Does California Need More Money? Or Do Organizations Need To Stop Stealing?
This week I saw a CNN article about how Students at the Albert Einstein College of Medicine in New York will receive free tuition after a 1 billion dollar donation from a former faculty member. Unfortunately, my next thought was, “Will they though?” And I will tell you why.
My skepticism is not unfounded, especially when we look closer to home, here in California. In the heart of our state, we know of the grim realities faced by the homeless, the addicted, the trafficked, the poor needing an education, struggling single parents, and the other vulnerable people of our state. We hear about the great work organizations are doing to advocate for them, and how we all know that helping them helps the community. But Californians are experiencing burnout and losing empathy, while blaming the wrong people.
In recent years, the state has earmarked billions — yes, billions — of dollars to combat homelessness. The 2021–22 state budget alone allocated a staggering $7.2 billion towards this cause. Yet, paradoxically, the homeless population continues to swell, with an estimated 172,000 individuals statewide lacking stable shelter. This equates to a mind-boggling expenditure of nearly $42,000 per homeless person. So we start to assume that with all this help being offered, people are not seizing the opportunities given to them, or not accepting the help. But are they really getting the help to begin with?
Consider the scene in Santa Rosa, CA, where a volunteer-run initiative sprang to life from the urgent need for winter shelter space. Two compassionate souls set up a humble trailer, offering warmth, hot coffee, and nourishment to the homeless. Yet, shockingly, local nonprofits met this act of compassion with unease and displeasure. Why, one might wonder, would organizations designed to aid the needy oppose such grassroots efforts?
The discomfort deepened with the closure of Social Advocates for Youth, also in Santa Rosa CA, a vital program catering to homeless youth, trafficking survivors, and those transitioning from foster care. Despite an annual influx of at least $10 million in funding, the program shuttered its doors, leaving a trail of confusion and questions in its wake.
According to the State Attorney General, In January 2021, there were over 118,000 charitable organizations registered with the Attorney General’s Registry of Charitable Trusts. As of June 2019, these registered charities reported total revenues of over $293 billion and total assets of over $854 billion.
So, where does the system falter? Why, amidst this sea of funding, do we witness the closure of essential programs and the rise of discontent within the nonprofit realm? Why is the problem not getting better? Two glaring reasons, among a myriad of others, emerge. Spending of this magnitude is sufficient if it is applied effectively. The worsening crisis indicates that something is off with how the state spends its resources.
Firstly, there exists what can be termed as the “Homeless Industrial Complex.” This insidious network often thrives on the perpetual cycle of need. Grassroots initiatives and volunteer-led endeavors pose a threat to this status quo. After all, if individuals find solace and aid outside the traditional channels, the flow of government funds to established organizations might dwindle — a prospect met with resistance and opposition. I have covered this and will attach a link.
But the other is the theft of our tax dollars. California does not have the worst-in-the-nation homeless crisis because it spends too little. It fails to hold recipients accountable. Take, for instance, the heartbreaking case of Social Advocates for Youth, with a yearly budget of millions. It was revealed that a director had siphoned off funds, embezzling thousands meant for the very youths the program aimed to serve. This betrayal not only robbed the vulnerable of essential resources but eroded trust in the nonprofit ecosystem. When she misused the organization’s funds, she was effectively stealing from youth, what could have been a hot meal for a youth, could have taken a youth off the streets, and could have bought clothes for a trafficked victim. That woman is now the program director of another nonprofit in the same county specializing in “Street Medicine and Outreach, Housing and Eviction Diversion.”
Sonoma County itself faced scrutiny when the Department of Health Services contracted a for-profit company, DEMA, to manage homelessness. The subsequent billing of $26 million raised eyebrows, especially when it was discovered by a local newspaper, the Press Democrat, that $800,000 was billed for staff positions that seemed to exist in name only. Despite these revelations, the county opted to renew the contract for an additional $1.1 million, pending investigation — a move that raises serious questions about fiscal responsibility.
In the Summer of 2023, a Vallejo CA woman was charged for allegedly embezzling hundreds of thousands of dollars from a San Francisco nonprofit that provided academic support and employment assistance to students in the Sunnydale Visitacion Valley neighborhoods and was indicted for stealing over $250,000 from the nonprofit for nearly four years, and now it has been shut down. Also in the Summer of 2023, A former head of the Junior 49ers youth football and cheerleading team in San Francisco was indicted on charges that include taking $256,000 from the nonprofit organization that financially supported the team. In December 2023, A former Goodwill Sacramento CEO was arrested and accused of stealing more than $1 million from the nonprofit organization. Also in December 2023, The former president and CEO of a Los Angeles-based anti-poverty nonprofit agency was sentenced to six months in federal prison for embezzling money from the nonprofit for his benefit, failing to report these funds on his tax returns, and intentionally misapplying more than $600,000 in grant money to pay for unauthorized expenses, before he was caught in 2019. In November 2019, two months later, they declared bankruptcy.
It is not only California. In 2022, the Minnesota nonprofit Feeding Our Future was Caught $48 million of federal funding on luxurious trips, fancy mansions, and other personal costs. 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. There are additionally hundreds of instances of people pilfering a few thousand here and a few thousand there, such as applying for PPP loans even though they have no employees, or creating shell nonprofits before joining boards and appointing money to themselves.
From Vallejo to San Francisco, from Sacramento to Los Angeles, headlines tell of individuals entrusted with nonprofit funds who succumbed to greed. Millions vanished into the abyss of embezzlement, leaving once-vital organizations in shambles. According to a 2017, study by the Association of Certified Fraud Examiners, “the typical nonprofit organization loses an estimated 5 percent of its annual revenue to fraud.” Most commonly from inflated expenses, ghost employees, or fictitious deliveries/services. And it all adds up. I work for one NGO and I volunteer for another. This theft and dishonesty puts those of us doing honest work at risk.
An overwhelming amount of NGOs lack policies and procedures that govern how money is tracked, receipted, deposited, and invested, which includes the oversight of basic accounting practices such as bank statement review and reconciliation, audit practice, and correct and timely financial statements. There is a lack of standards and procedures in hiring and employment tending to rely on the “good ole boy/girl network,” hiring those who do not have experience, expertise, or understanding of their roles and responsibilities. There also exists a culture amongst the public that the passion for the mission equals goodness, honesty, and kindness.
We also have a legal system that does not always have the resources to support the investigation or prosecution of theft within nonprofits, and it ends up being done by journalists, like the Press Democrat with DEMA. Many times, investigative offices find that the funds reported stolen were not enough to pursue an investigation, because it may not warrant the paperwork or the costs associated with the investigation. Especially if the money is gone and they will not get it back.
We as taxpayers, need to understand the true cost of NGO theft and realize it is not the fault of the vulnerable population that needs help. We need to demand accountability for our money. Firstly, stringent oversight and regular audits must become the norm, not the exception. Funds meant for the marginalized must be shielded from those who seek to exploit them for personal gain. Secondly, a cultural shift is needed within the nonprofit sector. Grassroots initiatives should be embraced as allies, not adversaries. Collaboration, rather than competition for funds, can lead to a more efficient and impactful ecosystem of care. Lastly, public awareness and engagement are paramount. Voters and donors must demand transparency and results from the organizations they support. The narrative of wasted funds and unmet promises must give way to stories of tangible change and upliftment.
As we navigate the complexities and the needs of those in our society who are most vulnerable, let us remember the faces behind the statistics — the individuals who rely on these nonprofits for hope. It is our collective responsibility to ensure that every dollar spent serves its intended purpose — to offer solace, support, and a pathway to a brighter tomorrow for those who need it most.
The road ahead may be challenging, but with integrity and commitment, we can steer towards a nonprofit sector that truly uplifts those in need. Only then can we ensure that the Albert Einstein College of Medicine students, and countless others, truly benefit from the generosity meant for them.
Note: The Homeless Industrial Complex article referenced in this piece can be found here: https://medium.com/@empoweredbymegan/why-we-donate-to-the-homeless-but-to-house-them-9c6f52d6b7ab
