United Way, Despite Criticism, Wins Renewal of Its Solicitation Permit

The Los Angeles-area United Way won renewal of its solicitation permit from the county Business License Commission on Wednesday after a hearing at which a former employee criticized the agency for keeping a cash reserve of more than $20 million.

The commission ordered the hearing last week after disclosures that more than $300,000 of charity money was loaned to five United Way executives.

After an hour of testimony, Commission President Dewayne B. Smith told Roy Anderson, United Way’s unpaid acting president, that while the permit would be renewed, he and other commissioners had concerns about financial management practices at the agency.

“You do need to do some housecleaning,” Smith told Anderson without elaboration at the conclusion of the hearing.

“I would like to see any problems you have solved,” Anderson told the commission,

The commission had ordered an inquiry into the loans but suspended it at the request of the county Board of Supervisors. On Tuesday, the supervisors directed County Counsel DeWitt W. Clinton to investigate United Way’s finances. Clinton is acting in place of state Atty. Gen. John Van de Kamp, who excused himself because his wife was a United Way director.

Fired Planner Urges Renewal

During Wednesday’s public hearing, Pini Herman, a social worker who was a United Way planner in 1983-86, urged renewal of the permit.

But Herman, who said he was fired four months ago without being given a reason, criticized United Way for holding “over $25 million” in reserve “for no clear purpose other than to generate interest (income) and to be available for some amorphous disaster in the future, which would probably render it a paltry sum.”

Herman’s remarks prompted Commissioner Bethel Smith to advise Anderson:

“Please don’t build up large treasures, people don’t give money for this. Money is not being given to be put in the bank and saved. The money is being given to give to the people--children and people who are starving and dying of cancer and sleeping on the ground . . . so give the money, don’t keep the money. . . .”

Anderson, who had testified earlier about United Way’s own inquiry into the loans, then returned to the witness chair. “The impression left here is that we are holding back a lot of money from the people. It’s not true,” he said.

Prudent Reserve Defended

“We do have certain reserve funds that we maintain. Maybe they’re a little too much, I won’t say for sure. But to leave the impression that we are harboring money and not giving it to others is just not fair.”

United Way’s latest audited financial report shows that it had $22.2 million in cash June 30, 1985.

Francis X. McNamara Jr., the charity’s president who is on a leave of absence, has said in the past that while the cash balances are significantly larger, as a percentage of revenues, than those maintained by most United Ways, he considers them as a prudent reserve in the event of a sudden drop in gifts or a major catastrophe, such as an earthquake.

In the past three years, the financial statements show, increasing the size of United Way’s fund balances has been its third-largest use of funds, after allocations to the Red Cross and running United Way itself. Between June 30, 1984, and June 30, 1985, the charity’s fund balances increased $6.3 million, its financial statements show.

The United Ways in Orange and San Diego counties do not maintain reserves, their chief financial officers said.

The Chicago area United Way, which is almost equal in size to the Los Angeles United Way, said its cash balances range between $4 million and $7 million.

United Way Inc., which serves Los Angeles County and western San Bernardino County, is the largest of 2,200 local United Ways, gathering $85.5 million in pledges this year.