Taxpayer Philanthropy: Feds gave nonprofit $23M despite accounting woes

(The Center Square)—The National Council of Urban Indian Health received $23.6 million in federal funds in four years even as an auditor flagged accounting problems in three of those years, an investigation by The Center Square found. 

The Washington, D.C.-based nonprofit had a material weakness, the most serious category of internal-control deficiencies, in both 2022 and 2023. Its faulty accounting coincided with a doubling of its federal funding during the pandemic.  

In 2022, the Council received $200,000 in federal funds before it had eligible expenses to justify the payment, according to Sikich, the accounting firm that audited the nonprofit. The auditor found it then asked for more federal cash without accounting for the money it had received.

The following year, the Council counted too much of a promised contribution as revenue before meeting the conditions for receiving the full amount. The error forced the nonprofit to correct its books, reducing reported revenue and the amount it expected to collect by $200,000. 

Blaming staff turnover

After both audits, the Council attributed the material weaknesses to staff turnover in its “financial functions” and “finance division.”

“The organization changed drastically in size and scope, thereby going through a substantial adjustment period,” the Council wrote in response to its 2022 audit. 

Carol Barnard, a certified public accountant and fraud examiner who specializes in auditing nonprofits for Aprio, said the 2022 material weakness was the more serious of the two.

She noted that federal rules are designed to prevent nonprofits from stashing the funding in a bank account and earning interest.

“It sounds like they might have gotten in a little bit over their heads,” Barnard told The Center Square.  

Sandra Bender, the Council’s former director of finance, said she had no objection to Barnard’s description. “No, not at all,” Bender said in an interview.

The Council staff did not respond to four voicemails and messages for comment.  

Founded in 1998, the nonprofit supports health programs for American Indians and Native Alaskans living in metropolitan areas rather than reservations. The Council averaged roughly $1 million in federal funds each year from 2011 to 2018, but its funding spiked during the pandemic. It rose to $7.8 million in 2021 from $3.1 million the year before.  

A problem during the pandemic

In 2023, the Council’s federal funding grew 19 percent, to $8.3 million from $7 million.

Marc Joffe, president of the Contra Costa Taxpayers Association, said taxpayers’ only recourse is to remain vigilant.

“All taxpayers can really do is look forward to the following year’s audit to see whether the issue has been satisfactorily resolved,” Joffe told The Center Square. 

In May 2023, the federal government ended the COVID-19 public health emergency. The Council’s federal funding was trimmed to $5.3 million in 2024 and $3 million last year.  

Last year, Sikich flagged the Council for an accounting deficiency, a less serious charge than a material weakness. The nonprofit overstated the value of donations it expected to receive over several years by counting them at their full value instead of accounting for the time it would take to collect the money.  

Bender was hired as assistant director of finance in April 2023 and became its finance director less than a year later. She said she helped adopt new accounting software that improved its financial controls. Sikich’s 2024 audit found that the previous year's revenue recognition problem was not repeated.   

Yet staffing remains a challenge. Bender resigned this April and is the chief financial officer for Native Empowerment Solutions, a Milwaukee-based consultancy to nonprofits. While the council lists a current associate director of finance, Bender said the finance team shrank during her tenure. 

“When I started, I was in a team of five people,” she said. “When I left, it was two.”