LYNNWOOD — The founder of The Hand Up Project pocketed over $10,000 in donations, the nonprofit alleged this week, the latest revelation about financial irregularities at an organization where the mission is helping people without homes and struggling with addiction.

A former employee of the south Snohomish County nonprofit also complained over a year ago to the state attorney general that founder Robert Smiley may have been unethical in taking other donations.

Months later, in an unrelated move, the organization stripped Smiley of financial oversight at a county-funded shelter program, emails show.

Despite those red flags, as recently as last month, the City of Edmonds awarded Smiley’s organization a grant to clean up homeless camps, then canceled the contract days later.

For years, local officials and others lavished praise on The Hand Up Project. Smiley’s story, as someone who was sober from cocaine and previously homeless himself, resonated in particular.

In 2020, the nonprofit brought in over $1 million to work with local governments to help people struggling in Snohomish County, tax filings show.

The Hand Up Project reported Thursday the stolen funds had been discovered in a recent internal investigation. It led the group to report its findings about Smiley to the Snohomish County Sheriff’s Office.

“We felt we had an obligation to do that,” according to a statement released by the organization.

The Hand Up Project also found other “significant” donations Smiley allegedly took, but insisted last week that Smiley’s alleged actions “had no relation or effect on any of our community offerings.”

Detectives continued to investigate this week, sheriff’s spokesperson Courtney O’Keefe said.

“I’m baffled by why it took so long (for The Hand Up Project) to properly investigate those claims,” said Laura Reed, the former employee who filed the complaint with the state attorney general’s office.

In a Facebook message to a Daily Herald reporter, Smiley said “not a dime was pocketed it all went to those in need.”

“I am also known as being the worst businessman out there,” he added, “my goal was always to help those in need and that’s really all I care about.”

Late last month, the Lynnwood-based organization with nearly 20 employees, cut ties with Smiley and his wife Theresa amid the investigation. Theresa Smiley was the nonprofit’s treasurer, tax filings indicate.

The ousted founder wrote in a message his time is “better spent being of service to my fellow man and doing whatever it takes to let them feel Worthy so that they can join Society in a productive manner,” instead of spending his life worrying about accusations.

‘While I am not perfect’

In October 2021, Smiley turned to social media, openly raising money for a personal vacation. But instead of directing people to his own PayPal or Venmo accounts, Smiley urged people to donate to accounts the nonprofit used to accept contributions, according to the complaint Reed filed with the state attorney general.

Reed had left the organization a few months earlier over concerns about how The Hand Up Project was running a shelter program at the Days Inn on Everett Mall Way. She now worried about the mixing of personal funds with those used for the nonprofit’s work.

“At that point I basically have to trust Robert and Theresa to do the right thing and do the right accounting and I started to add up concerns,” Reed said.

In the Oct. 18, 2021, complaint, she noted Smiley “may be misusing funds and engaging in unethical behavior.”

“I believe that this matter needs more investigation,” Reed added.

In a written response the following month, Smiley denied wrongdoing and claimed the complaint was “motivated by a personal grudge.” He acknowledged receiving personal donations on the organization account, but said all were properly recorded. He described his social posts as “not unethical or even ethically murky.”

“Literally every donation and expense is scrutinized by the bookkeeper,” Smiley wrote at the time. “While I am not perfect, there are many levels of scrutiny because we are attempting to do things honestly and right.”

He pledged even further scrutiny going forward, including requiring approval from the nonprofit’s executive committee before posting on social media.

“While I do not believe I did anything wrong,” he wrote, “our organization implemented checks and balances prior to this complaint, and is implementing even more after this complaint to avoid the appearance (of) unethical behavior.”

‘Deeply concerned’

Through it all, local governments continued lining up to work with The Hand Up Project.

In October, the nonprofit signed a contract with the City of Monroe to use federal funds to help homeless families in six rooms at a Monroe hotel, public records show. The two-year agreement was worth over $200,000.

Monroe Mayor Geoffrey Thomas said The Hand Up Project’s issues “deeply concerned” him. The city has scheduled a meeting with the nonprofit to learn how they’re being resolved.

“We will then decide on how these issues affect our existing agreement and ongoing relationship,” Thomas said in an email Thursday.

Last month, the City of Edmonds signed a $20,000 agreement with The Hand Up Project for cleaning up homeless camps and providing help to residents in need. But last week, the city canceled the contract citing “recent information discovered regarding the organization’s founder.”

Snohomish County’s contract with the nonprofit for a 28-person shelter program continues through June, according to the county.

“Our priority is ensuring the nearly 30 vulnerable individuals currently housed through this program remain housed and have access to needed support services,” county spokesperson Kelsey Nyland wrote in an email. “Ending the contract early would push these individuals back into street homelessness and lose progress made in connecting them to safer, more stable futures.”

In June, the shelter formerly housed in the Days Inn on Everett Mall Way moved to the Motel 6 on 128th Street SW. The county has since bought the Days Inn to eventually turn into emergency housing, but recently it was reported the motel is contaminated by meth.

Jake Goldstein-Street: 425-339-3439; jake.goldstein-street@heraldnet.com; Twitter: @GoldsteinStreet.