By Don Keelan
Once again, two nonprofits, one in South Royalton, Vermont and the other across the border in Lebanon, New Hampshire, have fallen victim to embezzlement.
ValleyNet, a nonprofit bringing broadband to central and eastern Vermont communities, was victimized by the theft of $560,000. The loss was reported last year, and it took until recently to locate the alleged embezzler, hiding over eleven hundred miles away in Brunswick, Georgia.
Don Keelan
The alleged embezzler of the Lebanon nonprofit, Listen Community Services, is being charged with stealing $230,000, and not unlike the ValleyNet thief, it was also done over several years.
I wonder if any of these stolen funds were covered by insurance, which, if not the case, represents sizeable losses to the nonprofits. ValleyNet did win a judgment against the theft, but it remains doubtful if it collects. An even more significant loss is the loss of faith and trust placed in the hands of the 72-year-old ValleyNet accountant and the 42-year-old executive director of Listen Community Services.
And therein lies part of the problem regarding embezzlement, especially here in Vermont, where we place so much trust in those accountable for the funds of the state’s 6,000-plus nonprofit entities.
There is absolutely nothing wrong with placing trust in those who are the custodian of nonprofit funds, but it must come with verification. As the experts have consistently reminded us, trust is an emotion and by no means an internal control over the financial affairs of an organization.
While studying the Vermont embezzlement causes with the State’s former State Auditor, Tom Salmon, it was discovered that in countless cases of municipal organizations, the presence of trust and only trust provided the opportunity for embezzlement. What had occurred in Ira, Vermont still remains a textbook case.
The over-reliance on trust is not the only barometer; there are others. One can spot an organization vulnerable to embezzlement.
For many embezzlers, it is an addiction fed with stolen funds. The addiction can satisfy the need to gamble, to meet an illegal drug habit, or convicted embezzlers often give the run-up of debt due to uncontrolled spending as to why they raided an organization.
There is a graphic often used to describe embezzlement: the Triangle of Embezzlement and its three components. At the apex, ‘Opportunity’ followed at the left and right base with ‘Perceived Pressure’ and ‘Rationalization.’
Unfortunately, Vermont nonprofits are an oasis for fraudsters seeking to embezzle funds. Not only is there so much trust, but there aren’t enough internal financial controls or highly trained financial folks on staff. Engaging in a costly annual audit is just out of the question for many.
The ‘Pressure’ component truly exists. Most embezzlers are first-time fraudsters and have to satisfy an addiction. The element of ‘Rationalization’ is “no one will miss the money, the organization has too much money, the organization can ask their large donors to make up the stolen funds, or it is covered by insurance.”
One area of little progress in curtailing embezzlement is the judicial system. Embezzlement in Vermont has a 10-year maximum sentence if found guilty, but rarely will anyone ever serve more than a few years. Getting the offender to make restitution is almost impossible.
No one wants to see a 72-year-old or, for that matter, a 42-year-old alleged embezzler serve ten years in prison. This can be avoided if organizations pay closer attention to their financial affairs and apply the Triangle of Fraud to their organization.
Don Keelan writes a bi-weekly column and lives in Arlington, Vermont.
The “over-reliance on trust”…is a problem in Vermont…in private business, in non-profits and especially in the social services. Our homeless services system has been based on the honor system, and as a result has grown to make Vermont second only to California in the number of “unhoused” per-capita. If you make something of value, such as housing available for free based only on a stated claim, we should not be surprised that a lot of folks will take advantage. Fraud is a form of embezzlement. It is government in that case that is failing to provide the accountability, and it is the taxpaying public who are being ripped off. We even have professional “advocates” such as Brenda Siegel who promote expanding the system and making it less accountable.
As far as business embezzlement, it is well known that in the Vermont justice system:
-IF you get caught, you MAY have to pay back, SOME of the money.
This model, well it happens every day, in another organization. It’s called VERMONT Government. The whole we don’t need it we can be trusted could not have a bigger more bold answer every day, every year than Montpelier.
Eb-5 is just the tip of the iceberg, and nobody in government was held liable for allowing and even coordinating this scam of the century.
“They won’t miss it” the statement said by every politician.
It’s not percieved pressure they feel it’s real, it’s cancel culture, it’s stated in questionnaire, if you don’t follow our mandate perfectly no money for you and we’ll primary you.
And we. Wonder why we have no real ethics violations? It’s normal business and really huge in you face accepted by the masses corruption.
Herein lies the problem:
“….we place so much trust in those accountable for the funds of the state’s 6,000-plus nonprofit entities.”
For a State of 640,00 people there are 6,000 “non-profit” groups ???? I’d say a majority are political & agenda motivated? Which means many are started, funded and run by…Liberal, Dem, Progressives? And there are now accounting and fraud issues in some? Just goes to show ya’….Liberals can’t run things well. Look at every major City or State controlled by democrats. To a “T” they are all a fiscal, crime ridden, mess.
You are right on.
It get’s worse….if there are over 6,000 supposed “non profits”….they are exempt from paying state taxes as a business entity. They skirt the system. But their whole purpose is not to be “non profit charitable”…many are just Saul Alinsky style political and agenda activists. Their tax exemption as a 501c-3 should be removed….
It seems to me Jeffrey that the next logical article should be about what is going on to attract that many people into creating “Non-Profits” ???
I appears having a non-profit might be more profitable than a For Profit in Vermont.
Which you’d think would be pretty telling about the state of the business climate there.
I’d be willing to bet that many Non-Profits create meaningless, do nothing jobs, for all the progressive-liberal college graduates with worthless degrees, who now desperately want the Biden administration to ‘forgive’ their college loans. I’ve paid for my kids’ college educations by working and saving, as have many Vermonters. The last thing I want to do is pay for the nonsensical degrees of irresponsible youths who are still living with their well-to-do parents…
I personally know of en employee @ the a fore mentioned “non-profit”, She has two college degrees, on in economics and another in computer systems,.
Her starting wages were $23/hr and fought like heck to get a raise(10%) after a year of promises. She travels from White River to South Royalton daily, because 1)her wages allow her accommodations with 3 others in a drafty century old rental house,(2 there is no affordable housing nor mass transit near by. A comparable job in her capacity (not a non-profit) offers starting wages @$40/hr, but that would be in a metro area out of state. She was born , raised and educated in VT schools , single and 33. Did I mention, she stayed up one night at the office to try and catch the thieves who stole the cats. from their fleet of trucks?
Most of the nonprofits are marxist organizations used to funnel money. They are mostly Astro Turf, think 2015 suddenly Rights and Democracy, think BLM, think most all the environ,metal, think any “sensible gun use organization, VERMONT is filled with political operatives hiding behind non profits.
VNRC, largest most powerful lobby group in the state, hiding behind the curtain so non-profit.
Planned parenthood, again a political powerhouse, not so much for abortion but the agenda 2030 and destruction of the family,,which is why they got the law through that has nothing to do with abortion and everything to do with allowing the state control of sexualizing our children and giving the state power to administer puberty blockers and medical sex change surgery without the consent of their parents. 50% of VERMONT births remain a steady unplanned, clearly they are,failing on that mission! Yet you can donate as a nonprofit and they funnel money to their PAC which funds the entire Democratic Party of VERMONT!
VPIRG is another one……we got a lot of them!