Guest post by Bob Bishop

After a hiatus, a new tsunami of illegal aliens is overrunning America’s border.  Most troubling is the wave of unaccompanied illegal minors.

The Human & Health Services is providing billions in grants to nonprofits to accommodate the asylum scam.  The nonprofits that provide the services enjoy substantial profit margins due to poor administration and lack of oversight by HHS., resulting in hundreds of millions in waste, fraud, and abuse by nonprofits.

According to HHS grant statistics for the Unaccompanied Alien Children Program (UAC), an Obama Administration creation, has spent over $9.7 billion since 2008. Approximately 407,000 adolescents received services or a $23,800 amount per referral.

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In 2020, approximately 85% of unaccompanied minors were from Central American countries, with 68% male. It is doubtful that any youth walked almost 1,500 miles (75 days nonstop at 20 miles per day) to arrive at the U.S. border.  The illegal entry is human trafficking funded by clandestine organizations and cartel-supported.

La Raza’s Alter Ego

Southwest Key Programs, located in Austin, Texas, runs the largest network of shelters for migrant children in government care, receiving grants totaling $2.8 billion. Its sole source of funding comes from federal grants. Its Board of Trustees, until recently, had four lifetime La Raza political activists who oversaw the nonprofit operations.  The founder and La Raza member, Juan Sanchez, CEO, was forced to resign in 2019 due to allegations of fraud, including exorbitant compensation for him and his wife. Mr. Sanchez sanctimoniously justifies his excessive pay claiming the Trustee Board, which he controlled, and the independent auditors approved the salary.

Dr. Juan Sanchez with comrade Che Guevara wall art in the background.  Tamir Kalifa for the New York Times

Southwest’s net assets (equity) have ballooned to $99.0 million thanks to liberal HHS grants and improper grant cost accounting. The excess funds were used to speculate in Austin real estate development involving related parties, including a board member and officers. The investments range from raw landhotels to apartments.

The Inspector-General of HHS selected Southwest for an audit because it is the largest provider of services to children in the UAC Program. The audit scope was to determine if Southwest Key claimed only allowable expenditures under applicable laws and regulations during Federal FY 2016. The audit (dated September 2020) found significant unallowable costs related to the UAC Program, requiring a refund of $13.1 million. It concluded the nonprofit “lacked effective control over and accountability of Federal funds.” Extrapolating the rebate for FY2008 through FY2020, Southwest would be insolvent.

The Department of Justice and the FBI have been conducting a criminal investigation for over three years into fraud, waste, and abuse. No grand jury has been sequestered on the case. It is absurd that Nancy Pelosi, not surprisingly, publicly praises Southwest as the unaccompanied minor program model.

Faith Based in Name Only

BCFS, located in San Antonio, Texas, runs the second-largest network of shelters for migrant children in government care, receiving grants totaling $2.0 billion. BCFS originally began as Baptist Children Home Ministries orphanage under the Baptist General Convention of Texas. In May of 2007, Kevin Dinnin, Executive Director, wrestled and gained control of the charity and rebranded it BCFS Human and Family Services. BCFS portrays itself as a “faith based”  organization but is not affiliated with a religious organization.  BCFS has expanded into a labyrinth of eight interrelated charities.  Mr. Dinnin went into charity to do good. He has done well indeed since he receives an extravagant salary of $720,000.

Since participating in the UAC Program, BCFS’s net assets (equity) as of August 2019 have increased by over $104.3 million from the disproportionate HHS grants. Like Southwest, BCFS relies exclusively on federal grants.  The accumulated excess funds are composed in cash, posh BCFS headquarters, and HHS grants receivable.

The Inspector-General of HHS also selected BCFS for a UAC program audit because it was the largest provider of services to the UAC Program for FY 2015. The audit (dated June 2017) found high unallowable costs related to leases requiring a refund of $648,000. The report addressed noncompliance in video monitoring in common areas, background checks, admission/intake assessments, medical exams, and discharge notifications to the DHS and other stakeholders.

Lack of Grant Oversight and Accountability

Due to the substantial assets accumulated by Southwest and BCFS, it is apparent the contracts were excessively lucrative to the nonprofits.   HHS created a temptation for nonprofits to engage in fraud, waste, and abuse.  The HHS should take legal steps to recover the overfunding of $150 million or more.  HHS needs to develop more robust controls that monitor contractor performance, including but not limited to more frequent OIG audits. Nonprofits found to be engaged in fraud, waste, and abuse should face either suspension or disbarment.  Grant fraud must be prosecuted to the fullest extent of the law.

The CPA profession plays a prominent role in government grants.  CPAs conduct a Single Audit (aka A-133 audit) that is an organization-wide financial statement and federal awards audit of organizations that expend $750,000 or more in federal funds in one year. The audit assures government agencies that internal controls are in place and the organization complies with the grant requirements.  The Federal and non-federal governments Single Audits place a substantial burden on CPA firms to detect and report fraud, waste, and abuse.

Southwest is a poster child of a high-risk audit client.  In its risk assessment scope, the CPA firm failed to detect or chose not to disclose the accounting control deficiencies and irregularities that the OIG auditors subsequently identified.

The two nonprofits are in form tax-exempt but in substance profit seeking private organizations.  The IRS should rescind their tax-exemption status.

Mr. Bishop is a retired corporate CPA.





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