HANDS ACROSS AMERICA, May 25, 1986 : HANDS’ BILLS PAID IN FULL, BUT HOMELESS STILL WAITING

Five months, one week and a day after 5 million-plus people held Hands Across (most of) America in a demonstration of compassion for America’s homeless and hungry, the poor have yet to see any of the $32.2 million that the event raised.

The USA for Africa Foundation, which staged the mega event, apparently decided to pay off between $16 million and $17 million in expenses first.

“The remaining bills related to the Hands Across America event are minimal,” foundation executive director Martin H. Rogol told Calendar last week. “The present assets of Hands Across America are approximately $15 million.”

Rogol declined to say how the $15 million is invested or how much interest the money is earning.

The reason the foundation is taking so much time to disburse the remaining donations is the same as the one that foundation officials have given frequently to explain the delays in its African grant process: It wants to make the payments with the utmost care in the interest of fair distribution and wise spending.

But Rogol has said that the first allocations of $12 million of the remaining Hands Across America funds will be announced about Thanksgiving time. There was no indication specified on when the money actually would be dispensed.

Rogol, who said that Hands’ expenses currently are being audited, has declined to comment on any specific expenses until the audit is complete. He said he didn’t know when that would be.

And, though charity-watchdog agencies such as the widely respected National Charities Information Bureau in New York City would like to know how and why those expenses were incurred, they’ll also have to wait.

“For us, we have to look at what those expenses are and whether or not they were (fund-raising) program expenses,” said bureau Executive Director Ken Albrecht. “We need more information from Hands Across America in order to tell.”

Over the last four months, Hands officials have turned down or put off numerous Calendar requests for financial statements. The charities information bureau has run into the same problems, according to Albrecht.

“We are about to ask them again, if we haven’t all ready,” said Albrecht, who noted that his agency receives frequent queries about Hands monies.

Although all expenses have not been reported, a foundation financial statement on Hands Across America filed last April with the City of Los Angeles (for the period through March, not covering the May 25 event), several budgeted figures were shown, including $270,659 budgeted for entertainment, $245,320 for travel and $2,018,734 for salaries.

Among other items in the statement:

Fred Droz, who oversaw the Hands project as its national director, was budgeted to receive a $70,000 management fee, though foundation executive director Rogol declined to say exactly what Droz was finally paid. Droz, a political advance man for former President Jimmy Carter and 1984 Democratic vice-presidential nominee Geraldine Ferraro, was back with his Orange County political consulting firm within a week of the Hands event.

Bob Giraldi, whose New York production company produced Michael Jackson’s “Beat It” video, also was paid. Giraldi signed on with Hands as a video promotional consultant last January and was in charge of putting together the Hands Across America music video. According to the financial statement, Giraldi received $234,986 of his contracted $250,000 fee as of March 31.

The foundation also has other on-going expenses for Hands. It has offices donated in a Century City high rise for its regular operation but pays $4,996 monthly rent for ninth-floor office space for the Hands staff.

The creator of Hands Across America, Ken Kragen, called a press conference recently at West Hollywood’s posh Le Bel Age Hotel to announce how the $12 million would be parcelled out. A complicated formula based on population, poverty levels and the number of people in each state who participated in Hands Across America will determine what share of the money poverty agencies in each of the 50 states and the District of Columbia will get. California, for example, will get the largest sum ($1,254,025) and Vermont, the smallest ($19,314).

But, Kragen told Calendar last week, the press conference also was his attempt to counter some of the critical stories about his foundation’s growing bureaucracy and slow distribution of money.

“We tried to go on the offensive with the positive side,” he told Calendar. “We’re going to continue to do that. It’s very hard when you’re doing the damn best that you can and it doesn’t get told.”

Kragen, who manages superstars Lionel Richie and Kenny Rogers, said that there has been a “bunkering up” tendency around Hands headquarters because of critical articles about the project. As a result, officials such as Rogol have been reluctant to answer questions about finances, he said.

At the recent press conference, Kragen, Rogol and Hands staff representatives tried to explain why it has taken so long to get the money to the poor. Before any money could be given, the grant-making process called for the staff to:

Draft grant guidelines.

Create a 37-member task force to review those guidelines.

Adopt final guidelines acceptable to a four-member subcommittee of the 12-member foundation board of directors.

Invite grant requests of some 7,000 agencies that cater to the poor.

Screen their applications with state, regional and/or national coordinators.

Recommend the successful applicants for approval by the board of directors.

About nine months earlier, in January, in Hands Across America’s kickoff press conference, several hundred celebrities and newsmen jammed the same meeting room at Le Bel Age. Free drinks and a hot-and-cold-buffet luncheon were served.

But the big draw was a conglomeration of celebrities like Suzanne Somers, Jack Carter, Dyan Cannon, Ben Vereen, Susan Anton, Ed Begley Jr., Rosanna Arquette and 130 other luminaries. Comedian Jack Carter quipped: “I was wondering if you had a wide-angle lens to take a photo of the line?” Bill Cosby couldn’t be there but sent a wire: “Helping out is cool.”

The celebs showed up to hold hands across Le Bel Age with Kragen and with those whom Kragen repeatedly referred to as his “partners in the media.”

But last month, at the first press conference following the Hands event, the celebrities and the spotlights and the swarm of waiters handing out free Cokes, coffee and chablis were gone. There were no crepes or melon or barbecued chicken wings at the back of the salon.

Only about two dozen reporters showed up this time. They asked questions about the money--but Kragen wanted to talk about almost anything but the money.

“I know it makes good copy, but we’re too often focused on the figures,” he said. He tried to shift the focus to the continuing plight of America’s poor, but the media kept coming back to the money.

“You can get the message out there for us,” Kragen said. “From the beginning, you in the media have been our partners in this.”

“We haven’t gotten anything and we’re in limbo like everyone else around here,” said Mark Halthaus, communications manager for the Union Rescue Mission in downtown Los Angeles. “We filled out an application we got from them in September and sent it in, but we haven’t heard anything.”

Thus far, long-established, well-known Skid Row homes for the homeless and hungry have received Hands Across America mailings, but no money.

Mitch Snyder, the flamboyant founder of Community for Creative Non-Violence in Washington, sympathizes with the need of Hands organizers to be cautious, but he is critical of their slowness and distance from the problem.

“What do you do with 16 million bucks? I’d be nervous too,” Snyder asked. “Everyone’s going to pick holes in how you spend it for various reasons.

“But while they want to be responsible about the method of distribution, waiting is not a good thing. They should have done whatever they could have done to get the money out, particularly before the onset of winter. It hasn’t happened yet and it’s already long overdue.”

With winter closing in, Snyder said his shelter for 820 homeless men and women remains only half built. It will take another $3.5 million to finish it, he said. He has already received a $70,000 grant from the USA for Africa’s “We Are the World” domestic aid fund (see accompanying article), but he could still use some of the $100,000 that the Hands project has earmarked to give to Washington poverty agencies this month. Still, Snyder fears it may be too little too late.

“The people responsible for distribution of the (Hands) funds are not closely associated with the people on the streets,” Snyder said. “If they had been, they’d have been more aware of the need to get it done quickly.

“We have seen an unprecedented number of people on the streets now and I’d say we’re looking at a catastrophe this winter. People are going to die in increasing numbers, probably record numbers.”

Back at the L.A. Union Rescue Mission, where 3,000 people will eat turkey for free this Thanksgiving, even a tiny grant would help.

“It costs us about 30 cents a meal to feed someone and, with all the extras, it’ll probably come out about a buck apiece on Thanksgiving,” Halthaus said. “So, it’ll cost, say, 3 to 5 K.”

When he first unveiled his plan for a transcontinental line of Americans at a Manhattan press conference one year ago, Ken Kragen set a goal of raising between $50 million and $100 million. He estimated an overhead of $18.8 million, but that did not seem unreasonable at the time.

Kragen already was looking for major corporate helpers like Coca-Cola, which had agreed to underwrite a portion of the expense. Rogol has declined to reveal how much Coca-Cola, Citibank or any other corporate contributor gave.

“The major corporate sponsors requested that we would not announce the amount of their contribution,” he said.

The Hands budget that foundation officials filed last April with the City of Los Angeles put Coca-Cola’s contribution at $1 million per month for the first four months of 1986. Citibank’s contribution wasn’t included in the budget.

Executive director Rogol acknowledged that the disappointing bottom line for Hands was the result of unfulfilled pledges from thousands of Hands participants. As long as two months after the Memorial Day weekend mega event, Rogol and Kragen were still banking on those $10, $25 and $35 pledges.

“But they never came in,” Rogol said.

A USA for Africa Foundation statement on July 9 put the Hands gross at $41,650,083. That figure was based on the hope that Hands participants would give what they had pledged. They didn’t and the gross was pared down by $9 million in subsequent releases, pending the collection of outstanding pledges.

For the three-week period ending Oct. 21, $81,919.95 in pledges came into Hands offices in Century City, said Hands press spokesman Dave Fulton. Officials expect it to escalate during the holiday season.

In the months following the event, the enthusiasm shown by celebrities and media nine months ago seems to be lessening.

“There seems to be a certain tiredness about these big events,” said Albrecht of the National Charities Information Bureau. “This may be the last one. We’ve all had enough of them for a while.”

There is no tiredness about curiosity surrounding the Hands money though, according to Albrecht. For more than a decade, his agency has been a clearinghouse for information on how charities raise and spend their money.

These days, a week doesn’t pass that Albrecht’s staff doesn’t get several inquiries about the Hands dollars from average people and news media.

But Albrecht can give only the broadest estimates: “We need more information,” he said. “It’s not possible to tell whether they meet our criteria or not without further information from Hands Across America itself.”

Albrecht’s agency’s criteria are similar to those of other charity watchdog agencies, including the City of Los Angeles Social Service Department. According to Albrecht, his bureau gives favorable recommendations to a charity if it spends no more than 30% of its gross income on actual fund-raising overhead.

After allowing for administrative and other expenses, at least 60% should go to the organization’s charitable goal.

According to documents filed last month with the L.A. Social Service Department, the Hands fund raising and public education costs were put at about 53% of the gross, leaving about 47% for distribution to the poor.

If roughly $7 million in outstanding pledges comes in, those percentages would almost measure up to the guidelines of Albrecht’s agency, with 58% for the poor and 42% for overhead.

But chances of those who made those pledges actually making good on them diminishes with each passing day, Albrecht said. “They’re not gonna get the $7 million. You and I both know that,” he said.

“Thanksgiving is traditionally a very giving time,” Kragen told two dozen reporters during last month’s Hands press conference.

He had expected a much larger crowd. There were 100 empty folding chairs and stacks of unclaimed press kits.

Rogol advised reporters to read through a sheaf of newspaper clippings in their press kits. They told of hometown fund-raising efforts in Jackson, Miss., Columbia, Mo., Tampa, Fla., and a hundred other cities. The articles detailed how toddlers gave their pennies and schoolchildren brought in canned goods to feed the poor, all because Hands Across America had raised their consciousness.

But reporters kept coming back to the money:

Was “compassion fatigue” responsible for the shortfall in expected pledges?

Why had it cost more than $16 million to put on the 15-minute national event?

And after paying off those expenses, when would the foundation finally disburse the other money?

Five months after Hands, the income and overhead are still being tabulated by the foundation’s accounting firm, Ernst & Whinney, Rogol told Calendar.

Since April, the firm has been in the process of completely overhauling both the USA for Africa and Hands Across America accounting systems.

Before Ernst & Whinney began earning its $7,500-a-month retainer last January, the foundation books were balanced for free by then-foundation treasurer Leonard Freedman. Freedman, who is also the accountant for Lionel Richie and several other entertainers, said that the foundation workload was too heavy and he was getting no compensation. He resigned after recommending Ernst & Whinney for the job.

“Len’s a rock ‘n’ roll accountant,” Rogol explained.

Freedman’s accounting method was based on simple cash receipts and disbursements. With its Hands project--based more on pledges, credit and promised payment than on cash--the USA for Africa Foundation moved to a new level of fiscal sophistication.

With Freedman’s method, “certain revenue is recognized when received rather than when earned, and certain expenses are recognized when paid rather than when the obligation is incurred,” said Arthur Young & Company, which conducted an independent audit of the foundation’s books last summer.

Ernst & Whinney’s first major task after taking over from Freedman was to switch from cash accounting to the accrual method. The firm still hasn’t completed the task, according to Rogol and, as an indirect result, the foundation has run into fiscal reporting problems with both the city of Los Angeles and the Connecticut attorney general’s office.

Six weeks ago, the charities oversight department of the Connecticut attorney general’s office sued USA for Africa for failing to file a financial disclosure statement as required by state law. The attorney general petitioned to forbid the foundation from soliciting further in Connecticut until the statement is filed.

The City of Los Angeles Social Service Department also chastised the foundation for failing to file a disclosure statement within 30 days of the Hands event, as required by city ordinance. After revising an incorrect disclosure statement, the foundation’s disclosure statement went on file on Sept. 24, 122 days after the event.

The foundation is switching to the firm of Laventhol and Horwath to handle this year’s audit, Rogol said. He said the foundation decided on the switch in part because Laventhol and Horwath audits the Live Aid Foundation, the other major Los Angeles-based pop charity.

Since its inception 15 months ago, Live Aid has had no apparent problems with the firm.