After falling months behind on payments to help the needy, the United Way of Tucson and Southern Arizona is promising to fix its finances quickly and repair relationships with the local charities it funds.
The United Way also will conduct an ethics review of how contracts are awarded after paying more than $100,000 in recent years to a firm owned by the wife of the agency's past board chair.
Ron Sable, head of the United Way's board of directors, said despite recent problems, the community still can have confidence in the agency that has raised tens of millions of dollars for worthy causes over the years.
"I believe (United Way) has an enormous impact in this community, and that hasn't changed because of the current situation," Sable said in a meeting Thursday with Arizona Daily Star's editorial board.
The newspaper reported last week that 29 local charities have been waiting since October for more than $400,000 they collectively are owed for programs to aid at-risk children, senior citizens and low-income families.
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Sable said the United Way intends to make partial payments to the charities "sooner rather than later" and has hired an auditor to help develop a new cash-flow management system to prevent future problems.
United Way officials said the past-due payments haven't been made because they aren't sure how much unrestricted cash is available to make them - an explanation that is perplexing to experts in charity management.
"If nobody in that organization knows how much unrestricted money they have, to me that is quite amazing," said Laura Otten, director of the Nonprofit Center at LaSalle University in Philadelphia.
"That's just so basic that any executive director should be able to roll the number off of his or her tongue."
Del Galloway, a spokesman for United Way's national headquarters in Virginia, said he wasn't aware of any other United Way in the nation with the type of cash-tracking problem Tucson's United Way is having.
Unrestricted money is that which was donated without any conditions, which means it can be used for any purpose. The United Way also receives conditional money, such as grants and donations earmarked for specific charities, which has been paid, officials said.
Sable and other United Way officials who met with the Star said they couldn't say for certain how the cash crunch came to be. Several factors likely played a part, they said.
For example, because of the recession, United Way experienced more than $1 million in realized and unrealized investment losses last year, money that could have helped provide a cushion against a cash shortage.
But in the end, Sable said, the bad economy "is not an excuse for what happened."
United Way did "a terrible job" keeping charities informed of its cash problems, Sable said. He pledged to make the auditor's findings public - possibly by month's end - so donors and affected charities can be reassured that the United Way is back on track.
Otten and other charity experts also question the United Way's wisdom in awarding more than $100,000 of business to Monsoon Marketing, a firm owned by Lori Banzhaf, the wife of Steve Banzhaf, a local Bank of America executive and past chair of the United Way board.
The now-defunct company, which planned and managed special events, received about $115,000 between United Way's 2005/2006 budget year and its 2007/2008 budget year, the Arizona Daily Star found in a review of the agency's most recent Internal Revenue Service filings.
During that time, Steve Banzhaf chaired United Way's human-relations committee, and later, its board of directors.
United Way spokesman Dan Duncan said the agency followed its policy - which requires at least one other bid for contracts over $20,000 - before awarding the work. Steve Banzhaf disclosed his conflict of interest and took no part in discussions or voting on the matter, Duncan said.
Lori Banzhaf had no comment when contacted by the Star on Friday.
While there's nothing illegal about awarding work to a board member's spouse with proper disclosure, "it's not very smart," said Daniel Kurtz, a former New York State assistant attorney general in charge of charities, who has written three books on nonprofit practices and conflict of interest.
United Way's bidding process "is not very rigorous" if it allows a minimum of two bids, Kurtz said. And even when everything is above board, he said, hiring relatives of board members is rife with potential for negative public perception.
"You want to avoid it because it doesn't smell right," said Kurtz. "Why create a problem for yourself?"
Hiring relatives also throws a wrench into the arms-length relationships required for good charity oversight, he said. If the agency isn't happy with a relative's services, for example, canceling the contract can cause tensions on the board.
Sable said United Way's ethics committee will review the matter in light of experts' concerns.
"I believe (United Way) has an enormous impact in this community, and that hasn't changed because of the current situation."
Ron Sable,
head of the United Way's board of directors
Contact reporter Carol Ann Alaimo at calaimo@azstarnet.com or at 573-4138.
