A Global Nonprofit Ponzi Scheme? Lessons Learned from a Fiscal Sponsor’s Collapse

When a nonprofit implodes, the tendency is to avert one’s gaze and hope that it was simply that one nonprofit or its specific cast of characters that made it a “one-off.” When the nonprofit International Humanities Center (IHC), a fiscal sponsor for over 200 projects around the world, imploded, it’s estimated that it took with it more than $1 million in donations that never made it to the intended recipients in what begins to look like a nonprofit version of a Ponzi scheme.

Much of the money donated to IHC to hold and administer on behalf of the array of progressive political and cultural groups was likely used to pay for IHC’s past obligations and expenses—and an additional six-figure sum was allegedly embezzled by a staff person involved in a fraudulent investment deal. Dozens of the IHC projects lost thousands or hundreds of thousands of dollars entrusted to IHC for back-end operations—funds that were, in some cases, all that the groups had. Then again, since IHC was keeping the books, no one knows for sure just how much was, seemingly, misappropriated.

Now, these small organizations are asking themselves how this could have happened and what they might be able to do to recover their lost funds. But the groups lack the resources—and in some cases, the desire—to track down their money. We must not avert our gaze. If other groups outsourcing back-end operations to nonprofit fiscal sponsors are to avoid being taken advantage of, what lessons can we learn from the odd, sad tale of IHC?