United Way Official Resigns, Alleges Inflated Numbers

By Jacqueline L. Salmon
Washington Post Staff Writer
Monday, May 22, 2006

The chief financial officer brought in to help clean up the scandal-rocked local United Way has resigned in frustration, saying that the organization is exaggerating how much money it is raising and that the bad habits she tried to fix persist.

Kim Tran said she left in part because of the problems. The charity's marketing manager, who confirmed her allegations, also has left, and auditors have pointed to significant problems in how the organization keeps its books. Final figures show that despite its cheery public announcements, the charity has failed to pull itself out of the fundraising nosedive that started three years ago after a spending scandal.

Some employees and former employees have also expressed resentment at what they regard as chief executive Charles Anderson's generous salary increases and the more than $50,000 he received in deferred compensation earlier this year -- even as rank-and-file workers saw benefit cuts and only modest raises.

The charity's leaders deny any allegations that fundraising totals have been inflated. United Way officials say they have rectified most of their auditors' concerns and that the organization is recovering in spite of past troubles.

"There is no question that we are now in a turnaround mode," said Ric Edelman, chairman of the United Way's 22-member board of directors. "We find that there is an awful lot of excitement among employers and donors that we talk to."

The nonprofit organization, which raises millions of dollars for more than 800 local and national nonprofits through its annual workplace fundraising drive, was devastated in 2003 after articles in The Washington Post and an internal investigation uncovered questionable spending by top leaders, bloated overhead costs and other financial improprieties.

Oral Suer, the former chief executive of the organization, pleaded guilty in 2004 to stealing nearly $500,000 from the charity and its pension fund and served two years in prison before being released earlier this year.

Tran, who was hired in 2003 to clean up the financial operation, quit in March after she said Anderson instructed her to include $1 million in questionable corporate donations in the charity's announced total for the 2004 campaign, which ran until March of last year. Two other employees, including marketing and communications chief Anthony Owens, who also left the organization in March, confirmed Tran's account.

Tran said she had been given no satisfactory documentation for the donations. She said she resigned after staying long enough to make sure accountants used the correct numbers when they finished auditing the organization's books earlier this year.

"I don't like being told what to [include], especially when I didn't see the basis for booking it," Tran said.

Anderson, several employees say, wanted to push up the publicly announced fundraising total to help polish the organization's image with the public, its board of directors and its national body, the United Way of America.

Anderson "literally told me, 'I want that [total] as high as possible,'" said Tran, who was director of financial planning and reporting for the national United Way of America before moving to the local United Way shortly after Anderson arrived in 2003.

Charity watchdog groups say such an embattled organization can ill afford another controversy.

"When you have an organization like them coming out of a pretty rough situation in terms of the public's trust in what you are doing," said Art Taylor, president of the Better Business Bureau's Wise Giving Alliance, which evaluates charities, "you have to take extra measures to be sure that everything is happening in a way that people can be comfortable with."

"If not, you're going to have a hard time convincing people to support you," Taylor said.

The charity reported in a news release and at a rally last summer that it had raised $39,007,675 in pledges during its 2004 campaign -- the most recent period for which it has announced results -- a modest increase over the previous year.

But according to the organization's audited results released in March, the actual total pledged came to $38.1 million, a 1.6 percent decrease from 2003. Auditors reached that sum by looking at checks, cash and completed pledge cards from corporations.

United Way officials say that last year's number was actually a "projection" because some companies had not yet told the charity how much their employees had raised and the charity had to estimate.

"At the time, we felt [the total] was a pretty conservative number," Anderson said. He said the United Way commonly used projected results, which often differ from the audited results. But he added that the organization is dropping the practice and will wait for detailed reports from all participating companies. He insisted the policy change was not because of Tran's complaints but because of new guidelines from the United Way of America.

The disputed campaign results, according to charity documents and interviews with board members and former employees, reveal an organization still under great strain, three years after the financial scandal.

From a high of more than $90 million in 2001, the charity's fundraising went into a free fall. But it appeared to begin a turnaround when contributions rose to $38.7 million in 2003, according to audited results. Audits reveal the drop in 2004, and that trend is expected to continue in numbers from the 2005 campaign when they are tallied, United Way leaders warned.

Furthermore, for the past three years, the charity has been subsidizing its budget with millions of dollars from its dwindling operating reserves, board minutes show. Those reserves are now depleted, the minutes show. To raise cash, last week the organization sold its 39-year-old Southwest Washington headquarters building to the District for $15.3 million. The charity had been leasing the building after moving to the Board of Trade Building in Northwest.

The charity's auditing firm, McGladrey & Pullen LLP of Bethesda, also has expressed concern about the organization's financial controls -- citing sloppy bookkeeping, lax cash handling procedures and failure to monitor employee credit card use.

The United Way's leaders say they have corrected most of the problems and plan to remedy the rest as quickly as possible.

Meanwhile, some employees say morale has slipped because of Anderson's generous treatment by the board of directors. Since he joined the organization in July 2003, his salary has risen almost 20 percent to $231,750. In addition, in February, the board voted to contribute $25,000 for each year of his service so far to a deferred compensation plan.

At the same time, rank-and-file employees received a 3 percent lump sum payment in 2004 and a 3 percent salary increase in 2005 accompanied by a requirement to work an extra half-hour a day.

Some former employees have questioned the need for the financially strapped charity to spend $18,000 in the past six months on an executive coach for Anderson.

But Edelman this week defended Anderson's salary increases as appropriate given his level of experience and the size of the organization.

Anderson said executive coach Steve Noble helped him improve by conducting a review that gave him feedback from peers, subordinates and board members. He said Noble also helped him put together a long-term strategic plan for the organization.

Anderson declined to comment on Tran's reason for resigning. Privately, several board members dismissed Tran and Owens as disgruntled ex-employees. They said Anderson has solid support on the board.