Guardians Foundation employee may have embezzled $1 million, Spokane officials say

An employee of the Guardians Foundation, a nonprofit that operates two Spokane homeless shelters, may have embezzled as much as $1 million according to city officials, but the Guardians’ CEO says the dollar amount is probably much lower.

Spokane City Council members Karen Stratton and Lori Kinnear are calling for a criminal investigation into the possible theft.

“It’s very important that the community and the citizens and the local government know where the money has gone,” Stratton said. “If somebody has taken it, when are we going to investigate and get to the bottom of it?”

The Guardians Foundation operates the Cannon Street homeless shelter on the outskirts of downtown near Sunset Boulevard and the Trent Resource and Assistance Center on Trent Avenue near Spokane Community College.

The Spokane City Council in September 2021 signed a $1.9 million contract with the Guardians Foundation to operate the 72-bed Cannon Street shelter through June. The council in August approved a $6.6 million contract with the organization to operate the 100-plus bed Trent shelter through 2023.

Guardians Foundation CEO Mike Shaw said his organization discovered the missing funds as part of its annual audit.

Shaw said the audit began uncovering abnormalities in the Guardians’ finances in July.

He said a Guardians’ official appears to have been transferring money into a personal account, doing some “weird” things with checks and using the Guardians’ PayPal to pay personal bills. Shaw said the improper use of funds appears to have begun a year and a half ago.

“The individual conducting these wire transfers is the only one who had access to be able to do it,” he said.

Shaw said he didn’t want to share the individual’s name until a police investigation into the situation has been completed.

“This individual was extremely valued and trusted and therein lies the pain,” Shaw said. “I’d rather get stabbed in the alley by a complete stranger.”

The employee accused of taking the money no longer works for The Guardians Foundation.

Shaw said the employee had attempted to cover their tracks by manipulating the Guardians Foundation’s records in QuickBooks. Shaw said once the audit uncovered the employee’s behavior, the employee attempted to obstruct the investigation by attempting to delete records of the transactions.

It’s not clear precisely how much money may be missing. Shaw said he estimates the number is far closer to $100,000 than $1 million and said Kinnear and Stratton are being “hyperbolic” by mentioning the higher figure.

“It was extremely inappropriate to say any number whatsoever,” Shaw said.

It’s also not yet clear whose money is missing. Shaw said the Guardians Foundation gets its funding from a “hodgepodge” of sources. The money could have been the Guardians’ own money. It could have come from Spokane, or even the federal government through the Department of Housing and Urban Development.

“Those are perhaps taxpayer dollars,” Kinnear said. “We don’t know if those are state dollars, federal dollars, whatever.”

Stratton said she learned of the possible embezzlement on Friday night.

City communications manager Kirstin Davis said the mayor’s office learned of the possible embezzlement last week and took immediate action. Davis said she was unsure which day of the week the mayor’s office learned of the alleged fraud.

In a news release, Davis said the Guardians Foundation has filed a police report and that Mayor Nadine Woodward has “ordered an internal audit of invoices submitted to the City by the Guardians and payments made to the organization.”

Spokane Police Department spokeswoman Julie Humphreys said the department’s investigative unit “will begin an inquiry” into the alleged fraud. She said The Spokesman-Review would need to file a public records request to see the police report.

Stratton and Kinnear stressed that an audit led by the mayor’s office would be insufficient.

“We want answers, we don’t just want a forensic audit,” Kinnear said. “We want an investigation by the police.”

Stratton said she’s concerned the mayor’s office didn’t immediately alert the City Council of the possible embezzlement. She said she learned of the incident through “two separate individuals in the community,” not the mayor’s office.

“I’m saddened that we don’t have the transparency and trust,” Stratton said.

Shaw said he believes he reported the embezzlement to the Spokane Police Department around Sept. 29 and told city staff about two weeks ago. He said he waited to report it to the city until the organization’s investigation “was thorough and complete.”

After learning about potential fraud Friday evening, Stratton said she told Spokane City Administrator Johnnie Perkins and City Council President Breean Beggs. Perkins called City Council members over the weekend and informed them of the situation, Stratton said.

Stratton said she fears the potential embezzlement could slow down the city’s homeless response efforts at a critical time.

“The City of Spokane is already in a fragile homeless situation,” Stratton and Kinnear wrote in a news release. “To add fraudulent activity weakens our progression and frankly is unacceptable.”