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United Way board keeps audit results confidential

  • Updated

Financial consultants have determined what went wrong at the United Way of Tucson and Southern Arizona, but donors may never know the details of what they discovered.

The agency's board of directors has decided not to release reports from two auditing firms hired to find out why United Way lost track of its cash flow and fell months behind on payments to dozens of local charities serving the needy.

Board chair Ron Sable, who pledged in January to make the auditors' findings public, now says the board has decided the reports are "private" - an about-face that raised eyebrows among national experts in nonprofit management.

One of the reports was presented to the board last month. The other is pending.

"This could haunt them," nonprofit expert Laura Otten said of United Way's decision to keep the reports - paid for with $51,000 in public donations - under wraps.

For a nonprofit to lose track of its finances is "a very serious matter," said Otten, director of the Nonprofit Center at LaSalle University in Philadelphia.

"In a situation like this, where the cloud has already shrouded their organization, they should want to bend over backwards to show the public what happened and what they are doing to fix it."

United Way hired the auditors late last year to assess the agency's financial picture after senior management suspended more than $400,000 in quarterly payments owed to 29 local charities.

Officials said at the time that payments were frozen because they weren't sure how much unrestricted cash was on hand to make them.

Unrestricted money is that which donors hand over without any conditions on how it can be used. Most United Way donors don't give that way - instead they restrict their gifts by spelling out where they want their money to go.

The frozen payments only involved unrestricted donations. But concern about United Way's problems has spread to the much larger pool of givers who restrict their gifts.

Pima County, for example, recently dispatched its own auditors to United Way to check whether restricted donations made by county employees were getting where they were supposed to go in a timely manner. They were, the county found.

However, some agencies receiving unrestricted donations waited for four months and eventually got paid in January.

Since then, United Way has been paying on time and now is current on all its obligations, Sable said.

"We have righted this ship," he said. "It turns out we're in pretty good shape."

He said the cash crunch occurred mainly because United Way was not reimbursed promptly by a state agency for work done to expand a children's program.

Sable e-mailed the Arizona Daily Star a list of improvements he said have been, or will be, made. They include:

• Better financial reporting to show the board how much money is in different accounts, especially the unrestricted account.

• Changes to investment policies, which were not updated in a timely manner when the economic downturn began. As a result, United Way lost more than $1.4 million in its last budget year.

• A stricter conflict of interest policy, still being developed. The Star has reported that United Way paid more than $100,00 in recent years to a now-defunct marketing firm owned by the wife of the board's past president and current secretary, Steve Banzhaf.

• A policy change so that when United Way gets grants to start new programs, it won't end up adding to the agency's overhead.

• Elimination of the senior vice-president position, which paid more than $116,000 in salary and benefits. Eight other positions also have been cut.

• Tighter budgeting to reduce expenses. Workplace giving, which topped $8 million last year, is expected to decline this year as layoffs leave some unable to honor their pledges.

Besides financial pressures, United Way recently has seen high turnover in its senior ranks.

Longtime President and CEO Ed Parker, who was paid a salary of more than $180,000 a year and $20,000 in benefits, was due to leave June when his contract expired. Instead, he left in February and is being paid until June.

The senior vice-president whose job has now been eliminated resigned in March. And United Way's last finance chief, hired in November, quit three months later.

Sable said United Way expects to name a new CEO by June and find a new finance director soon afterward.

Elizabeth K. Boris, director of the Center on Nonprofits and Philanthropy, part of the Washington, D.C.-based Urban Institute, said the number of staff departures suggests United Way's board "has done some housecleaning."

The turnover, coupled with questions about finances, make it crucial for the agency to be forthcoming about its problems, she said.

"Nonprofits live on the trust they build with their donors. When they compromise that trust by not being fully open about what's going on, they compromise their most precious asset."

Sandra Miniutti, spokeswoman for New-Jersey-based Charity Navigator, a national organization that evaluates nonprofits, agreed.

She said agencies seeking public donations "have to be even more aboveboard than other organizations."

As it stands, she said, United Way "is leaving everyone to wonder what went wrong."

The Roster

United Way's board of directors

• Ron Sable, chair, Concord Solutions Ltd.

• Larry Finuf, chair-elect, Wells Fargo

• Christine McNamara, treasurer, Handmaker Jewish Services Inc.

• Steve Banzhaf, secretary, Bank of America

• Lou Albert, Pima Community College

• Clarence Boykins, Tucson Black Chamber of Commerce

• Rosalva Bullock, Tucson Unified School District

• Bennett Burke, Southwest Gas

• Debe Campos-Fleenor, Campos-Fleenor Allstate Insurance

• W. Mark Clark, CODAC Behavioral Health Services

• Joe Coyle, Ritter International

• Kenneth F. Day, LSI

• Neal A. Eckel, Durazzo & Eckel, P.C.

• Dennis Elias, Carillos Tucson Mortuary

• Linda Hatfield, AFL-CIO Local 7000

• James Holmberg, community volunteer

• Mike Jameson, Tucson Newspapers

• Richard Johnson, Oro Valley community volunteer

• Adaline Klemmedson, University Medical Center

• Kelly Langford, Tucson Urban League

• Alexandra Master-Judge, Raytheon Missile Systems

• Randy McDonald, Citigroup Tucson

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