organization, and we were about to sink.”

At the Spa Creek Conservancy of Annapolis, President Amy Clements said the organization moved quickly when it discovered that an undisclosed amount of money was missing. She said the group consulted a lawyer, demanded payment from the person believed responsible — then said nothing publicly. Its disclosure report did not describe the loss or its scale.

“We definitely did not publicize it outside the board,” Clements said. “We have a very good reputation. We have grantors. We didn’t want anybody to be upset. . . . We took care of it on our own.”

Like Lewis, Clements said she had been unaware that accountants had checked a box on her group’s disclosure report revealing that there had been a diversion. “We thought we had successfully brushed that under the rug,” she said.

At Georgetown University, its disclosure report divulged that an unnamed administrator paid himself about $390,000 over four years from an account the university didn’t know existed. It said $14,500 in spousal travel expenses also were “paid in error.” The travel money has been repaid, the disclosure said, and the university has a “restitution agreement” to recover an unidentified portion of the remainder.

Prosecutors encouraged charity officials to take strong action.

“For this office to succeed in preventing serial embezzlements or misappropriations of charitable funds, it is imperative that charities report these matters to local authorities,” said the District’s attorney general, Irvin B. Nathan, whose office is looking into The Post’s findings.

Added Ronald C. Machen Jr., U.S. attorney for the District: “We understand the impulse to deal with these matters privately, but doing so is a great disservice to the broader public interest.”

Victim of opportunity

The Progressive Policy Institute, founded in 1989 and incorporated as the Third Way Foundation, describes itself as “an independent, innovative and high-impact D.C.-based think tank” and as “the original ‘idea mill’ for President Bill Clinton’s New Democrats.” It promotes a centrist approach and focuses on energy policy, competitiveness and medical innovation.

Lewis, a veteran Democratic fundraiser who was finance director for the Democratic National Committee in 2005-06, joined the institute in 2010 as director of development. He quickly landed some sizable donations and thought the future looked bright — until he picked up the phone one day in late 2010 and heard a manager at the institute’s bank.

“Our bank account was at zero,” Lewis recalled. “We were close to folding.”

He said a look at the organization’s records quickly confirmed that something was terribly wrong. Over the previous year or so, records showed, money had been flowing out in unexplained checks, credit-card charges and ATM transactions.

When confronted, the senior manager believed responsible readily acknowledged taking the money, Lewis said.

“We did not seek ex­cuses for the facts that we discovered, and she did not offer explanations, except to say it did happen,” Lewis said of the manager. “At that point, our goal was to be made whole and continue with our policy missions.”

Two people with knowledge of the matter identified Kennedy as the senior manager.

Lewis said the institute was a victim of opportunity: At the time of the alleged embezzlement, it was separating from the well-known Democratic Leadership Council, a related nonprofit group that handled many of the institute’s core functions and with which it once shared an office.

“Accounting had been done jointly,” Lewis said. “We didn’t have our systems up and running, and it didn’t cross folks’ minds at that point as something that needed to be watched.

“We were equally worried about finding new office space and hiring new staff.”

The senior manager believed responsible for the loss resigned immediately, in September 2010, Lewis said. An institute financial filing shows that the group stopped paying Kennedy that month, and it names her as having “repaid” the institute more than $54,000 that year. (Records for the following year are not yet publicly available.)

Federal Election Commission records show that after leaving the institute, Kennedy worked for a congressional campaign. Kennedy’s résumé, posted on a networking Web site, describes her as the campaign’s finance director and her responsibilities as having been to “eat, sleep, breathe money. Money ..... and money.”

After the unsuccessful campaign, Kennedy worked in 2012 as director of statewide compliance at a nonprofit political group, the organization confirmed. A nonprofit union local in Florida said she works there now, as political director.

Checks and balances

At the institute, the incident remained private until a year after the discovery, when officials there referred to it on Page 28 of its annual federal disclosure:

“During 2009, an employee embezzled some of the organization’s funds for personal use. A majority of the amount stolen was recovered from the employee in 2010 and 2011.”

Lewis said he did not know why the filing included no amount, as directed in federal filing instructions. An accounting firm produced the report, he said.

Asked whether the institute notified donors about the loss, Lewis said: “I would say no. . . . Our goal was to keep PPI going. . . . We did inform the board.”

In a subsequent e-mail, Lewis stressed that because of the repayment, ultimately “no donor contributions have/had been lost.”

Lewis said he has learned that checks and balances are key. “We put in some new oversight rules to make sure we’re not going to be in that position again,” he said, emphasizing that since the loss, the institute has “come a long way.”

Clements, the Spa Creek Conservancy president, said the advice of prosecutors struck home.

“I agree, it’s probably a really bad way to handle it,” she said. “In retrospect, certainly the right thing to do in this situation was not the thing we did at the conservancy. The right thing to do would have been to go to the police.

“It’s a terrible thing, because I would hate for someone to go to another nonprofit.”

Jennifer Jenkins contributed to this report.