Maine Fundraising Federation Comes Up Short—Who Was Watching the Money?

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October 2, 2014; Bangor Daily News

United Mid-Coast Charities is the fundraising mechanism of a federation of charities in the Camden, Maine area. It says it has no paid staff. Its 43 board members—yes, 43—are all unpaid. An endowment pays for expenses such as office supplies. It says that 100 percent of the money it raises is distributed to grant recipients.

So how is it that the organization raised $3.9 million between 2004 and 2012 but only distributed $2.8 million? In late September, a board member happened to come across a “financial discrepancy” and confronted the 17-year president of the charity, Russell “Rusty” Brace, who had stepped down in August. Subsequently, the organization announced that Brace had engaged in the “substantial embezzlement of donations.” On Friday, United Mid-Coast Charities filed suit against Brace, claiming that over a thirteen-year period, he had stolen $3.8 million, “depositing checks payable to UMCCinto an account set up for Braces business, Brace Management Group.” As of Friday, no criminal charges had been filed, but new board president Steve Crane, in a statement posted on the organization’s website, said “law enforcement authorities, including the FBI, had been notified.”

In an odd move, the charity hired a Portland-based public relations firm called Savvy, Inc., whose representative, Dennis Bailey, suggested that differences between amounts raised versus amounts distributed in specific years shouldn’t necessarily be interpreted as specific evidence of wrongdoing, as money raised in one year might have been distributed the following year. However, Bailey, whose firm was described as a “crisis management” entity by the Free Press, did confirm “a substantial amount of money was taken over the course of many years.” The organization’s annual finances year-by-year were as follows:


Total revenues

Total contributions

Program services

Total expenses

















































































By our review, in only four of the years from 1998 through 2012 did the organization’s program services, that is, grant distributions, exceed total revenues. In some years, the gap was particularly sharp: in 1998, $470,010 in revenues compared to $150,915 in program services; 2005, with $1,066,493 in revenues but only $498,332 in program services; and 2008, with $726,401 in revenues but only $359,757 in program services. In these and other years, there is no indication that the following year’s program services were increased as a result of the previous year’s surplus.

Some fifty charities in Waldo and Knox counties look to the fundraising of United Mid-Coast Charities for support. Obviously, the deal in which donations to United Mid-Coast would go out 100 percent to the federation members didn’t happen as planned. Money seems to be missing, and whether or not Brace took that money, the pattern of expenditures over more than a decade suggests that the board of directors was asleep at the switch. On one hand, a 43-member board is usually a less than excellent governance structure—too much dissipated responsibility. On the other, it would seem that someone on the board over a period of many years—given turnover, many more than 43 people—might have been interested enough to look at the agency’s finances and notice the income and output discrepancies.

Whether or not the authorities end up pinning the embezzlement on Brace, there is no question that the entire board of United Mid-Coast Charities has an element of culpability for failing to provide anywhere near the fiduciary oversight that it should have.—Rick Cohen


  • Tom G

    But the funds that were embezzled were taken from the donor and deposited directly into Mr Brace’s account.

    Therefore the missing funds never would have been recorded as receipts on the books of UMCC.

    The issues you point out in this article are separate from the embezzlement.

  • Alison McKellar

    Thanks for this breakdown. This was the sense I had from a quick look, but reading the explanation from you makes it crystal clear. It is much easier to understand how Mr. Brace could have gotten away with his embezzling after looking at the records of what actually got reported. If the board was letting the organization operate while taking in so much more than they gave out, it’s clear that no one was asking many questions. With such a large board, in such a small community, you’d think that someone would have noticed discrepancies between donor lists and personal knowledge of friends and contacts who had donated. Is Mr. Brace the only one that engaged in any sort of fundraising?

    Having spent a lot of time in non-profit board meetings, it’s impossible for me to imagine these numbers not being scrutinized. What were they doing during their board meetings? What do they talk about? I live in Camden and would have really expected more from this community.

  • Dennis Bailey

    The writer of this article is uninformed and made no attempt to contact me or anyone at UMCC to discuss this matter. The figures he relies on come from United Mid-Coast Charities IRS filings which are public, but unfortunately the forms were not understandable by the writer.

    The most important point to make is all of UMCC’s finances are fully reviewed and audited, and all the money that was raised by UMCC and deposited to its account is fully accounted for. There is no “missing money” in the financial forms that this writer relied upon.

    Here’s what a full reading of the documents show: Over the years the organization received donations and it categorized them depending on the donors’ intent. Donations are classified as four different types:

    1. Unrestricted donations (non endowment) – these are donations that are made to the organization which can be used at the board discretion, and the organization has stated that all these donations are to be spent on grants to other charities.

    2. Designated donations – these are donations given to UMCC to be forwarded to a specific charity. In other words if a donor gives UMCC a donation with the stipulation that it go to the YMCA, for instance, it is UMCC’s responsibility to act as a pass-through entity and make sure the YMCA gets the funds. For tax reporting purposes this is not considered income, nor is the related payment to the YMCA considered a deduction. When the check is received a liability is incurred and subsequently paid. UMCC is simply as pass-through entity. The reporting is compliant with tax code.

    3. Endowment contributions intended for operating expenses – these are contributions made with the intent of helping to pay for the operating expenses of the organization. Contributions made to this endowment are not allowed to be used for anything but the operating expenses and cannot be expended for grants to other charitable organizations.

    4. Endowment contributions intended to be held in perpetuity – these are contributions made with the intent of increasing the endowment. Contributions made to the endowment are not allowed be expended for grants to other charitable organizations. Earnings, however, from the endowment are allowed to be used for the operating expenses of the organization with board approval.

    On the tax return referred to above, unrestricted donations and endowment donations are lumped together as required by the tax code and show on the forms as revenue. There is simply no distinction between the two types. And yet only some of this revenue is allocated for program services, the rest for expenses through the endowment fund, as the donors have stipulated.

    So there is no “missing money.” The forms simply reflect a timing issue of when the expenses were paid by UMCC and when they were reimbursed for the expenses through the endowment. UMCC did not transfer money out of the endowment at the exact time they paid for the expense. The transfer could happen any time after the expense was paid which could be several months and even carry over into the next fiscal year.

    We want to emphasize that UMCC is in the process of reviewing all accounts and expenses paid by UMCC. But we also want to emphasize that none of stolen funds in question ever made it into UMCC’s bank account, and as a result are not reflected in any of these IRS statements. The court suit explains that Mr. Brace diverted $3.8 million in donations over many years and deposited them in his own account, of which the UMCC board had no knowledge. Despite your headline, the directors of UMCC we’re all “watching the money.” But they can’t be expected to watch money in an account they never knew existed.