Charity claims extra credit
Half of donations from other givers
Los Angeles Daily News
January 29, 2006
By Beth Barrett, Staff Writer
The McCormick Tribune Foundation, the charitable arm associated with the Los Angeles Times' parent company, has stirred controversy in Los Angeles' philanthropic circles by claiming it contributed $6.1 million to area charities in 2004 although at least half of the money came from other local donors.
Some nonprofits speak highly of the program that increases their revenue but such leading philanthropists as former Mayor Richard Riordan are highly critical. And several nonprofits have dropped out of the program, saying they end up doing most of the work in partnered fundraising events and are uncomfortable with the way the foundation uses an unusual but legal means of reporting its contributions.
In its simplest form, the foundation requires nonprofits to give it a substantial check representing between 40 and 80 percent of the net contributions from local donors at fundraisers. Afterward, the foundation returns the money plus its own donation, but the Chicago-based foundation publicly reports contributing the whole amount.
"We're not doing it this year," said Wendy Free, executive director of the I Have a Dream Foundation - Los Angeles, a nonprofit that provides after-school and summer enrichment opportunities for first-grade classes in the region. "Some of our donors were confused; they thought they were giving money to the Tribune foundation."
Riordan said the foundation paints a misleading and inflated picture of its charitable activities since the Tribune Co., in a merger with Times Mirror Co., took over the Los Angeles Times in June 2000 and promised to take an active role in the community.
"My gripe is, they're not saying what they're giving," said Riordan, who sits on the board of LA's BEST (Better Educated Students for Tomorrow), a nonprofit that is staying with the foundation program because in the last two years it has realized a $214,500 net gain over the $502,500 in donor money that was raised.
"Here's what they do: they take credit for donor (funds) plus what they put in. That's where the dishonesty comes in. It is a violation of basic integrity of taking credit for money that they have not donated."
Catherine Brown, director of the communities program for the McCormick Tribune Foundation, defended the way the foundation reports its grants, noting the Internal Revenue Service agrees that local donor dollars can be accounted for as part of the overall contribution by the foundation, which in 2003 petitioned the IRS and officially became a public charity.
"We consider those dollars ours," Brown said.
She said no nonprofit is obligated to participate in fundraising and all those that have participated in the program in Los Angeles have gained revenue from it. She said the foundation brings value to the fundraising partnership events, including visibility, sharing of some administrative costs, and usually "some nice press involvement."
"We do it to get more money into each individual community than otherwise would be there," Brown said.
The foundation was established in 1955 on the death of the Chicago Tribune's editor and publisher, Col. Robert R. McCormick, and has an endowment of approximately $1.5 billion. It has partnerships across the country, including one with the Denver Post, the flagship of the MediaNews Group of newspapers that includes the Daily News. It also has partnerships with the Los Angeles Times and KTLA, both owned by the Tribune Co., the Los Angeles Angels and the Mighty Ducks.
The foundation raised more than $30 million through fundraising partnerships, and gave out more than $57.5 million in grants nationwide in 2004, including the local donor dollars.
The foundation reported making community grants of $6.1 million in Los Angeles in 2004, with a foundation official saying the percentage of donor dollars is roughly the same in each community.
It also reported making $10.6 million in donations in Denver, where the Tribune Co. owns a television station, and nearly $14 million in Chicago. It also donated $35.3 million, much of it in the Chicago area, from its general fund, which is not part of the fundraising program.
Trent Stamp, executive director of New Jersey-based Charity Navigator, a nonprofit watchdog of charities, said the mechanism used by McCormick Tribune Foundation is unusual, and that there could be an appearance of using local fundraising to inflate the organization's charitable claims.
"Certainly it's not standard operating procedure within the foundation or the charitable world," Stamp said. "It's probably not illegal if they document it in the tax record, but it doesn't pass the smell test at all."
"You have an organization that appears - if true - to be double (counting) the amount of money they give to the nonprofit. You have, in effect, sort of a money-laundering scheme."
Despite Riordan's criticisms, Andrew Frances, LA's BEST's senior director of communications, said the nonprofit considers the relationship with the foundation to be "very fruitful and very respectful," and intends to continue it. LA's BEST is a nonprofit aimed at improving educational opportunities for elementary school children mainly within the city.
Free, with I Have a Dream, said the fundraisers involved "extra work," and there was always a certain risk the donors' money that went to the foundation wouldn't be recouped through a grant - though in reality that never occurred.
"We always discussed why give money to a foundation, and whether it was worth the risk or not," she said.
Carol M. Dedrich, vice president of development, special events & communications for the Fulfillment Fund, a nonprofit that helps Los Angeles Unified high school students graduate and continue their education, said she passed on partnering with the foundation more than two years ago because of lack of staff for the proposed fundraising events.
John Culpepper, director of Friends of Cabrillo Marine Aquarium in San Pedro, said his nonprofit support group isn't partnering with the foundation this year, a decision made by mutual agreement.
"There is exposure," he said. "Everything you send them sits in the bank ... they get all this interest, and then they give you the grant back.
"They're not legally obligated to give you the grant, but it ends up happening. You work in partnership with a certain amount of trust you'll get the grant."
The aquarium's last black-tie gala resulted in 75 percent of the $77,000 in mainly ticket sales, or $57,000, being remitted to the foundation. He said a subsequent grant was applied for with the understanding the aquarium stood to get a grant worth $1.40 for every $1 it send the foundation.
The result was an $81,000 grant, for a net profit of $24,000 to the nonprofit.
"We sent them $57,000 and we got back $81,000. It's a grant application, but you take on faith they'll be good for it."
Beth Barrett, (818) 713-3731