CAMDEN, Maine — An area charity whose former longtime president is being investigated for possible embezzlement took in at least $1 million more than it handed out over the past decade, a review of the organization’s financial records shows.
United Mid-Coast Charities Inc. stresses in all its fundraising drives and on its website that 100 percent of the contributions it receives are distributed to other local nonprofit organizations. The 43 board members are all volunteers, there is no paid staff, and an endowment pays all expenses, such as office supplies and services.
But a review by the Bangor Daily News of the organization’s federal income tax filings from 2004 through 2012 shows that United Mid-Coast Charities took in nearly $3.9 million in donations and gave out only $2.8 million.
When asked this week why the organization had given out less money than it took in, Eric Belley, who was elected on Aug. 20 to serve as board treasurer, said that is what an investigation aims to determine.
United Mid-Coast Charities announced Tuesday that it discovered the organization had been the victim of “substantial embezzlement of donations” by former president Russell “Rusty” Brace. Brace had served as president of the organization for 17 years before stepping down at the annual meeting on Aug. 20.
Brace has not been charged with a crime.
The possible embezzlement was discovered last week when a member of the board’s executive committee found a financial discrepancy and immediately confronted Brace. The organization is not saying whether Brace admitted to the embezzlement.
Repeated telephone calls to Brace’s home in Rockport this week have not been returned.
The organization has not said how much money it suspects has been embezzled, but it has indicated that it is working with local banks to determine the extent of the theft.
The BDN review of eight years of IRS filings between Oct. 1, 2004, and Sept. 30, 2012, shows that there were two years when United Mid-Coast Charities did hand out more than it took in. In 2011-12, the charity received contributions of $226,000 and handed out $331,000. Grants awarded also exceeded contributions received in the 2005-06 fiscal year.
In the remaining years, however, the organization took in far more than it gave out. In total over the eight-year span, the records show that $1,056,000 more was received in contributions than handed out. The most extreme case was in 2004-05, when United Mid-Coast Charities received contributions of nearly $1.1 million but gave out less than $500,000, according to its tax filing.
The review of the financial records also shows that the amount of contributions reported as being received by the organization has declined each year since 2007-08. In 2007-08, the organization reported taking in $703,000. The low point was in its last filing in 2011-12, which indicates only $226,000 was contributed to United Mid-Coast Charities.
Dennis Bailey of Savvy Inc. of Portland, a public relations firm hired by the charity on Sept. 26 to deal with an anticipated large volume of questions from the public, said that too much should not be read into the IRS filings. He said that some of the discrepancy between what was taken in and given out might simply be that money was received in one year and given out the next.
He also said some of the charities donors specify that the money go to the charity’s endowment fund or for operational expenses, which would explain why the amount given out would be less than the money taken in.
Bailey also cautioned that if money was contributed by the public to the charity but not reported by Brace, it would not show up on those income tax filings. He said while the investigation has just begun, there is no indication that anyone in the charity other than Brace was involved in the embezzlement.
In a letter posted on its website, new board president Stephen Crane, who was elected to the post on Aug. 20, said that the FBI has been contacted and that the organization has retained a lawyer — former U.S. Attorney Jay McCloskey.
Other than grants made to other organizations, United Mid-Coast Charities recorded other expenses in 2011-12 totaling $98,000, including $42,000 for bookkeeping and clerical work, $27,000 for printing and postage and $9,000 for supplies.
The tax forms show that $48,000 of the total expenses were paid to KAX Office Center, for services and accounting work that year. KAX was owned by Brace before the company was sold earlier this year.
The tax forms for preceding years show similar expenses, including similar payments to Brace’s KAX Office.
The largest beneficiaries of United Mid-Coast Charities’ grants in 2012 were Broadreach Area Childcare Services in Belfast, which received $40,000; the Penobscot Bay YMCA in Rockport, $32,000; and the Waldo County YMCA in Belfast, $25,000.
Bailey said Thursday that he expected the organization’s attorney would soon file a request to a court to place a lien on Brace’s properties. Brace and his wife own a home in Rockport, and he also owns Brace Management Group Inc., which owns an office building at 21 Elm St. The Elm Street property is assessed by the town at $1.6 million.
Records in the Knox County Registry of Deeds showed that Brace Management paid off a $126,5000 mortgage on the Elm Street property on May 17.