Related story: Parker has run United Way since '76 It's not all local The United Way of Tucson and Southern Arizona promotes itself as a local health and human services champion, but the dollars it collects also go to animal causes and faraway places, such as a pig shelter and an Italian boys' home. * Pigs A Lot Northwest shelter for potbellied pigs * African Wildlife Foundation Agency in Kenya * Boys' Town of Italy Inc. Home for boys Marketing the numbers Click here to see an example of how the local United Way fails to follow national guidelines on financial reporting for charities. Tell us what you think * What do you think of donor choice? * What do you think of United Way money going to causes outside of Tucson? * What questions do you have for the United Way? E-mails should contain two to four sentences, your name and phone number for verification and may be sent to: thinkq@azstarnet.com Phone messages of no more than two minutes may be called in to 573-4209. Be sure to spell your name and leave a phone number for verification. Respondents are encouraged to include ages and occupations. Submissions become Star property. How the Star reported this story We reviewed audited financial statements and annual reports provided by United Way for 1995 to 2000, as well as IRS filings, pledge forms and minutes of some board meetings. After repeated requests over a three-month period, United Way also provided spending breakdowns for recipient charities based on location and type of service. Dozens of interviews were conducted with past and current board members, staffers, member agencies, and several other United Ways nationwide.

At least one of every five dollars distributed by the local United Way last year either left the area or went to agencies that don't help the needy.

The United Way, whose mission is to advance "the area's health and human services agenda," handed out more than $2 million to out-of-state causes such as a boy's home in Rome, Italy, and to local organizations such as a shelter for pot-bellied pigs.

The spending is part of a pattern that reveals an agency quick to trumpet its fund-raising successes but reluctant to reveal many of its business practices - practices that increasingly are in conflict with its stated purpose.

A three-month investigation of United Way by the Arizona Daily Star also found:

* In two of the last three years, United Way publicly overstated the amount of money member charities received by as much as $1.9 million.

* Nearly $1 million of the money that United Way counted toward its local campaign last year was actually raised at a company in California and spent on charities there.

* United Way does not follow at least five of the standard charity business practices recommended by watchdog groups in areas such as public accountability and accurate disclosure of financial information.

* The agency has been quietly taking from some donors' gifts more than the advertised 13 percent rate for administrative overhead, while other donors get discounts and pay less.

The local organization reported raising $15 million last year, more than ever before, from about 90,000 corporate and individual donors. It distributed $10 million to agencies, including the $2 million to out-of-town groups or those not helping the needy. It spent the rest, about a third, on overhead, its own programs and reserves.

United Way President Ed Parker said out-of-town giving is due to more donors' choosing to direct gifts to favorite causes rather that letting United Way decide how to spend it. That's left United Way with a smaller pool of money to distribute to its 69 local member agencies.

In cases where United Way didn't follow recommended charity standards, Parker said it was because he didn't know the standards existed until a reporter recently told him. Changes are being made to meet the standards in the future, he said.

Until this week, Tucson's United Way had never publicly mentioned the out-of-state giving trend.

Its annual report to the public last year listed 560 charities that got money - nearly all of which were located in Pima County or elsewhere in Arizona. Hundreds of out-of-state recipients were not included on the list.

Where financial discrepancies occurred - such as the case where member agencies got $1.9 million less than United Way said - Parker said it was largely because of the complexity of United Way's financial operations and timing differences between when money is collected and when it's spent.

"It was definitely not done with the intent to mislead anyone," Parker said, adding any misstatements will be corrected or are already being fixed.

"Do we make mistakes? Yes. Can we do things better? Yes. We're not perfect, but we can improve," said Parker, who last fiscal year was paid just over $136,000.

Such assurances do not satisfy a growing number of critics questioning United Way practices.

"The truth is not being put out there," said Gail Gurney, executive director of the Girl Scouts Sahuaro Council, one of dozens of United Way member agencies whose officials are seeking answers about financial discrepancies and what they see as inadequate public disclosure.

"The United Way isn't giving people a clear picture of what's really going on," Gurney said. "All you hear about is how they raised all this money. They never say that some of it isn't staying in Tucson."

Beth Walkup, who has two decades of nonprofit management experience and sits on United Way's board, said she was surprised to recently learn from United Way staffers how much money left town.

"I believe the average citizen thinks that if United Way raises $15 million, that's money that's going to stay here," said Walkup, the wife of Tucson's mayor.

Walkup, who serves on more than 20 local hospital and charity boards, said she was shocked to recently learn that Tucson's United Way does not comply with several nationally recommended standards aimed at ensuring that charities give the public an accurate picture of their operations. Such standards are put out by the National Charities Information Bureau, the Better Business Bureau and other watchdog groups.

Walkup wondered why United Way wouldn't know about such standards when they are widely used by local charities United Way oversees in its member agency system.

Out-of-town money grows

The National Rifle Association Foundation, an African wildlife fund, and food banks and homeless shelters from Los Angeles to New York City were among the more than 1,300 out-of-town agencies that got money through the Tucson United Way.

Out-of-town giving has been quietly growing since Tucson's United Way began at some point to allow wide-open donor choice - apparently in violation of its own written policy, which says money can go only to local health and social service charities.

Some United Way affiliates nationwide, including Valley of the Sun United Way in Phoenix, now use similar restrictions to keep charity dollars local.

The local policy was passed in 1982 by United Way's board of directors. The 19-year-old document was all Parker could produce last month when the Star asked for a copy of the most current donor choice policy.

In practice, though, the agency has for years been letting local donors give to almost any agency anywhere, so long as recipients are recognized by the U.S. government as tax-exempt non-profit groups.

In a July 14 interview, Parker said he didn't know when the switch to wide-open choice happened because the practice evolved over the years and as far as he knew "it was done informally."

Nancy Shlegel, Tucson United Way's vice president of finance, was also asked since late June for a current donor designation policy and said that she knew of no other written policy but the one from 1982.

Five days ago, Shlegel produced minutes from a January 2001 United Way board meeting that said the board had voted to "reaffirm" its donor choice policy "which states that United Way accepts contributions designated to any organization."

Asked for a copy of the policy that the board had reaffirmed, Shlegel could not produce one and said she did not believe there was such a policy in writing.

Parker said donor choice was expanded because it seemed to be what many donors wanted.

"Donors were telling us loud and clear that they wanted choice and we responded to that," he said, adding that United Way tries to encourage local donations by giving first mention on pledge cards to its Community's Greatest Needs Fund.

Parker said some employers, such as the federal government, demand donor choice as a condition of participating in the United Way campaign. For example, he said, thousands of area federal employees, including those at Davis-Monthan Air Force Base, form a large group of donors who moved here from elsewhere but choose to direct their charity dollars to causes back home.

Parker said that even if those donors now give out of town, there may eventually be a local benefit because sometimes they can be persuaded to give to local causes as well.

Other United Way affiliates nationwide have seen similar trends in pass-through giving. Some, concerned about erosion of their local social safety nets, have responded by tightening their rules to keep such dollars at home.

Others have thrown the doors open to unlimited donor choice.

In the Washington D.C. area, for example, where a mammoth chunk of the work force is made up of federal workers, the local United Way has largely become a pass-through agency for donor dollars.

More than $88 million was raised last year by the United Way of the National Capital Area, but 90 percent of the money was earmarked to causes outside the United Way system, marketing director Tony DeCristofaro said.

Less money given

In two of the past three years, Tucson's United Way gave less money to its member charities than it said it did.

United Way's 1999 annual report - a yearly account to the public of agency operations - contained a pie chart that said $7.9 million was distributed to member agencies. The actual total that year was $6 million - $1.9 million less, according to United Way's audited financial statements and breakdowns provided by the United Way finance staff.

In 1998, the annual report said United Way paid out $6.7 million to member charities when the actual figure was $6 million, a difference of $700,000.

Such discrepancies, which have upset member agencies, have arisen in part because of United Way's failure to follow nationally recommended charity standards.

For example, United Way routinely uses unaudited financial estimates in its annual reports - a practice frowned upon by charity watchdogs because unaudited numbers have not been verified for accuracy by an independent outside source.

Parker said he considered the annual report a "publicity piece. It is not intended to provide in-depth financial information."

Watchdogs also say a charity's annual report should disclose net worth and tell the public that audited financial statements are available on request. Annual reports should also cover the same periods as audited financial statements and should present expenses in the same categories as the audit, according to the National Charities Information Bureau guidelines.

United Way hasn't done any of those things. Parker said the agency will change the practices in future annual reports.

Overall, "there should be no material omissions, exaggerations of fact … or any other practice which would tend to create a false impression or misunderstanding," according to the NCIB.

A code of ethics passed last year by the local United Way board contains a similar statement.

"We maintain the highest standards of excellence and accountability, including prudent use of finances, and fair, accurate and honest disclosures of information," the code of ethics says.

Parker said he regrets if past practices have caused confusion. "It's just been done like this for years and years and years and it was never suggested to do it any other way," he said.

Susan Gilmore, a vice president at United Way of America, the umbrella group that provides financial guidance, policy advice and marketing help to local United Ways nationwide, said standards like the charity information bureau guidlines should be "no-brainers" for any United Way.

"We've always believed that we're the best of the best, the premier non-profit in every community," Gilmore said.

Varying overhead charges

While the United Way advertises that it charges 13 cents on the dollar for administrative overhead costs, it actually charges some donors more than that and others less.

Some Tucson workplaces get deep discounts on the fee United Way normally charges donors to cover its overhead costs.

As a result, employees at other firms may unknowingly have more of their gifts deducted for overhead in order to make up for the donors getting bargains.

Officials at United Way of America said they do not endorse the discount practice and had never heard of it being used by any other United Way.

The city of Tucson, for example, pays the local United Way 7.5 percent for overhead - half the regular going rate - for donations made by City Hall staffers, said Emily Nottingham, the city's assistant director of community services.

At one Tucson workplace, employee donors do not pay any United Way overhead at all, according to minutes of a United Way finance committee meeting last fall.

The name of the workplace that pays nothing was blacked out by United Way when a reporter requested a copy of those minutes.

Wealthy individuals who make large donations may also have less than 13 percent taken from their gifts for overhead, said Shlegel, the Tucson United Way's finance chief.

She agreed that when some donors get discounts, others may pay more for overhead so that United Way can cover its administrative costs.

Who pays more? Shlegel said it's the person who gives directly to United Way's general fund, the shrinking pool of donor money that United Way divides among its member agencies.

Philip Jones, spokesman for United Way of America, said the national organization does not endorse giving overhead discounts to different workplaces.

"I would think that's getting into dangerous territory," said Jones, referring to the perception of unfairness that might result.

Some local United Way board members seemed to share that concern when the discount issue came up at the agency's finance committee meeting last November.

Richard Hammel, a Tucson accountant who at the time was serving as United Way's volunteer treasurer, is quoted in the minutes of that meeting saying: "United Way is not being truthful to the giver as to how much and who pays for these administrative costs."

The minutes also said that "United Way cannot continue to give away to some and charge others. Administrative costs need to be spread evenly to everyone involved - from the 'little guy' to the wealthy." That statement was not attributed in the minutes to any particular speaker.

Hammel, who left the United Way board last month when his term as treasurer expired, declined to be interviewed in depth for this story. He did say, "When the finance committee was made aware of some of the inconsistencies, they did their best to correct them for the future."

Rick Krivel, a local National Bank of Arizona executive who until June 28 was chair of United Way's board of directors, was not interviewed for this story because he did not return repeated calls to his office.

Parker, the United Way president, said only two local workplaces now get such discounts and said the practice will soon be discontinued.

California cash

Nearly $1 million of the money that helped the local United Way reach its campaign goal last year was actually raised at a company in California.

In March 2000, Tucson's United Way told the public it had just barely managed to meet its record-breaking $15 million fund-raising goal. What it didn't say is that nearly $1 million of the money came from California and was later sent back to the Golden State.

The money in question - $914,074 raised by employees at a Raytheon plant in Calfornia - stayed in Tucson only long enough for the local United Way to redirect it to more than 400 California charities.

Joe Coyle, an executive at Raytheon Missile Systems in Tucson who was fund-raising chairman for Tucson's United Way at the time, initially told the Star he had no knowledge of the transaction.

The next day, Coyle confirmed in an e-mail that it had occurred when Raytheon was consolidating operations to Tucson from California.

Coyle said the company asked the Tucson United Way to disburse the California money because the firm's own accounting systems were backlogged at the time.

Raytheon didn't count the out-of-state money as part of its local gift to Tucson's United Way because "it was essentially a pass-through," Coyle said.

Parker said he did not think it was misleading to the public to tally the California money as part of the local campaign even though it was just passing through. He said it was done as a favor to Raytheon.

"It wasn't put in to hit a magical goal. There was really no reason to do that," he said.

Rick Myers, a vice president at IBM in Tucson who will lead the United Way's next fund-raising campaign, said he was not aware of some of the practices in question until recently. He said he and other members of the United Way volunteer board of directors are strongly committed to fixing any problems at the agency.

"I think the board will do anything it takes to make this better. We don't want to give people a reason not to give," Myers said.

One of the board's first tasks will be to try to ease the friction that's developed between Parker and many of United Way's member agencies.

* Contact Carol Ann Alaimo at 573-4138 or at caalaimo@azstarnet.com
* Star business manager Charles R. Rochman and reporter Enric Volante contributed to this story.

Monday, July 23
· Member agencies cite mistrust, friction
· United Way member agencies: gainers and losers

Tuesday, July 24
Promoting an image of excellence

Letters to the editor

Star editorial: United Way astray

Friday, July 27
Follow-up: Charity officials 'circle the wagons'