City Ramped Up Vetting of Large Nonprofits in 2005

In 2005, Michael Bloomberg’s administration created a new level of scrutiny for nonprofits that received large amounts of public money.

This doesn’t apply directly to today’s news, because these measures wouldn’t have detected fraud on such a small scale. But it does seem to indicate, at least, that the administration was aware that the system is susceptible to the kind of abuse that Kendall Stewart’s staff allegedly carried out.

From the City Limits article by Karen Lowe:

The Rosen, Gonzalez and McLaughlin cases, all of which DOI investigated, convinced Gill Hearn by 2005 of the need for a new Nonprofit Vendor Fraud Unit, which by last year was staffed with a handful of experienced accountants, forensic auditors and white-collar crime investigators. DOI Associate Commissioner Richard Krause, a former financial fraud investigator in the U.S. Attorney’s Office for the Southern District, and Chief Investigative Auditor Ivette Morales, a former financial services manager at Kroll, head up the unit, with help from – among others – the city’s inspector general for social services, Pat Russo, who served as state welfare deputy inspector general under Gov. George Pataki. (Each of the 45 city agencies has an inspector general keeping watch.)

[skip]

Indeed, the case of Charles Rosen – a DOI investigation into fraud at the Gloria Wise Boys and Girls Club in the Bronx, of which he was executive director – resulted in DOI including recommendations for better nonprofit internal governance in its Sept. 2006 findings report, which also announced that through a negotiated settlement the city would be reimbursed for $625,000 that was stolen or misused.

[skip]

The Gloria Wise case also was catalyst for creation of the Capacity Building and Oversight unit in the Mayor’s Office of Contract Services (MOCS) says assistant director for CBO Jenny Walty. Freshly minted this fall by MOCS chief Simpson, CBO is launching a “Not-for-Profit Vendor Review Program” to learn more about nonprofits’ financial practices – and tighten them up where needed. Of the 800 nonprofit vendors holding human services contracts worth at least $1 million (in aggregate, if not alone), 50 will soon receive a four-page questionnaire asking questions about financial controls, board structure and governance, and executive compensation. The four-page Not-for-Profit Vendor Review Report also asks for 15 attachments, such as audited financial statements, bylaws and an organizational chart.

City Ramped Up Vetting of Large Nonprofits in 2005