New Report Examines Questionable Accounting Practices at United Way
Brian A. Gallagher, president of the United Way of America, indicated that while some of the practices in question conform to GAAP, the post-Enron scrutiny of accounting practices require that the organization now respond to the issues in question.
Many of the practices result in inflated revenues for the local member organizations. The concern is that donors are entitled to know what percent of their contributions are going to the charity and what percent are going to administrative costs, and the inflated revenues tend to show a smaller percentage going to administrative overhead.
Among the issues being questioned:
- Double Counting: Occurs when two or more United Way affiliates claim the same contribution as their own.
- Third Party Campaigns: The full amount raised by in-house corporate campaigns which raise money from employees for multiple charities are sometimes 100% recognized as United Way revenues, even when less than 100% of these funds are earmarked for the United Way.
- Valuation of Donated Goods: Concerns are being raised on how United Way members value donated goods and services which are then counted towards contribution totals.
- Counting Volunteer Time: United Way encourages its members to report their volunteer time at $14.83 per hour and count those hours towards the total contributions. FASB allows this practice only for certain volunteer activities, but often all of the volunteer time is counted.
- Unrestricted Gift Allocations: Restricted gifts have limits as to where the money is to be allocated – including administrative overhead – but unrestricted gifts often are tapped for a larger overhead contribution, thereby skewing the administrative costs percentages.
Member organizations of the United Way are independent organizations, not subject to uniform reporting guidelines, practices, or even accounting software. Member organizations assert that this independence allows them to better react to their local community’s needs without worrying about “big brother” oversight. The tug-of-war between the independence of the organizations and the centralized control of the national United Way organization will continue to be debated.