Overhead Eats Up Volunteers of America FWD

Tom Boland (wgcp@earthlink.net)
Wed, 22 Jul 1998 23:13:10 -0700 (PDT)

FWD  via GuideStar Nonprofit News Service
     The Columbus Dispatch -- July 19, 1998, Pg. 1A

     Alice Thomas , Dispatch Staff Reporter

Millions of dollars that the Volunteers of America counts as services for
homeless people cover wages for thrift-store workers who have never
received help from the agency.

Minus those wages and other operating costs, the agency spent 19 percent of
its 1997 budget on direct services - homeless shelters in Columbus and a
community center in Dayton, a VOA-commissioned audit shows.

Some people say that 81 percent is extremely high overhead for a charity
and bespeaks a bigger emphasis on business than service. Others, however,
defend the accounting practice as acceptable and give the VOA high marks
for operating with little taxpayer money.

In any case, the percentage spent on services paints a very different
picture of the agency than does its national literature, which says that
''more than 85 percent of combined Volunteers of America revenues go
directly to program services.''

''They make so much money, but I don't know where they're spending it,''
said Jim Williams, a former truck driver for the agency's thrift-store
operation. ''It's not on the homeless.''

Williams and a half-dozen other former workers are critical of practices at
the local agency, which spends the bulk of its budget - a total of $ 8.7
million last year - running 10 thrift stores in Columbus and one each in
Dayton and Logan, Ohio.

Williams said he wasn't allowed to work in the thrift stores. Instead, he
participated in a work program for homeless alcoholic men that provides
such jobs as driving trucks, tagging clothes or working in a shelter

Those jobs start at $ 2.58 an hour, and the men are charged $ 360 a month
in rent to stay in a shelter. Thrift-store jobs start at $ 6.25 an hour,
according to the agency.

Williams, who said he advanced to $ 5.50 an hour during his 21-month stint
as a driver, said he routinely got up at 7 a.m. and drove a 24-foot truck
225 miles to unload 25 donation boxes in which people drop off clothes and

''The good jobs go to people who aren't in the program,'' he said.

Another former truck driver who didn't want to be named said he, too, was
restricted to certain jobs.

''They talk about all the millions of dollars they give to the homeless,
but they're not getting any of it,'' he said.

Last year, the VOA took in $ 7.1 million - 81 percent of its total revenue
- by selling items left in drop boxes and auctioning donated cars.

It spent $ 4.7 million - more than half of its budget - running the thrift
stores, primarily on employee wages and benefits. By comparison, $ 1.6
million - 19 percent - went toward direct services.

Dan Langan, director of public information for the National Charities
Information Bureau in Washington, D.C., said counting wages as services is
acceptable in the nonprofit sector.

The store employees ''are making a charitable service go,'' Langan said.
''They're doing hands-on work, and, therefore, it's entitled to be put
under program services.''

Kate Conover, vice president of the National Committee for Responsive
Philanthropy, a charity watchdog group in Washington, D.C., has a different

''Eighty percent is very high - it's more than questionably high,'' she
said. ''Usually when it's been that high, either there's been a very good
reason or it's a real problem - there's something wrong.''

High overheads, Conover said, are better justified by new organizations
that haven't built service clientele or ones that provide more indirect
services. Early civil-rights organizations, for example, probably couldn't
claim to be cost-effective but nonetheless are credited with playing a
significant role in reform, she said.

Standard overhead for a charity - which includes everything but money spent
on services - typically ranges from 15 percent to 40 percent. Counting
wages for workers who don't receive services is questionable, she said.

''Technically, they are correct in adding that as an administrative
expense,'' she said. ''Ethically, that's up for debate. Most people don't
do it that way.''

She added, however, that ''just looking at the cost alone is not
necessarily the best indicator of what kind of service they're providing.''

One notable aspect of the VOA budget is that less than 11 percent of its
funding comes from tax dollars - a low figure for charities. Even other
VOAs depend far more heavily on taxes: 67 percent on average, according to
a 1997 annual report on the national agency.

Jeff Brasie, who became president of VOA eight months ago, acknowledged
that some services need to be strengthened, but he defended the VOA's
thrift-shop operation.

''It is run like a business; it must be run like a business,'' Braise said.
''But the proceeds from that get channeled back into programs and services.
And there need to be enhancements.''

The local VOA board has discussed the agency's business emphasis, said
Robert Halley, vice president of Heartland Bank and chairman of VOA's

''We're painfully aware of that,'' he said.

Halley said the agency - which in Columbus was founded in 1904 - is paying
attention to new demands on charities.

''We've become very financially strong - very self-sufficient, which is
ideal because we don't have to depend on other people,'' he said. ''But the
other side of the coin is, 'Are we doing enough?' ''

He hinted that some programs, such as the work program for alcoholic
homeless men, may be past their prime.

''Twenty years ago, you were really doing a service if you were providing
some of these things - a job and a place to stay,'' Halley said. ''It's a
change in regimen now. And that's part of what has to happen.''

Perhaps VOA's staunchest supporter is its former longtime director, Graham
LeStourgeon, whom both Brasie and Halley praise for years of dedication and
smart business sense.

''There were times when I felt that the costs might be very high, but the
net is, too,'' LeStourgeon said. ''If we were standing out there with our
hand out, I think we could raise some money, but not that much. ''If you
run a business, any business, you've got costs. It's just a business
approach, rather than to have to worry about a handout all the time,'' he
said, noting that the VOA stopped taking United Way money years ago
''because we didn't need it.''

Also, he said, the thrift stores are a service, providing inexpensive
clothing and a depository for unwanted household items.

When he retired last year after 23 years at the helm, LeStourgeon said his
goal was to leave the organization in strong financial health.

''I just hope they build on what we left them.''


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