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MONDAY February 23, 2004 - Subscribe - Contact Us - Rate Card Valley&State Backpage O&E Sports Archives Classifieds Faith&Beliefs Obituaries Revels December 18, 2003 Headwaters using its experience to educate Embezzlement in the past, group passes on knowledge By Vickie Aldous Ashland Daily Tidings Headwaters learned the hard way how susceptible nonprofit organizations are to embezzlement. But the Ashland-based environmental organization is working to share lessons learned with other nonprofits and the foundations that provide funding to groups. Most information about how to guard against embezzlement assumes the person stealing money from a nonprofit serves as the accountant, said Tonya Graham, Headwaters executive director. However, the group's former executive director, Rick Gwynallen, pleaded guilty to aggravated theft in 2001 after being accused of taking $159,000. "We're now looking for ways to educate other organizations about what their vulnerabilities might look like," said Graham, who has shared information with nonprofits and foundations about embezzlement safeguards. "We want to fill the void of information that is there about protecting an organization from your own executive director. We hope to turn a learning experience for us into information and knowledge for other groups." A concentration of powers Headwaters members said Gwynallen wrote grant proposals, checked the mail and reported on the results of the proposals. He told members that successful grant requests had been turned down, then secretly deposited the money in a bank account for his own use that he had set up in Headwaters' name. These days, the executive director is not allowed to receive Headwaters' mail. And while Graham can prepare checks, a board member signs each check. Graham does the account reconciliations, but the treasurer checks the bookkeeping, according to Graham. "When I tell people the executive director is not allowed to check the mail, people's jaws hit the floor," she said. "They wonder what kind of vulnerabilities they have." Foundations also can take action to help ensure grant funding is not diverted, according to Graham. "Our main recommendation to foundations is to contact by phone two people in the nonprofit to congratulate them on getting the grant, such as the executive director and the head of the board of directors," she said. "There would be someone else in the organization who knew they had won the grant." Headwaters discovered the tip of the embezzlement iceberg when Gwynallen reported the group had won a grant in a smaller amount than had been awarded. Other area groups who had an interest in the grant knew the actual amount and disclosed the discrepancy. Starting over During the 1 1/2 years that Gwynallen is believed to have been diverting funds, Headwaters slashed its staff from the equivalent of eight full-time workers to a single half-time position, according to Graham and board member JoAnne Eggers. Since then, the organization has rebuilt, with a staff of two full-time people - Graham and Conservation Director Cindy Deacon Williams - and a part-time program assistant, Shannon Bigham. The annual budget has dropped from a height of $350,000 to $165,000, Graham said. Gwynallen was sentenced to five years probation and 30 days in the Jackson County Jail. He also was ordered to pay $159,000 in restitution, a judgment Headwaters won in a civil case, according to the Jackson County District Attorney's office. Gwynallen, who moved to the East Coast, has made sporadic payments totaling $35,543, Graham said. Funding from foundations used to make up 85 percent of the budget, but Graham said foundation money now accounts for a more sustainable 46 percent. Headwaters wants to limit its reliance on grants because of the instability of that source of revenue, she said. "Our goal is to keep our grant dependency at 50 percent or less. Our goal in the long term is for our core funding to come from membership contributions and local support," Graham said. Contributions now make up 21 percent of the group's income, according to the recently released Headwaters annual report. Graham said no foundation has refused to fund Headwaters because of the embezzlement. After learning about the embezzlement, Headwaters members quickly contacted any foundation staff who could have had contact with Gwynallen, and then re-evaluated the entire organization and set up safeguards before requesting any new grants, Graham said. It was a time for soul searching, according to Eggers. "We asked ourselves, 'Should this organization continue to exist?' We asked ourselves some very serious questions," she said. "We came to the conclusion that Headwaters is doing work that no other organization is doing in the same way." Steven Whitney, program officer for the Bullitt Foundation in Seattle, said Headwaters tackled key issues before seeking a grant. "It was pretty clear Headwaters did what it should do and dealt with the problem and got their house in order before requesting new grants," he said. "Before they came asking for financial support, they were able to go through a list of things to make sure this would never happen again. They anticipated our concerns and questions by the time they asked for the first grant (after the embezzlement crisis)." The foundation gave a small initial grant and has supported the group since then, Whitney said. The Bullitt Foundation had given to Headwaters before the embezzlement, but did not have any of its funding stolen, he noted. Whitney said it was obvious that Headwaters had a dedicated board that took responsibility for solving the group's problems, and community support was strong for the group because of its long tradition of advocacy in the region. Headwaters has been a fixture in Southern Oregon since 1974. The group had about 550 members before the embezzlement was discovered, and now has approximately 600 members, according to Graham. Headwaters hopes to double its membership base by the end of 2004 with a new membership campaign, according to the group's annual report. Looking to the future Among other goals for the coming year, Headwaters plans to continue its forest protection and clean water programs, pursue litigation when necessary and work to find collaborative solutions to environmental problems, Graham said. "Headwaters has positioned itself as the environmental group that is going to make every effort to solve environmental conflict in the least divisive way for the community," she said. "That doesn't mean we won't litigate. We try to work through collaboration and cooperation as often as possible. We see the litigation program as a last resort. We're community based. We want to make sure the solutions we put to the community are helpful for the community as a whole." Headwaters helped develop a middle-ground approach for the controversial Mt. Ashland Ski Area expansion proposal. The group continues to work with the Talent Irrigation District on a means to keep canals clear of vegetation after winning a court case to block the use of moss-killing chemicals. The cooperative approach also entails working with U.S. Forest Service and Bureau of Land Management personnel before projects are finalized to try to shape the outcome of those projects, Eggers said. "We look at projects that are planned by the federal agencies and look for projects that we can support as well as ones that can be appealed and litigated," she said. "We contact agency personnel prior to planning to express our values, ideas and concerns. We try to give them a heads up. I do think it's made a difference - and a difference in building relationships that are positive." With Headwaters on solid footing once again, the group will continue to attract foundation funding to carry on its tradition of environmental protection, Whitney predicted. "You live in a very special region in the country with world class resources and substantial threats," he said. "The Rogue Basin benefits enormously from the work of nonprofit groups in the region, and Headwaters has been one of them for a long time." DailyTidings.com Home Page Valley&State | Backpage | O&E | Sports | Archives | Weather | Classifieds Columnists | Faith&Beliefs | Obituaries | Revels | Subscribe | Contact Us Copyright 2004 Ashland Daily Tidings and Ottaway Newspapers All Rights Reserved Site Search: A new improved archive search is coming! 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