March 10, 2008

Travel Reimbursement Scam Unraveled at JDRF

In the wake of the alleged theft of several hundred thousand dollars by two employees, the Juvenile Diabetes Research Foundation is faced with shoring up its image among donors.

Although declining to comment directly on the case after referring it to New York District Attorney Robert M. Morgenthau, the charity issued a statement defending its internal procedures. "The JDRF has a great track record of safeguarding the funds entrusted to us around the world," the statement read. "Issues like this do happen, but thanks to the controls we have in place they rarely happen and are always discovered."

The statement further said the foundation, based Manhattan's financial district, would seek full restitution of the missing money.

According to a story in the New York Times, which foundation officials privately confirmed as accurate, board member Gail Pressberg described how two employees managed to counterfeit travel receipts over a period of several years and pocket the money. The scheme unraveled in December, when foundation called some of the hotels as part of an audit and found that the stays had never happened. This led to the employees' termination.
The foundation spent $2.4 million on travel in 2006, according to its Form 990.

Barbara Thompson, the spokeswoman for the district attorney, said the matter had been referred to the office about two weeks ago. Beyond that, she declined to comment.

The fact that the scheme went on for several years is not necessarily an indicator of slack controls, said Frank Kurre, the national managing partner of the nonprofit practice at the accounting firm Grant Thornton. "When you have the collusion of two or more employees, you can still get around controls," he said.

However, he recommends that one way nonprofits can avoid the situation that hit the foundation is to route all travel bookings through an outside agency rather than letting employees or other people on the inside do it themselves. "That avoids the possibility of creating fake invoices and sending them in," he said.

In addition, he advocates that agencies perform background checks on potential hires, even though many former employers now decline to give references. "There is a lot of information in the public domain," he said, ticking off categories to check such as criminal records, significant lawsuits or liabilities and IRS liens.

Potential hires should be asked to sign off on a credit check. If someone has a bankruptcy in their background, for example, that should automatically disqualify them from a senior financial position, he said.

In an email sent to foundation employees on Dec. 12, foundation spokesman William Ahearn identified two employees who were dismissed in connection with the matter. Neither could be reached for comment.

In 2006, the foundation awarded $122 million in research grants out of its $196.2 million budget to seek a cure for Type 1 diabetes. This form of the disease often strikes children.

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This article is from NPT Weekly, a publication of The NonProfit Times.

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