Fiscal sponsor's letter to nonprofits: 'I am standing in the fire'

Many of the Southland nonprofits left penniless after an umbrella sponsor abruptly shut down are scrambling to repair their finances. At the same time, the California attorney general's office is investigating.

"When we want money, they write the check. When we get money, we give it to them. And they hold it. And they take a percentage," said Ben Allanoff, discussing how the International Humanities Center — based in Pacific Palisades — handled his environmental group's financial affairs. Allanoff runs the Topanga Creek Watershed Committee.

He says in hindsight, there were red flags. For example, it was hard to reach anyone at the center when he had questions about his group's account. A recent email sent by the fiscal sponsor's executive director, Steve Sugarman, confirmed his suspicions.

The letter said the center had gone out of business.

"I figured our money was gone," Allanoff said. "And in fact I wrote to a friend, 'It's good to be poor when you get ripped off because you didn't lose that much.'"

Allanoff says his group is missing $600. It's one of the luckier ones. The Pasadena-based Afghan Women's Mission reportedly has $400,000 in donations that are unaccounted for.

"Once the money has been deposited in the project's account, the fiscal sponsor should never touch a dime of it," said Paul Vandeventer who directs Community Partners based in downtown Los Angeles. It provides financial management and other investment services to nonprofits. Many of these groups are so small, they need help with basic administration.

Vandeventer says his organization has review systems to guarantee funds that a nonprofit hands over to them are protected.

"It's segregated," said Vandeventer. "It's a restricted account. And it's for the expenses that are related directly to that project and not for the core expenses of the fiscal sponsors themselves."

At least 200 California nonprofits may have lost money managed by the International Humanities Center. They have so far reported losses of about $800,000.

A consultant for the umbrella group says money went to pay off legal fees, back taxes and $12,000 in monthly rent for an office in Pacific Palisades.

The center's executive director Sugarman said in his letter to clients that the organization is soliciting money to restore their funds. Community Partners president Vandeventer wonders if that will happen.

"For a funder to come to me at Community Partners and say 'Oh, we just want to give you a whole bunch of money for general operating purposes to use as you wish and apply to project balances or anything like that,' it would be so unusual as to be implausible," said Vandeventer.

In the wake of this story, Vandeventer says his group is assuring clients their money is safe.

Nonprofits who lost money under the International Humanities Center's management say they now can't afford to pay their own bills or their staffs.

Sugarman has made no comment.