Nutrition news

Allegations of fraud in federal nutrition program raise questions about oversight of nonprofit boards

A three-person board of directors has volunteered to oversee a Minnesota nonprofit that distributes cash for meals to poor children as part of a federal nutrition program.

But now that the non-profit organization, Feeding Our Future, is at the center of an investigation into an FBI fraud alleging tens of millions of taxpayer dollars were misappropriated, the allegations raise questions about the roles and the responsibilities of nonprofit boards.

No charges have been filed in the Feeding Our Future case, but even if the allegations turn out to be true, its three volunteer board members are unlikely to face any consequences unless they deliberately commit misconduct. , said lawyers who work with nonprofits.

Board members have basic legal obligations to oversee and govern the work of a nonprofit, attend meetings to review financial information, and manage its charitable assets.

“If it’s right [that] they kind of fell on the job and they should have done a better job, it would be pretty unusual for there to be personal liability,” said Sarah Duniway, a Minneapolis attorney who represents nonprofits and n is not involved in the case. Unless it turns out that they were deliberately turning a blind eye or actively engaging in fraud, it would be difficult… to hold them accountable.”

The FBI began its investigation into Feeding Our Future last May and raided its offices on January 20. In unsealed search warrants, investigators alleged the organization was part of a larger scheme to defraud the US Department of Agriculture, embezzling at least $48 million from infant nutrition. programs to an array of entities who spent the money on personal expenses ranging from lavish trips to a million dollar home in Plymouth and a Porsche. Prosecutors decided to seize 14 properties belonging to people accused in the scheme.

It is unclear what the organization’s board members knew about its finances. None of the three board members could be reached for comment. The executive director of Feeding Our Future denies that her organization or anyone she has worked with has done anything wrong.

Under Minnesota law, a nonprofit must have at least three board members and they are considered trustees, responsible for overseeing the organization while the executive director or CEO is the leader. paid responsible for day-to-day operations. Most nonprofit boards are made up of business and community members who volunteer to offer their perspective and advice.

Unlike corporate boards or college and university boards, state and federal laws give more protection to unpaid volunteers who serve on Minnesota’s more than 9,000 nonprofit boards. , immunizing them against any legal or criminal liability, unless they have committed an intentional fault, Duniway. The immunity is intended to encourage people to volunteer their time to serve on boards, she said. Even if a board member breaches their fiduciary duties and does not benefit from them, there will likely be no repercussions.

But the Minnesota attorney general’s office, which regulates all charities that solicit donations in Minnesota, could take broader action against a nonprofit, such as filing a court order to remove board members. directors or close a charity.

“It raises a question in a situation like this where it looks like really bad things are happening, maybe it’s hard to hold board members accountable,” Duniway said, adding that board members can also only know what they are told by an organization. “I think it’s a good question to ask if they knew [about these allegations]and if they didn’t know or say they didn’t know, should they have known?”

The Minnesota Department of Education, which distributes federal funding to schools and organizations, has repeatedly blamed Aimee Bock, founder and executive director of Feeding Our Future, for running the nonprofit, noting that it had not completed the required tax forms and had no financial staff to manage its complex and growing operation. Then last year, the Attorney General’s office removed Feeding Our Future as a registered charity after unsuccessfully requesting the required tax forms and annual reports that all charities must submit.

After a reporter questioned Bock and his lawyers about it on January 27, they filed the documents and charges with the attorney general’s office on January 28, claiming that the failure to file the required forms was unintentional because the notice had been sent to the wrong address. The organization is now listed as an active charity.

Board members are supposed to make sure the required tax forms are completed, but it’s not uncommon for smaller nonprofits to fail to file paperwork or have their registration expire compared to larger ones. nonprofits with massive staffs and boards, said Jess Birken, who works with nonprofits at her Minneapolis law firm.

“You never want your organization’s great mission to be tarnished by something like this,” Birken said. “It’s really important for the nonprofit’s boards and staff to keep both eyes on the mission, but also to monitor compliance. … Maintaining the trust of the community is important. “

According to forms filed with the attorney general’s office, the three board members of Feeding Our Future in January were Ali Egal, Jamie Phelps, 45, of St. Paul and John Senkler. A former chairman of the board, Benjamin Stayberg, 39, of South St. Paul, also did not return messages for comment. None of the board members are named in FBI documents or accused of wrongdoing.

Bock said his organization was targeted for suing the Minnesota Department of Education. She also alleges discrimination because she has worked with predominantly minority and immigrant-owned businesses. She said she never stole money and saw no evidence of fraud among the more than 100 contractors her organization reimbursed for delivering 100,000 meals a day to children in Minnesota. Bock said she had receipts and documents – now seized by the FBI – proving they distributed food.

Neither Bock nor anyone else named in the search warrants has been charged with a crime and experts say it could be months before charges, if any, can be filed.

Nonprofit board members have faced similar questions in other surveys. Several high-profile DFLs who served on the Community Action of Minneapolis board resigned when state investigators invaded its offices in 2014, including then-U.S. Representative Keith Ellison, state senator Jeff Hayden and several Minneapolis City Council members. Bill Davis, who ran the nonprofit, was eventually sentenced to four years in federal prison for theft and fraud, wasting hundreds of thousands of dollars meant to help low-income people.

The Minnesota Department of Education first raised concerns about the amount of refunds Feeding Our Future was asking for in 2020 and denied dozens of site requests. But the nonprofit sued, and a Ramsey County judge ordered the state to resume reimbursements, saying it had no authority to stop payments.

Last year, Charles Amevo of CPA Global Portfolio Consulting CA LLC, based in Edina, was asked to carry out an independent audit of the 2019 and 2020 finances of Feeding Our Future. In 2019, the organization reported revenue of about $2.4 million — $2.3 million of which came from federal funds — and had a deficit of $13,000. In 2020, the organization reported revenue of $9.2 million, of which about $8.9 million came from federal funds, and a deficit of $35,000.

Amevo said in an interview that he reviewed financial statements and grant documents and made an on-site visit to the St. Anthony office of Feeding Our Future to monitor a food distribution to verify that the money from the grant went to the program. Its report is “unqualified”, which means that it is considered appropriate and is an unqualified audit. He said the attorney general’s office contacted him last week to ask for the financial statements he had received as part of the agency’s investigation of the nonprofit.

As news of the allegations spread, Duniway customers began calling in alarm, worried about scrutiny by a Minnesota nonprofit and verification that they were following all federal laws. and states on charitable donations.

“It just forces people to be alert to the fact that they have a responsibility beyond their little universe of stakeholders and to think about it – and that’s good,” she said.

The investigation looked at both Minnesota’s strong nonprofit sector — whose nonprofits fear jeopardize donations and funding for other kids’ meal programs — and the Department of Education. Some lawmakers have called for an audit of the agency.

Kris Kewitsch, executive director of the Charities Review Council of Roseville, said board members and donors have many resources to verify that an organization is transparent and accountable, such as reviewing the required Form 990 tax ( which can be found on the IRS website).

The Attorney General’s Office (ag.state.mn.us) also lists active charities and provides financial information. Contact the office at 651-757-1496 to request a copy of a nonprofit’s annual report and Form 990, or consult nonprofit experts, such as the Charities Review Council, which lists organizations on smartgivers.org that have been rigorously reviewed to meet their responsibility. standards.

“The reality is that a majority of nonprofits are doing amazing things,” Kewitsch said. “I hope all of us who do good things can help donors have confidence that when they give, they will support the mission.”