As a small business accountant working with nonprofit organizations I frequently find deficiencies in their accounting or legal filings. Minor oversights are commonplace and I’m pretty good at getting them resolved before they cause too much of a problem. But I’ve never come across such an egregious situation as a multi-million dollar nonprofit organization soliciting public donations that did not even bother to make the most basic required registration with the state.
That’s the latest allegation stemming from an ongoing investigation by New York’s Attorney General as reported in yesterday’s Washington Times. The story is hard to believe. The attorney general has not made any official statement and it seems that the situation is quite embarrassing to New York’s top law enforcer. I am certain that if any of my small nonprofit clients attempted such a brash illegal move, they would have been hounded by state law enforcement agencies. I just can’t imagine how an unregistered high-profile charity was allowed to solicit public donations for so long and avoid prosecution long after they were accused of improperly handling the money. Apparently, in this case veterans group allege that they never received most of the money collected. Yet NJ enforcement agencies have not taken action to date. I don’t pretend to know the whole story, but clearly individual donors were not protected under the laws of the state intended to prevent such abuses by an illegitimate charity.
It is difficult to believe that the Trump Foundation’s independent accountant was not aware of the filing deficiency and the annual audit requirements of a charity of this size. After all, that’s a major source of business for CPAs. The same accountant was formerly accused of making false statements in the Trump Foundation’s IRS filings. Earlier news reports allege that the Trump Foundation was illegally using funds to pay Trump’s business expenses and influence a government official in Florida to avoid being sued. It appears that the accountant took steps to cover up the transaction.
Taken together, the four separate allegations of wrongdoing by the Trump Foundation make this the largest case of abuse of our nonprofit laws in our nation’s recent history. The four allegations are: 1) that the organization was not registered to as a charity to solicit donations and did not complete required annual audits, 2) that public donations collected were not passed on to the veterans organizations, 3) that the organization made illegal payments on behalf of Trump, and 4) that the organization made false statements in its IRS filings to cover up the improper activities. While there have been dozens of nonprofit fraud cases reported in the past, none that I can recall allege such widespread failings over these four major areas of operations areas.
I am actually not surprised to know that the Trump Foundation is illegitimate from start to finish. Unfortunately, I’ve had other dealings with Trump to conclude that he is a crook so his charity’s illegal actions are consistent with his business’s observed illegal behavior. I am surprised to learn that New York government let it go on for so long so that so many were hurt by the scam. I am saddened to learn that a CPA firm with a formerly good reputation has been implicated as complicit in this scam. It is a serious blow to the integrity and reputation of the Certified Professional Accountancy profession.