CITY ASKS ‘HANDS’ TO REFILE FINANCIAL STATEMENT
A city-required financial statement accounting for income and expenses for last spring’s Hands Across America charity mega-event has been termed incomplete and will be sent back to the USA for Africa Foundation for refiling.
According to officials of the Los Angeles Department of Social Services, the city’s charity oversight agency, the Century City-based foundation that staged the May 25 event understated Hands Across America expenses by more than $8 million and overstated income by $7 million. City officials said the form failed to include either corporate contributions of more than $8 million or the fund-raising expenses that those contributions covered.
“It was incomplete,” said department investigator George Delianedes. “The figures didn’t add up and (the line items) looked like estimates.”
The one-page form indicated that USA for Africa showed $23.5 million in receipts and about $3.5 million in fund-raising expenses, according to department officials. Actually, receipts are closer to $33.5 million and fund-raising expenses are nearer $12 million when corporate contributions and fund-raising expenses are included. Those figures also exclude $4 million to $5 million for a telemarketing and merchandising operation that solicits continued contributions and delivers T-shirts, pins and other Hands souvenirs to consumers.
“I don’t know how it (the financial form) got over there (to the Department of Social Services),” foundation president Ken Kragen told The Times on Tuesday. “It wasn’t supposed to go out.”
Kragen said he did not sign the form when it crossed his desk last week because he questioned its arithmetic. He ordered that it be redone because “it wasn’t right in my opinion.
“They (city officials) weren’t supposed to get it. When it came across my desk with ‘Urgent, please sign’ on it, I said, ‘This form doesn’t add up. The figures don’t add up.’ I said, ‘People are going to look at the form and say, “Where the hell’s $5 million?” ’ “
In addition, about $7 million in uncollected pledges was shown as a Hands Across America asset, city officials said. The uncollected pledges made it appear as though the project earned much more than it actually has earned so far, they said.
Hands Across America communications director Joyce Deep said that the missing information was included in a cover letter submitted with the form and that the form was signed by executive director Marty Rogol. Rogol was in New York and could not be reached for comment by press time.
Deep explained that the mistake lay in failing to note that $8 million in contributions from such companies as Coca-Cola and Citibank were used to pay for a “public education” campaign prior to the actual event May 25. The $7 million in uncollected pledges also should not have been included, she said.
Delianedes said that an accountant from his department’s auditing section will assist the Hands Across America financial officials this week and show them how to fill out the form.
Kragen pointed out that the correct income and overhead figures for Hands Across America have already been released and publicized several times. He said that the form will be amended and resubmitted to the Department of Social Services this week.
“It was all a mistake,” he said. “We may screw up, but we’ve always been honest.”
The May 25 transcontinental fund-raiser for the nation’s homeless and hungry attracted an estimated 5.5 million participants who joined hands in 16 states from California to New York for a 15-minute sing-along. Participants were asked to pledge at least $10 for a place in line. Any funds left after expenses were to be contributed to projects aiding America’s homeless and hungry. Currently, the organization estimates that about $17 million is available for distribution to agencies aiding the homeless. No grants have yet been made. The money remains invested in Treasury bills until the foundation determines who will receive the grants, Hands officials said.
Rogol said last month that the first grants should be made by Thanksgiving.
By city ordinance, nonprofit charitable organizations are required to file financial statements within 30 days of a fund-raising event, but filing extensions are often granted, particularly in the case of major events such as Hands Across America.
According to a spokesman for the California Attorney General’s Office of Charitable Trusts, the USA for Africa Foundation has filed no financial information with it. Normally, a charity is required to file an accounting within a few weeks of its fiscal year, but extensions are routinely granted. Such an extension was granted earlier this year to the foundation, the spokesman said. Under terms of its extension, USA for Africa must file its Dec. 31, 1985, financial statement with the Office of Charitable Trusts by Nov. 15.