Question
1:
Read the article below on Tumbleweed, an Arizona non-profit
that went bankrupt. Review its website and reference its 2017, 2016 and 2015
Forms 990 available at the ProPublica link below. Draw on the information in
the article, the NFPs website and the 990s to inform your discussion board
post.
Articles:
https://www.azcentral.com/story/news/local/phoenix/2017/01/05/tumbleweed-non-profit-homeless-youth-goes-bankrupt/95769498/
Website:
http://www.tumbleweed.org
(much of the web
content is still available, although some links are now disabled)
ProPublica Link for 990s:
https://projects.propublica.org/nonprofits/organizations/237284153
In particular, reference the full text filing for the year
ending June 30, 2017 (for the calendar year, or tax year beginning 07/01/16-06/30/2017).
Hint: Schedule N Liquidation, Termination, Dissolution, or Significant
Disposition of Assets explains the bankruptcy.
Also pay close attention to Part 1 and Part IX of Tumbleweeds 990 for
the year ending June 30, 2017.
Address in your posting at least five of the numbered
questions below from Part 1 and five of the numbered questions below from Part
II. Your total discussion board post should address at least ten questions.
Additional questions asked after the number are only there to help you reflect
more and are not considered separate questions.
Part 1 (address at least 5):
Why did Tumbleweed file for Chapter 11? What were some of
the organizational and accounting issues that contributed to the filing?
What was Tumbleweeds primary source of revenue?
What were Tumbleweeds main expenses?
What assets was Tumbleweed able to transfer to UMOM?
How much were these assets valued?
Did any of the officers, directors, trustees or key
employees of Tumbleweed transfer to UMOM?
Was Tumbleweed required to notify the Attorney General of
Arizona of its intent to dissolve?
Did Tumbleweed discharge or pay all its liabilities in
accordance with state laws?
Analyze Part IX of the 990 (Statement of Functional
Expenses). Considering Tumbleweeds mission and operations, what expenses seem
inflated? What expenses might be too low for an organization of Tumbleweeds
size?
How do the expenses listed on the 990 correspond to the
expenses as explained on the website?
Part 2
(address at least 5):
How might Tumbleweed have avoided bankruptcy?
Review the donation section on Tumbleweeds website. If you
were a donor viewing this website a year or two before the bankruptcy (without
knowing if bankruptcy was coming) would you donate to Tumbleweed? Why or why
not?
Review the program section of Tumbleweeds website. If you
were a donor viewing this website a year or two before the bankruptcy (without
knowing if bankruptcy was coming) would you donate to Tumbleweed? Why or why
not?
Review the Organizational pages of Tumbleweeds website. How
would you characterize their executive team and senior management team?
How would you characterize their accounting staff?
Do you think Tumbleweed could have avoided bankruptcy by
cutting expenses or do you think the problem was larger than expenses?
What is your opinion of the Tumble tees program? Do you
think this was profitable based on the information available?
Your initial, an individual posting should contain
thoughtful and meaningful commentary and be no fewer than two paragraphs in
length. Your responses to your classmates should also be at least two
paragraphs. Your performance will be assessed based on the quality of your
initial post as well as your responses to others. Satisfactory posts
demonstrate a clear understanding of the topic and the related required course
material. Excellent posts show intellectual curiosity about the topic,
reference outside sources and examples, and include additional analyses of
relevant financial information such as audited financial statements or the IRS
Form 990. Exemplary posts may also include thoughts on the strategy, decision
making and the long-term financial picture of the NFPs examined.
========================================================
Question
2
Background: Asset misappropriation is one of the common
types of non-profit fraud. Andrew Liersch led the Santa Clara County Branch of
Goodwill Industries from 1976 to 1993. By all accounts, he was an esteemed
leader. He was a member of numerous community and church organizations and a
family man. However, between 1979 and 1997 Liersch and his associates,
including a group of Goodwill store managers, took the most valuable items
community members donated to Goodwill, sold the items for their own profit, and
deposited the illicit proceeds into bank accounts in Austria, Switzerland and
the Isle of Man. Liersch used his control and intimate knowledge of the NFPs
workings to hide the conspiracy. He even used Goodwill trucks to transport the
skimmed donations out for resale and charged the expense to Goodwill.
The scheme operated in plain sight: the skimmed donations
were loaded and transported in full view of employees and customers. Liersch
also regularly lied to the Board of Directors. He was also well known for his
uncanny ability to match revenues to projections. One prosecutor noted, He
would project a $10 million budget for the year and come within $38 of that.
No one within Goodwill detected the scheme. It was only uncovered when a
co-conspirator blew the whistle. Before he could be apprehended by authorities,
Liersch fled to Guatemala where he lived for years before being expelled from
the Central American country in 2003. Upon his return to the United States, he
was arrested on charges of money laundering and wire fraud. It is estimated the
fraud cost the charity $26 million.
Read the article:
https://www.latimes.com/archives/la-xpm-2003-may-29-me-goodwill29-story.html
Optional
Reading:
ACFE Report on Fraud
in Nonprofits:
https://www.acfe.com/report-to-the-nations/2020/docs/infographic-pdfs/Fraud%20in%20Nonprofits.pdf
Protect Your Nonprofit From Occupational Fraud Threats
Note that the Santa Clara County Branch of Goodwill was
reorganized and is now part Goodwill of Silicon Valley. Review the Goodwill of
Silicon Valley website: https://goodwillsv.org/ and its Charity Navigator Page.
Note that Goodwill of Silicon Valley now has a four-star rating on Charity
Navigator.
Address in your discussion board at least five of the
questions below. Additional questions asked after the number are only there to
help you reflect more and are not considered separate questions.
Why do you think no one reported Liersch and his associates?
In reviewing the Goodwill of Silicon Valley website what
resources does the NFP now have for reporting potential fraud?
How has Goodwill of Silicon Valley committed to
transparency?
Describe the Senior Leadership team of Goodwill Silicon
Valley. Do you think this team might have detected Liersch and associates
fraud?
Review the audited financial statements posted on the
Goodwill of Silicon Valley website. According to the financial statements, how
are Goodwills inventories valued?
Review the annual report posted on the Goodwill of Silicon
Valley website with attention to the employee profiles. What are some things
that are mentioned in these profiles that may make the NFP vulnerable to future
fraud? What steps is the organization taking to address these risks?
What are the main factors that account for Goodwill of
Silicon Valleys four-star rating on Charity Navigator?
How could Goodwill of Silicon Valley further bolster its
rating on Charity Navigator?
How far does Charity Navigator look back to research the
diversion of assets? Do you think this is far enough?
If an employee wanted to commit the same fraud now that
Liersch did so many years ago, do you think it would be possible? What would be
the main obstacles to committing the fraud now?
Knowing what happened at Goodwill in the past and reviewing
the organization now, would you feel comfortable donating $100,000 of designer
clothes, jewelry, and handbags to Goodwill of Silicon Valley by dropping them
off at the location?
Your initial, an individual posting should contain
thoughtful and meaningful commentary and be no fewer than two paragraphs in
length. Your responses to your classmates should also be at least two
paragraphs. Your performance will be assessed based on the quality of your
initial post as well as your responses to others. Satisfactory posts
demonstrate a clear understanding of the topic and the related required course
material. Excellent posts show intellectual curiosity about the topic,
reference outside sources and examples, and include additional analyses of
relevant financial information such as audited financial statements or the IRS
Form 990. Exemplary posts may also include thoughts on the strategy, decision
making and the long-term financial picture of the NFPs examined.
