The damage has been huge: $500,000 or more from Habitat for Humanity of Yavapai County, $111,000 from Prescott’s Coalition for Compassion and Justice, $200,000 from Prescott Downtown Partnership, $100,000 from the Old Town Association in Cottonwood, $70,000 from a reptile-rescue group in the county, $14,000 from the Verde Valley Homeless Coalition.
Over the past ten years embezzlement cases affecting county-based nonprofits have regularly come to light. The pandemic shutdown opened more opportunities for trusted directors and members of these organizations to take advantage of less oversight. With our area’s more than 3,000 nonprofits it’s a low percentage, but still shocking.
The April 2024 arrest of Karen Northcutt, former executive director of Habitat for Humanity of Yavapai County, represents one of those “perfect-storm” cases, after an executive director retired and was replaced in 2019, says longtime board member Bruce Rosenberg, who stepped up as executive director when Northcutt was fired in February.
“This was a pretty carefully planned-out and meticulously executed scheme that took place over four years,” Rosenberg said. “So it’s a little bit different from someone emptying the bank accounts overnight and absconding with hundreds of thousands of dollars in cash. . . . It was smaller amounts, incrementally, over a longer time, that added up.”
This year, after weathering the Covid storm, the organization’s board decided to review Northcutt’s work, and discrepancies quickly began to surface. Then a whistleblower tipped the board about the alleged theft.
Rosenberg says the organization was fortunate that it was able to continue its activities without financial problems, but not all have been so lucky. The Coalition for Compassion and Justice (CCJ) found itself hamstrung in 2023 when alleged theft by Sheena Holmes forced the group to forego applying for grants for a year till the forensic accounting finished. The group had been working to raise funds for its Paloma Village project, a 25-unit manufactured-home community on four acres in Chino Valley that had to be postponed till its relaunch this year.
CCJ Executive Director Allison Lenocker says she was sympathetic to the plight of Habitat because of what her own organization went through. “It broke my heart to hear about what happened to them. People in a trusted position taking advantage of a nonprofit is devastating. We never want to think that someone will want to take advantage of us, especially when it’s an organization that relies on donations from the public.”
CCJ has bounced back and regained grants and public support, but instituted new policies and procedures to ensure that cash and other income is accounted for in multiple ways. The group has moved on, but the court case will likely drag on for years.
The case involving Prescott Downtown Partnership, in which Misti Smith allegedly stole $200,000, is reportedly coming to trial this month following her arrest in November ‘21. Any restitution would be paid only when the trial is won.
Different factors apparently led to these crimes — money problems, drug use, gambling debts — but in hiring, the background reports often come back clean. In Northcutt’s case she reportedly was previously arrested and even served time for embezzlement, but used a new married name in Prescott. Holmes allegedly stole from another nonprofit she’d worked for, but that theft was not reported to police. Often church groups, PTAs and small businesses do not report embezzlement if the amounts are small or the money is paid back.
Despite that, other kinds of effort can prevent and curtail theft, says David Seigler, executive director of United Way of Yavapai County, which works with 30 partner organizations in the area. “While these thefts happen because bad people are doing bad things, there are things that the nonprofit community can do that can help lessen the opportunities and in some cases keep them from happening at all, but they are not necessarily universally used. We wanted to put together some courses that would teach boards and their nonprofit staffs, particularly senior staffs, some different policies and procedures they could adopt that would help keep this from happening in the future, and at least mitigate it if it happens.”
The United Way is partnering with the Arizona Community Foundation and Stephen Crandall Accounting and Associates, which has offered workshops on fiscal controls to businesses and nonprofits for ten years.
“There’s a lot of information out there,” Seigler said. “What we want to do is grab the golden nuggets of all of that, put it in a half-day class and make it an annual activity. We already do a lot of this through what we call the Center for Organizational Excellence, a United Way program where we put on classes for nonprofits — HR stuff, legal things, fundraising and grant-writing, and how to work with integrity. Now we’re bringing a lot of these together and making this one class. It’s such valuable information that we will make it mandatory for all grant recipients from now on.”
The next workshop will be at the Prescott Resort on October 23, and will include lunch. Seigler said ACF of Yavapai County will require its hundreds of grant applicants to take the course, too.
“It’s not just going to be focused on criminality and those bad things that happen,” Seigler said. “We’re going to be focused on making sure that all our policies and procedures are properly in place and active. The groups are going to leave with actionable materials and documents they can integrate into their own organizations.”
