What to do about misused grants

May 12, 2005 | Read Time: 10 minutes

Q What are the standard procedures a grant maker would follow if it discovered that funds it had given to a charity have been misused? Specifically, what would that grant maker do if the entire grant has already been paid to the grantee?

A. Private foundations have a legal obligation to try to recover money that they believe has been misused, so you are dealing with a serious issue, says Marc Owens, a lawyer in Washington who previously spent a decade overseeing the exempt-organizations division of the Internal Revenue Service. He notes that while grant makers must get the money back or risk violating the law, charities that award money to other groups must worry about this issue too, since they must ensure that all of their funds are used for legitimate philanthropic purposes.

“The first step is to find out what happened,” says Mr. Owens. Start with a letter that requests that the grantee correct the situation. “In some cases, it’s more appropriate to change something than it would be to repay the money to the grantor.” Grantees who receive such warnings often take steps to deal with any potential problems, he says: “In most cases, grantees want more money so they’re willing to comply. The dynamic is usually all about making the grantor happy.”

If you’re still not satisfied, you can send a letter requesting that the grant recipient pay the money back. You might want to bring your lawyer into the loop at this point. “Depending upon the state, the grant maker may also have grounds for a suit seeking restitution of the misused funds,” says Francis J. Serbaroli, a lawyer in New York who represents both foundations and charities.

Keep in mind, though, that the legal requirement to make a reasonable effort to recover misused funds does not amount to a legal requirement to sue an organization to recover the funds. “It’s a judgment call, based on the size of a grant, how egregious the diversion was, and whether there is a real capability of there being repayment,” says Mr. Owens.

Other options: You could ask your state attorney general’s office to investigate, says Mr. Serbaroli. And, if you have evidence that grant dollars were used for the personal benefit of employees of the grantee, you might also notify the Internal Revenue Service. Read information on how to report fraud to the IRS on the agency’s Web site.

Q. I am an assistant professor in the humanities, but I have decided to leave academe. I see myself working for a nonprofit organization in the field of education or culture, but I am not sure what kinds of jobs I could aspire to, or how to make that transition. I would love to end up in a management or project-management position. Any advice on how to get there?

A. Your first step is to figure out what field you’re really interested in pursuing — education or culture — and narrow that down to a list of nonprofit groups where you would like to work. You’re in for a bit of concentrated introspection, says Theresa M. Szczurek, a career consultant in Boulder, Colo., who has helped people move into nonprofit jobs. She suggests that you think about what’s important to you and consider your background: “What are your unique talents, experiences, education, and aptitudes that mold how you can contribute?” If you’re stumped, you might want to check out her book, Pursuit of Passionate Purpose (John Wiley & Sons, $24.95, 2005). It contains several exercises that are designed to help career changers figure out what to do next.

After you have identified the charities where you would like to work, sign up as a volunteer. This will help you get to know people who hire employees — and also whether the nonprofit world is a good fit for you. (A previous edition of Hotline, available on the Philanthropy Careers Web site, discusses getting hired from the volunteer pool.)

When you are ready to start going out on job interviews, you should be prepared to show that you understand the difference in culture between the academic and the nonprofit worlds, and that you’re able to make the transition, says Stephen Zawistowski, senior vice president for national programs at the ASPCA, in New York. He came to the ASPCA in 1988 from a job as a professor of animal behavior and has since hired employees from academe.

Scholars face a couple of specific challenges when moving to the nonprofit world, he says. For example, many are used to a more leisurely work pace than a typical charity employee enjoys. “The academic timeline is run on three- or four-month blocks — you’ll often hear, ‘I’ll get to that at the end of the semester,’” he says. “But if you’re running a department, there’s typically a bit more urgency — financial reports need to be done monthly, for example.”

To bridge this cultural gap, tell a prospective boss that you are ready for a faster pace. For example, says Mr. Zawistowski, “highlight the projects that you have brought to completion — one of the plagues [in charities] is the projects that get started and then languish.”

Another obstacle that job seekers from academe face is a lack of management experience. But, Mr. Zawistowski says, you can also apply some creativity to best showcase the type of management experience that faculty members typically accumulate. For example, have you worked with graduate students? That counts. Can you discuss a project that worked out well? You might want to talk up the experience of completing a book, or your Ph.D., suggests Mr. Zawistowski.

“Completing a Ph.D, if nothing else, requires a certain amount of perseverance,” he says. “And I don’t know anyone who hasn’t had at least one jerk on their dissertation committee, so you’ve probably dealt with difficult personalities, and you have to be self-starting and work on a timeline,” he says. All those things, he notes, suggest project-management skills.

You should also play up your communication skills, he says: “The whole art of academia is creating a persuasive argument, marshaling the facts and presenting them quickly and easily.” In charities, many jobs depend on conveying a mission to the public or to donors.

The Chronicle’s sister publication, The Chronicle of Higher Education, has lots of information on its Web site to guide people who want to leave the academic world to work at nonprofit organizations or other types of employers.

Q. I am currently working in for-profit financial services, but have an extensive background in nonprofit fund raising. I’d like to make the transition into the grant-making world, preferably working for a corporate foundation. But I’ve met with no success so far. Are there recruiters who deal with such foundations, and if so, how should I approach them?

A. Certainly, recruiters have foundations as clients, says Kerry Moynihan, managing partner at the Christian & Timbers search firm, in Tysons Corner, Va. But you should be aware that recruiters aren’t in the business of helping people make career changes.

“The job is to find someone who has the exact right fit of experience and temperament for the culture of the hiring organization,” he says. When a recruiter is trying to fill a top spot at a foundation, he or she is typically looking for someone with grant-making experience.

So, when you approach a recruiter, “connect the dots for them,” says Mr. Moynihan. In your cover letter, clearly highlight the skills in your background that are closely analogous to the job you seek — such as the extensive experience in fund raising that you mentioned. Recruiters get hundreds of résumés each week, he says, so “don’t expect them to figure it out.”

A 2003 Philanthropy Careers article discusses how to deal with headhunters.

Q. What are grant makers’ attitudes or policies toward giving financial support to charities that are running a budget deficit?

A. It all depends on why that budget deficit occurred, says Linda Carter, president of the Community Foundation of Broward, in Fort Lauderdale, Fla. Many situations might tip a charity into the red, she says, and not all of them will scare off a potential grant maker.

For example, she says, “many times nonprofits develop a deficit because they run programs at full scale even though they haven’t secured full funding for implementation.” Or a charity could have faced an unpredictable drop in gifts, a major corporate donor’s relocation or shifting priorities, or a delayed government reimbursement.

Generally, a grant maker is less likely to withhold support if a charity’s budget woes are the result of unusual circumstances, rather than a pattern of poor cash management or unethical behavior. In the latter cases, she says, “we would definitely pull our funding until the organization made dramatic changes.”

Another factor that influences a grant maker is whether the charity has a plan to deal with the deficit and its causes, says Ms. Carter. Such organizations should make extra efforts to communicate about their budget difficulties, she says, and to discuss their strategy to get out of the hole.

For more information about the financial woes charities can face — and how to dig out of them — take a look at Why Nonprofits Fail, by Stephen R. Bloc. (Jossey-Bass, $27.95, 2004). For more about how grant makers operate, try Demystifying Grant Seeking, by Larissa Golden Brown and Martin John Brown (Jossey-Bass, $26.95, 2001). And for more books on the grant-seeking process, see The Chronicle’s Nonprofit Handbook online.

Q. I am a 58-year-old woman who has helped raise more than $300-million over a 30-year career. I have just been dismissed from my job as a vice president at a charity (I blew the whistle on unethical practices) and am now looking for work. Do you have any advice for older workers who have much to offer but whose wrinkles may put employers off?

A. Your age could be a potential liability, since illegal age discrimination is an unfortunate reality. But if you highlight your experience, you should do well in today’s job market, says Charles A. Rhoads, managing director of the Houston office of Boyden Global Executive Search. “Experience is being valued over potential,” he says. Indeed, he adds, the last five candidates he placed in senior-level nonprofit positions were between the ages of 51 and 62. (For tips on how to overcome age discrimination while job seeking, see “Facing an Age-Old Problem, The Chronicle, February 3.)

The same goes for the whistle-blowing. “I would advise you to turn it into a positive,” says Mr. Rhoads. These days, he says, with charities and businesses concerned about complying with the 2002 federal corporate-accountability statute known as Sarbanes-Oxley, a candidate who can demonstrate business ethics should be looked upon favorably. “You need to package yourself as an ethical, energetic, and experienced performer with a measurable track record,” he says.

Just be cautious when you are discussing your former employer in job interviews, suggests Kerry Moynihan, managing partner at the Christian & Timbers search firm, in Tysons Corner, Va. Don’t bash the organization where you worked. Stick to verifiable, public facts, such as an efficiency rating that went down, or an investigation by a state attorney general. And be prepared to offer glowing references from other employers in your past.

The following links were mentioned in Hotline: