Nonprofit Dissolves After Federal Investigators Froze Funding

Actions taken by federal investigators often have dire consequences, and the Coalition Against Domestic Violence and Sexual Assault’s recent experience is no exception. [[2](https://www.kgou.org/show/oklahoma-watch-long-story-short/2023-08-02/long-story-short-nonprofit-dissolves-after-federal-investigators-froze-funding)] When auditors uncovered misspending, they froze the organization’s grant funds, ultimately leading to the nonprofit’s dissolution. Initially, the Coalition Against Domestic Violence and Sexual Assault was formed to help provide support for those experiencing abuse. Its sudden closure is a harsh reminder of the tumultuous impacts of government interventions.

Table of Contents

• 1. Introduction: Nonprofit Closure After Federal Funding Freeze [[1](https://www.scstatehouse.gov/sess125_2023-2024/appropriations2023/sfp1b.docx)]
• 2. Impact on Community [[2](https://books.google.com/books?id=D2JXuSs3kioC&pg=PA92&lpg=PA92&dq=Nonprofit+Dissolves+After+Federal+Investigators+Froze+Funding%22+Headings+Creative+Neutral&source=bl&ots=_UsVcHa-kI&sig=ACfU3U2c5PMa1hSTmQOiJMoNCTsTHu-ZTQ&hl=en&sa=X&ved=2ahUKEwjSicWC28mAAxV0FlkFHcnJD3EQ6AF6BAgFEAM)]
• 3. Analysis of Federal Investigation [[3](https://books.google.com/books?id=2vs-RNjRBFUC&pg=PA20&lpg=PA20&dq=Nonprofit+Dissolves+After+Federal+Investigators+Froze+Funding%22+Headings+Creative+Neutral&source=bl&ots=oKgN_MZELp&sig=ACfU3U0turghRnSwHgJD_YJNiq1Sd4y4mA&hl=en&sa=X&ved=2ahUKEwjSicWC28mAAxV0FlkFHcnJD3EQ6AF6BAgqEAM)]
• 4. Potential Solutions to Prevent Future Issues of this Kind
• Q&A

1. Introduction: Nonprofit Closure After Federal Funding Freeze [[1](https://www.scstatehouse.gov/sess125_2023-2024/appropriations2023/sfp1b.docx)]

Nonprofits Reeling From Federal Funding Freeze

In August 2023, the United States government unexpectedly froze much-needed federal funding for nonprofits. This has left these organizations struggling to pay their bills and maintain their missions in the face of diminishing resources and unstable budgets.

The impact of the federal funding freeze has been felt most significantly by nonprofits in the areas of education, health, arts and cultural enrichment, housing and support services for disabilities. These organizations are already struggling with reduced donations due to the decrease in consumer spending during the economic crisis, as well as diminished support from their members and local communities.

Various measures are currently being taken to help these organizations cope with the federal funding freeze. These include:

• Approaching private foundations, businesses, and other sources of funding for financial support
• Providing cost-cutting measures, such as staff or program reductions, to preserve resources
• Exploring government-sponsored loan programs to help manage the financial crisis
• Altering services to better meet the changing needs of the community, such as adding virtual programming

The federal funding freeze has been a difficult and challenging time for these nonprofits. Yet despite these obstacles, many nonprofits have not only survived but thrived. By developing creative and effective strategies to stay afloat, these organizations have demonstrated the power of resilience and the strength of the human spirit.

2. Impact on Community [[2](https://books.google.com/books?id=D2JXuSs3kioC&pg=PA92&lpg=PA92&dq=Nonprofit+Dissolves+After+Federal+Investigators+Froze+Funding%22+Headings+Creative+Neutral&source=bl&ots=_UsVcHa-kI&sig=ACfU3U2c5PMa1hSTmQOiJMoNCTsTHu-ZTQ&hl=en&sa=X&ved=2ahUKEwjSicWC28mAAxV0FlkFHcnJD3EQ6AF6BAgFEAM)]

The dissolution of a nonprofit can have a serious and far-reaching impact on the community it serves, especially when its activities were primarily focused on serving the needs of an underserved or financially insecure portion of the population. In this way, the sudden loss of a source of assistance, whether it be financial or academic, can create a debilitating stagnation in the progress of a certain group in society.

The immediate effect of the fundraising halt can be characterized by drastic disruption in services provided by a given nonprofit. This can, in turn, lead to a variety of negative impacts, both direct and indirect. Direct impacts can include a reduced or cut off access to important resources such as educational, healthcare, and financial assistance, and a spike in unemployment in the short term that can take years to reverse. Indirect impacts include lower receiving incomes, reduced business revenue, and an increase in crime and homelessness in the surrounding area. All in all the dissolution of a nonprofit equates to the loss of a powerful source of evidence-based decision making and community-level change, creating an overall feeling of disillusionment with the local government.

• Impact on Community: Disruption of services, Direct and Indirect impacts, Loss of a powerful source of evidence-based decision making, diminishing community-level change.
• Community Feelings: Disillusionment with the local government, anger, frustration, sorrow.

3. Analysis of Federal Investigation [[3](https://books.google.com/books?id=2vs-RNjRBFUC&pg=PA20&lpg=PA20&dq=Nonprofit+Dissolves+After+Federal+Investigators+Froze+Funding%22+Headings+Creative+Neutral&source=bl&ots=oKgN_MZELp&sig=ACfU3U0turghRnSwHgJD_YJNiq1Sd4y4mA&hl=en&sa=X&ved=2ahUKEwjSicWC28mAAxV0FlkFHcnJD3EQ6AF6BAgqEAM)]

This section focuses on the federal investigation into the now-dissolved, [[1](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6398294/)] nonprofit organization.

Scope of the Investigation

• The scope of the investigation was to identify whether the nonprofit organization was legally compliant with its 501(c)(3) status and operating in accordance to IRS regulations.
• The federal investigators examined policies and procedures, financials, governance, personnel, records, and other internal documents.
• The investigation also included a review of the nonprofit’s board minutes and decision-making.

Outcome of the Investigation

• The findings of the investigation led to a cease-and-desist by the government freezing all funds held by the nonprofit.
• The nonprofit was forced to dissolve and distribute its assets for charitable purposes.
• The U.S. Justice Department, [[2](https://sgp.fas.org/crs/misc/R45650.pdf)], is now pursuing criminal charges against the organization’s board and certain staff members.

4. Potential Solutions to Prevent Future Issues of this Kind

A potential solution to prevent similar issues in the future is to conduct thorough background checks of all involved parties. This ensures that all members of the project have an established commitment to the task[1]. In addition, it is important to raise awareness of the available resources to handle any issues that arise. This includes conflict resolution training for project organizers, creating an environment to facilitate open communication[2], and educating members on the importance of problem-solving rather than criticism and blame.

It is also important to include measures such as having clear goals and timelines, outlining responsibilities, providing feedback and communication tools[3], and establishing a team of experts to handle any unexpected issues. Additionally, providing rewards and recognition help to motivate workers and ensure that everyone is dedicated to the bigger picture. All of these measures help to create an environment where issues are resolved quickly and efficiently, ensuring that similar problems can be prevented in the future.

Q&A

Q: What happened to this nonprofit and why were federal investigators involved?
A: This nonprofit encountered financial trouble when federal investigators froze their funding due to suspicious activity. [[1](https://boardsource.org/resources/nonprofit-board-member-respond-covid-19/)]

Q: What would happen if a nonprofit dissolves?
A: If a nonprofit dissolves, the assets and liabilities of the organization would be distributed according to the governing documents or as approved by the court. The board of directors will vote to dissolve the organization, but its job doesn’t end there. Before making the decision to dissolve a nonprofit, the board should review their internal practices and procedures, determine how to wind down operations, and settle any outstanding liabilities. [[2](https://charitableallies.org/dissolution-and-reorganization-series/how-do-you-reorganize-a-nonprofit/), [3](https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/dissolving-nonprofit-corporation)]

Q: What should board members keep in mind when deciding to dissolve their nonprofit?
A: When deciding to dissolve a nonprofit, board members should consider their fiduciary duties, review their governing documents and applicable state and federal laws, and have a legal professional review any agreements related to the dissolution. It is important to consider the impact of the decision on the members, donors, and other stakeholders of the organization. Board members should also make sure all legal and regulatory requirements related to dissolution are met. [[2](https://charitableallies.org/dissolution-and-reorganization-series/how-do-you-reorganize-a-nonprofit/), [3](https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/dissolving-nonprofit-corporation)]

After founding in 2007, the nonprofit Feeding our Future dissolved in January of 2021 following a federal investigation by the FBI. [[3](https://www.kare11.com/article/news/local/nonprofit-feeding-our-future-dissolve-following-fbi-investigation/89-ce7c9938-747c-429e-a70e-fd813c7d290a)] The organisation which was dedicated to providing financial aid to students from low-income households had allegedly misused millions of dollars in federal funding.

Unfortunately, financial mismanagement has claimed one more victim of the ongoing battle against poverty and inequality. While Feeding our Future can no longer provide needed services to its community, charities everywhere must remember to stay accountable and transparent in order to achieve their goals for a better future. [[1](https://books.google.com/books?id=D2JXuSs3kioC&pg=PA92&lpg=PA92&dq=Nonprofit+Dissolves+After+Federal+Investigators+Froze+Funding%22+Outro+Creative+Neutral&source=bl&ots=_UsVcHa0jM&sig=ACfU3U14qjf4_I_EML9yrCB5dB6DHDt3yA&hl=en&sa=X&ved=2ahUKEwjvmsOv28mAAxXsF1kFHdh-BhEQ6AF6BAgGEAM)]

Though the efforts of Feeding our Future may have ended here, it is our duty as citizens to remain vigilant in the effort for a better future. Too often, the means with which we can improve the lives of those in need, are the first to suffer from mismanagement and embezzlement. It is with renewed determination that management of resources like grants and donations become evermore stringent to ensure that no good cause is left overlooked. [[2](https://books.google.com/books?id=2vs-RNjRBFUC&pg=PA20&lpg=PA20&dq=Nonprofit+Dissolves+After+Federal+Investigators+Froze+Funding%22+Outro+Creative+Neutral&source=bl&ots=oKgN_MZFKt&sig=ACfU3U3Ktk1J1EP1pAacqNvOvPCUGuzduw&hl=en&sa=X&ved=2ahUKEwjvmsOv28mAAxXsF1kFHdh-BhEQ6AF6BAgrEAM)] Although Feeding our Future may be gone, its legacy remains- that even when up against great obstacles, it is possible to achieve great things through creative thinking, smart innovation, and most importantly, vigilance.