Unusually Large Charity Fraud—in Alaska!

Alaskans are unusually generous—or there's something else going on—for an embezzler to make off with $75,000 from local chapters of two name-brand charities. 

A Department of Justice press release reported on the sentencing of Tequisha Johnson for forgery and computer fraud against Easter Seals and Salvation Army.  Earlier this year, a press release from the FBI and a story in the Juneau Empire reported on the arrest of Ms. Johnson for making unauthorized fund transfers of $29,250 from Easter Seals and forging checks of approximately $45,000 from the Salvation Army.  Apparently Ms. Johnson had moved on to Easter Seals through a temp agency after working for Salvation Army (though it's not definite that fraud had come to light at that point).  Her versatility is impressive—able to engage in high-tech fraud with fund transfers and old fashioned low-tech check forgery with equal ease. 

What surprised me was that she was able to take nearly $30,000 in the period from November 2006 to March 2007.  I didn't think Easter Seals raised that kind of money in their local offices.  And they don't.  The Form 990 of Easter Seals Alaska (EIN 92-0018031 Form 990) shows just $32,567 in private contributions in their fiscal year ended August 31, 2006.  But there is also a $35,766 government grant and $2,087,561 in program fees (which I'll guess represent government contracts, directly or as a subcontractor). 

The program services section (Part III of the Form 990, page 3) indicates that Easter Seals provides respite and chore services for approximately 50-100 elderly clients (apparently they are hard to count more precisely) and day care for an unspecified number of low-income individuals.  The organization employs 120 (Line 90b) with payroll of just under $2 million, which works out to an average pay of under $20,000 a year.

With the program service income, there's plenty of money in this operation to divert.  On the oversight side, among the officers and key employees we see a chairperson, Tonya Rollison, with listed compensation of $145,000 and in schedule A of other highly compensated employees we see an executive director, Vilma Gutierrez-Osborne, also at $145,000 and two accountants at about $50,000 each. 

I suspect that the chair doesn't actually receive a salary, the salary for the ED was erroneously entered on the wrong line, as Ms. Gutierrez-Osborne also appears on the list of officers and key employees with no salary.  It's just another instance of sloppiness in preparation of the Form 990.  And as this fraud shows, the sloppiness doesn't stop there. 

My guess here (which doesn't require great insight) is that the fiscal oversight is lacking.  I think an organization with $2 million in service revenue is big enough to require more than just accountants, but it's still so small that it can't really afford a full fledged financial officer.  The $2 million to $5 million scale is very awkward in this respect, and unfortunately there are many thousands of charities that fall in this range.

Sorry I can't do the same kind of analysis for the Salvation Army, which, of course, is exempt from filing Form 990 because it's considered a church, even though it is often engaged in pretty much the same kind of social services, often under government contracts. 

Comments

[Walter]

I am going to put a link to this site on akweb.org if that's okay.
Walter

[charitywatching]

Question: If a real person posts that they have been "head" of bogus charities in their biographical information on the internet, what do you think their intention is??