"I'm not enough of a research person to pass judgment on what Professor Bennett has done," says Waters, who was named Volunteer of the Year by the American Cancer Society in 1993 in recognition of his outstanding fund-raising efforts.

Casano's and Waters' reluctance to review the society's finances with a critical eye is not surprising; many people are hesitant to discuss problems in a charitable organization they support. Most donors, and at least some board members, operate on the same principle as Brock: blind faith.

And, in fact, there is very little oversight of any other kind when it comes to major health charities such as the American Cancer Society.

State and federal regulators generally take a hands-off approach to regulating health charities. Arizona only requires charities to file a brief disclosure statement and a copy of audited financial statements with the secretary of state.

Bennett believes that health charities like the American Cancer Society receive little scrutiny from donors, volunteers and government agencies because they cast an aura of "doing good." Few want to question a charity--the cancer society, for example--because it may be construed that they are against good works, such as finding treatments or a cure for cancer.

This reluctance to hold charities accountable is what allowed the former national president of the United Way of America, William Aramony, to live a life of royalty for years, Bennett says.

Aramony traveled the world in first-class comfort while providing jobs in the United Way empire for family and friends. All of this was possible, according to a 1992 report, because there simply were no policies outlining the appropriate expenditure of travel funds.

The solution to preventing future United Way-style scandals, Bennett says, is to require all charities to open their books to public inspection.

Charities are exempt from state and federal taxes, and are able to avoid many workplace regulations. They are provided these benefits because the public believes charities are providing service to the less fortunate.

"In return for this subsidy, they [charities] should make the details of all expenditures available to any interested party," Bennett says.

The American Cancer Society's Arizona division refused to open its books for inspection by New Times. The society also declined to provide detailed salary information on its ten highest-paid employees. Division officials also refused to explain other specific spending listed in the charity's financial statements, including $83,000 labeled "other travel" and a long-standing, fully collateralized $1.5 million bank loan.

The society did release copies of its audited financial statements for the last three years. Those statements show that 95 cents of every dollar spent by the charity in Arizona last year went to salaries and overhead.

Voluntary health charities, such as the American Cancer Society, are required to file annual financial statements with taxing authorities. Those statements are available for public review. They also must prepare annual reports under a set of guidelines created by a coalition of major charities.

These guidelines, however, allow charities to lump together the cost of providing a service, including salaries and overhead, with the actual value of the product or service delivered. This blending of expenses makes it extremely difficult to determine how, and where, a charity spends donations.

For example, if a charity says in its annual report that it spends $1 million on public education, it could mean the charity gave $1 million to a public school system. It could also mean the charity's management spent $990,000 to deliver $10,000 in tangible services and products to public education.

There is no way to tell from a charity's annual report.
"There is nothing illegal about reporting it this way," says Bennett. "I'm just saying this is fantasy land. You can't tell if a charity is good, bad or indifferent."

The only way to gain more insight into a charity's finances is to examine its audited financial statement. These statements, which are not widely distributed, have somewhat more detail about how money is spent than annual reports.

Audited financial reports provide a starkly different picture of ACS-Arizona's spending from what is displayed in the group's annual report. It is the annual report that is widely distributed and frequently used in fund-raising efforts.

The American Cancer Society, like other health charities, divides spending into five general categories--public education, community services, professional education, patient services and research.

The Arizona division's 1994 annual report states that it spent $1.1 million on public education, $733,000 on patient services, $389,000 on community services, $194,000 on professional education and $3,660 on research.

Nowhere in the annual report, however, does it state that expenditures in these five categories also include salaries, payroll taxes, employee benefits packages and general overhead expenses--in addition to the actual product or service delivered to the public.

In fact, the annual report would lead a casual reader to believe those expenses are all included under a category labeled "management and general," which totaled only $322,000.

Bennett's accounting exercise reveals a stunningly different ACS-Arizona from the one so benevolently portrayed in its annual report. Rather than the society spending $733,000 on patient services in 1994, as the annual report states, the actual amount of money going directly to patients was only $71,000, according to Bennett's methodology. Of this, $47,000 was spent on "specific assistance to individuals."

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