February 19, 2019
Somerville Homeless Coalition Says Former COO Stole $108K

January 28, 2018 — The Somerville Homeless Coalition, a nonprofit that helps homeless and near-homeless families and individuals in the city and surrounding towns access and maintain safe, affordable, permanent housing, disclosed that its former chief operations officer allegedly embezzled $108,000 by padding his paycheck and charging personal expenses to the organization's credit card.

The Somerville Homeless Coalition (SHC) said it fired Warren McManus, the COO, after it discovered the theft in 2015, according to a report published today in The Boston Globe.

At the time, SHC reported the matter to the U.S. Department of Housing and Urban Development, a major provider of funds to the nonprofit, which told him they would inform appropriate officails, according to The Globe.

SHC in March 2016 wrote to donors, informing them of "financial misconduct" on the part of an unnamed employee, but did not report the matter to Somerville police, The Globe reported.

Today's published article is the first public disclosure of the allegations.

“The whole thing has been a nightmare,” Mark Alston-Follansbee, executive director SHC, quoted in The Globe. “The money he stole from us could have prevented 100 families from going homeless.”

McManus, who worked for SHC for 20 years and now lives in upstate New York, reportedly told The Globe that he worked seven days a week, took only three holidays annually, and paid himself extra for the time he earned, but lost track of his hours.

In addition to the funds he allegedly misappropriated, McManus reportedly admitted he also added his adult son to SHC's health insurance plan, although he apparently was not eligible to be covered.

"McManus said he met with federal investigators last Thursday, signed a statement concurring with several allegations, and agreed to pay back $61,854," The Globe reported.

McManus, according to the published report, has not "seen any allegations that he misused the agency’s credit card, so he wasn’t sure whether those allegations were correct."

“We thought we had good controls and financial systems,” The Globe quoted Alston-Follansbee. “We found out we had neither.”

The organization has reportedly replaced its auditors, increased its finance staff, and implemented new financial management policies.

On average, it takes two years for a nonprofit to detect fraud, according to John E. Mulvaney, Jr., director at CBIZ & MHM New England, which provides ample time for an organization to suffer a significant loss..

Leigh Tucker, managing director of nonprofit solutions at CliftonLarsonAllen, notes that "Administrators, boards of directors, and financial managers need to be proactive in their approach to detecting and preventing fraud," and suggests 10 ways to detect and prevent fraud in nonprofits.

A key step nonprofits should take to avoid fraud is to establish a financial risk management policy., according to Robin Kelley, partner at AAFCPAs.

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