Georgetown discovered $390,000 in unapproved compensation in 2010

IRS 1040 Tax Form Being Filled OutOn Oct. 26, The Washington Post revealed that Georgetown University reported a diversion of approximately $390,000 in unapproved compensation to an unidentified administrator between 2007 and 2010 in its 2010 IRS 990 Form.

The University discovered the possible diversion during one of its routine internal auditing procedures. After an investigation, the University took steps to address the matter. “The University investigated the situation and reported it through its normal governance procedures and made the appropriate disclosures on its IRS Form 990,” Rachel Pugh, director of media relations, said in a phone interview with Vox.

The Post looked into filings from more than 1,000 non-profit organizations that reported a diversion on their tax forms, focusing specifically on misappropriated funds amounting to at least $250,000 or a sum that accounts for more than 5 percent of the institution’s total assets. Georgetown was was one such non-profit that was mentioned. “The possible diversion accounted for less than 0.04 percent of Georgetown’s approximately $1 billion annual operating revenue,” said Pugh.

Several years ago, unknown University employees set up a non-University bank account, which was used to administer funds related to their work on a school-sponsored conference. The unidentified administrator received additional compensation for work related to the conference in this entirely separate non-University bank account.

After the University discovered the diverted funds in the fall of 2010, it took a number of actions. “We closed the bank account and transferred the remaining balance to a bank account controlled and audited by the University that was also subject to the University’s internal control,” said Pugh.

The University cooperated with the administrator to conduct an internal audit of all the transactions of the account from 2007 to 2010 and proceeded to follow internal procedures for disciplining the parties involved. “We required repayment of travel expenses, agent error, and restitution of the unapproved compensation received by the administrator in 2010.” Pugh said. “We reported the matter on the university’s form 990, following all the instructions for reporting divergence by the IRS form.”

Although The Hoya reported that “Georgetown expects to be contacted in regard to the federal investigation,” Pugh explained to Vox that there is currently no federal investigation of the matter, and there never was.

Pugh said that there was no need to resort to law enforcement in the first place. “There was no evidence that the employee had an intention to rob anyone. The employee did not submit any false documentation, fully cooperated with our investigation, and voluntarily paid the restitution,” she said. Pugh added that she couldn’t say whether the administrator was fired.

The University has taken further steps to ensure that this type of situation does not occur in the future. “Over the years we’ve become more professional and adopted more rigorous policies and internal control as well as implemented a compliance program, which includes the compliance helpline for employees to report concerns and we also have a robust internal audit function,” said Pugh. The school now requires that policies are consistent across campuses and that employees relate all information regarding to travel and financial transactions or expenses.

Photo: Ken Teegardin via Flickr

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