Accounting Scam Embroils California Nonprofits

Two hundred small California charities have been bilked by another nonprofit, International Humanities Center, to whom they outsourced accounting and the processing of donations. Many groups are now unable to make payroll or continue their work.

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MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel. Hundreds of small U.S. charities say they've been bilked out of nearly a million dollars by another nonprofit. The International Humanities Center was based in Los Angeles and managed donations on behalf of other groups.

As NPR's Carrie Kahn reports, many who lost money say they can no longer pay staff or keep their doors open.

CARRIE KAHN, BYLINE: Henia Belalia helps run a Salt Lake City nonprofit called Peaceful Uprising.

HENIA BELALIA: We are focused on environment justice issues and social justice issues, fighting essentially the root causes of climate change.

KAHN: Belalia says it was early last year that her group set out to find a fiscal sponsor, someone who could accept donations and grants on its behalf. She says Peaceful Uprising is too small and doesn't have the expertise or the money to file for tax exempt nonprofit status.

Belalia says other activists recommended the International Humanities Center, IHC.

BELALIA: They were really excited about us coming onboard and were allegedly very supportive of what Peaceful Uprising was doing. It definitely began as a very good relationship.

KAHN: But Belalia says soon after communication was sporadic, and in December, her group and others working with IHC got a letter from its executive director, Steve Sugarman. He wrote that the center was in financial trouble, but not to worry.

The next month, Sugarman wrote another letter, saying the center was closing its doors. He added, quote, "I remain committed to the vision of advancing conscious evolution on this planet." There was no explanation about what happened to the money.

Belalia's group lost $88,000. She says she's devastated.

BELALIA: Especially when you are a small organization and you've put your trust in another organization that you were thinking is there for, you know, fighting for the greater good alongside you.

KAHN: It's not uncommon for small nonprofits to seek out a fiscal sponsor who'll handle donations and administrative responsibilities for a fee. The San Francisco Study Center has sponsored hundreds since 1975. Jeff Link heads the center, which also compiles a directory to help charities find fiscal sponsors. He says the practice is vital to keep small activists afloat.

JEFF LINK: Instead of putting money into the front office, they can put it into the frontlines of service.

KAHN: Link says what happened with IHC is terrible, but very unusual in the nonprofit profession.

Deena Metzger's group had nearly $19,000 banked with IHC and had worked with Sugarman for eight years. Metzger says her organization uses indigenous traditions and contemporary methods to teach and heal, so when she got wind of Sugarman's financial problems, she suggested to him that they use some of her methods to work things out.

DEENA METZGER: He did not respond to that call.

KAHN: Metzger says she is hurt by the loss, but finds comfort that she's not alone. And she's not. More than 200 nonprofits had their money tied up with Sugarman. Groups ranging from the Afghan Women's Mission, which lost $400,000, to the Southern California Bluebird Club, which is out $6,000.

IHC's website is no longer functioning. Sugarman did not respond to phone calls or emails. Two of the affected charities say they've been contacted by investigators with the California Attorney General's Office.

Henia Belalia says, despite losing so much money, her group will continue fighting against climate change.

BELALIA: This cannot deter us from doing what we do because I believe that what we're doing right now is the most important thing that we can be doing.

KAHN: Belalia says Peaceful Uprising has a new fiscal sponsor, one they picked with much more diligence. Carrie Kahn, NPR News.

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