National Grant-Making Group Was Defrauded of $200,000 by Workers

At least two employees of the Council on Foundations, an organization of 1,750 grant makers, allegedly defrauded the group of an estimated $200,000 in a scheme that went on for two years, the organization said in a letter posted on its Web site today.

The council says that the employees, who worked in the organization’s technology department, used the group’s money to buy computers that they then resold for personal gain.

The council’s accounting department became suspicious in December after finding invoices for computers the organization was not using, said Janne Gallagher, the group’s senior vice president and general counsel. The organization brought in outside counsel and investigators to look into the matter. None of the employees involved in the alleged fraud now work there.

Ms. Gallagher said the council had alerted the Arlington County Police Department of the fraud and would be turning over the results of its investigation to the police department for prosecution.

She said she could not name the employees or specify how many people were involved other than confirming that more than one employee was involved. “We don’t want to jeopardize any law-enforcement actions that might be taken,” she said.

Stepping Up Inventories

Steve Gunderson, the council’s president, was traveling and could not be reached for comment.

In his letter to members of the council, he said the organization was taking steps to ensure that fraud couldn’t happen again. In 2009 the counsel laid off 16 percent of its employees because of the bad economy, and the letter said having a smaller staff meant that some practices had slipped through the cracks.

Ms. Gallagher said that the council had not done an inventory of its equipment in at least three years, for example, but that it would now begin to do inventories annually.

She would not comment on whether any other employees at the council beyond those directly involved in the fraud, might face any consequences for what happened.

Ms. Gallagher said it was important to note that the $200,000, while a significant amount of money, is a small part of the organization’s $15-million budget.

“I share the sentiment of staff here that we’re terribly disappointed that it happened and we’re committed to making sure it never happens again,” she said. “We just hope our members can learn some lessons from what happens to us.”

Pamela E. Davis, president of the Nonprofits Insurance Alliance Group, said the council made the right move in coming forward with news of the fraud.

“I really applaud them for that,” she said. “Frequently, [organizations] just dismiss the individuals and don’t prosecute, and that allows them to go elsewhere and be undetected.”