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When Sharing the Wealth, Let the Donor Beware : * Consumers: Following United Way's troubles, charitable organizations fear a possible givers' backlash, plus a recession, will dampen donations.

April 05, 1992|LYNN SIMROSS | TIMES STAFF WRITER

A fund-raising specialist, Judy Levy knows charities. She and others who track them believe the recession has had a major impact on nonprofit organizations, as has the United Way scandal.

"People are picking and choosing charities," says Levy, who has been producing fund-raising events for some of the best-known local and national charities since 1980. "Contributors are saying they used to give to six (charities), now they've cut back to four."

Donors "are asking tougher questions," she says. "People should do more investigative work to see what they are putting their money into."

In late February, United Way of America president William Aramony resigned after allegations surfaced that he had used charitable donations to finance a lavish lifestyle that included overseas trips on the Concorde, limousines and an expensive condominium on New York City's Upper East Side. Disclosure of his $463,000 annual salary provided another direct hit.

"Consumers and donors are very upset about a national charity being in the spotlight like this," says Bennett Weiner, vice president of the Council of Better Business Bureaus and director of its Philanthropic Advisory Service (PAS).

"This touches on issues of interest to all donors--salary issues, as well as other management ones. It's too soon to tell whether consumers are being more careful (with donations)."

Charitable organizations large and small are worried about a givers' backlash. Will the public just get mad? Or will it get even, and put away its pocketbook?

"The crisis is not over, either for United Way or the charitable community," says Brian O'Connell, president of Independent Sector, a Washington-based national coalition of more than 850 nonprofit organizations, foundations and corporations with giving programs.

O'Connell foresees increased public scrutiny of charitable groups "about salaries, perks, conflicts of interest and other aspects of their operations."

As a direct result of the unfavorable United Way publicity, he also thinks it is "possible, bordering on likely, we will have new hearings in Congress and state legislatures to examine behavior in the sector."

The Internal Revenue Service, which views unreasonable compensation of executives of nonprofit organizations as a serious problem, has an interest as well.

Under federal law, the IRS can fine charities that fail to provide adequate financial information to the public. In a worst-case scenario for a charity, such as misappropriation of charitable funds, the IRS can remove the organization's tax-exempt status.

A study published by the Chronicle of Philanthropy, a biweekly Washington paper that keeps tabs on the nonprofit world, may increase the public's ire.

The Chronicle's survey disclosed that more than 25% of 117 of the nation's largest nonprofit organizations pay their top executives $200,000 or more a year. That's all George Bush makes as President.

Although executive compensation at charities varies widely, most charity personnel historically have been paid less than their for-profit corporate counterparts. Top salaries have increased in many nonprofit organizations in the past few years in order to attract and keep skilled management.

"It's important that charities have boards of directors who really do oversee and scrutinize what's going on," says Independent Sector's John Thomas. "There may be some good to come from all of this, that the boards will see they need to be on top of it from a governing position. Being a board member (of a charity) is not just something you add to your resume. It should be taken seriously, not lightly."

But since the United Way difficulties surfaced, some observers believe that many charities' board members may put a lid on executives' pay.

"If you're the head of a big organization and haven't had a salary increase this year, you're probably not going to get one, and that's not right either," says Kenneth Albrecht, president of the National Charities Information Bureau in New York.

The NCIB evaluates national not-for-profit organizations and reports on which do or do not meet its code of nine standards for charities. Those standards include disclosure of financial structure, detailed use of funds, program activities and board governance, and are available to the public.

For its part, the Chronicle also chided some of the charities it surveyed for grudgingly providing their financial statements, even though federal law says they're supposed to.

Several charities required a Chronicle investigator to make appointments with their general counsels to obtain financial information; others refused access to copying machines, insisting the detailed reports be copied by hand. Among those requiring the reporter to hand-copy the material were the Council on Foundations, the Girl Scouts of the USA, the National Urban League, the National Gallery of Art and the Los Angeles County Museum of Art.

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