Loan Scandal Aggravates United Way’s Fund-Raising Problems

Even at private cocktail parties, Merritt L. Johnson says, he gets grilled about “the controversy.”

Johnson, president of Orange County United Way, does not try to sidestep the questions, even though the controversy has nothing to do with him or his organization, which is now facing an uphill battle trying to raise $19 million for 123 local social service agencies.

“As soon as they find out what I do, the questions start,” Johnson said.

The questions refer to the reported $300,000 in cash loans made since 1980 to five top employees of the United Way agency in Los Angeles. The loan money--much of it unsecured and most of it without interest--came from United Way donations.

The five officials had used “flawed judgment” but had not acted illegally, an independent citizens’ panel said. Still, the scandal last spring tainted the Orange County organization because much of the public does not realize that all 2,200 United Way agencies in the country are autonomous, he said.

“We have to deal with it up front . . . daily,” Johnson said.

The controversy aggravated the fund-raising problems that Orange County United Way already was having following a decline in the local business economy.

“It has definitely had an effect, although it is difficult to measure,” said Johnson, who called this year’s goal “absolutely the greatest challenge I’ve ever had.”

The local United Way is two-thirds of the way through its campaign, and if this goal is met, it probably will be by a thread. But the chances of even that are not good.

The Pace Setter Program, in which 10 companies run their United Way campaigns in the summer to set projections for the full campaign in the fall, raised about $600,000 this year, the same amount as last year. But this year’s goal is 8.6% higher than the $17.5 million raised last year.

“Looking at the L.A. situation and the business climate, we’ve had a tough job,” said David Carroll, Pacific Bell area vice president, who led the Pace Setter program. “We’ll be very fortunate to reach the goal.”

If the goal is not reached, the 123 agencies that receive money from United Way could get less. Already, the United Way has cut back funding 5%. That decision was made in July when contributions tailed off because of massive layoffs at big corporations that provide United Way with the bulk of its money.

That cut, and the pinch for contributions this year, worries many of those 123 agencies, some of which would close without United Way money.

Phyllis Neal, co-director of Community Day Nursery of Garden Grove Inc., said her organization “could not exist” without the $32,000 it receives. Her group provides low-cost day care for children of working single parents who earn only slightly more than minimum wage. The organization already raises $40,000 yearly on its own to keep the 18-year-old nursery operating.

A local church provides rent-free quarters, allowing Community Day to barely survive.

“We can live with a 5% reduction. But if it gets higher, it could really get tough,” Neal said.

For Margaret Reister, director of El Modena Community Center in Orange, just the 5% reduction has had major effects. El Modena is a community center where services include free lunches for the elderly or unemployed and after-school tutoring for children. It operates on a budget of $110,000 a year, $86,000 of which comes from United Way.

Reister said that the facility already is understaffed and that some workers are paid for only 25 hours a week although they work at least 40.

“We’re already having problems with the 5% cut. If United Way doesn’t reach its goal, I don’t know how we could handle it,” she said. “Without that funding, we’d have to shut the door.”

When last year’s campaign ended, the United Way announced it had reached its $18.4-million goal. But when the money was counted, the figure was closer to $17.5 million, much lower than what had been pledged.

“Every year we project what we have in pledges, and we were always low. Last year, we were high. The economic climate really changed things,” Judy Trest, the organization’s communications director, said.

She said that this year the United Way will make no projections but will wait until all the money is in before deciding if more cuts are necessary.

The economic woes of some of United Way’s biggest contributors, in addition to the image problem created by the Los Angeles scandal, are the main reasons contributions could be off this year.

The Irvine Co., for example, reduced its work force by 350 earlier this year. Last year, Irvine Co. employees set a fund-raising goal of $75,000 and actually collected $84,000. The company matched that amount as its own contribution to the United Way.

This year, the employees’ goal is $60,000.

Contributions Reduced

The Fluor Co., which does much of its business in the oil-related field, has had to reduce its work force because of the rapid decline of the oil industry. Fluor also will contribute less this year. In 1984, Fluor employees contributed $381,000 to the Los Angeles and Orange County United Ways. Last year, the figure fell to $278,000. Thus far this year, Fluor employees have contributed $187,000.

The corporate contribution for the two area United Ways also has decreased. In 1984, Fluor gave a total of $356,000. The total dropped to $266,000 last year and to $200,000 this year. During those three years, the Los Angeles United Way received 82% of the Fluor contributions and the Orange County agency the remaining 18%.

Moreover, both local and national United Way officials fear that corporate contributions could continue to decline, especially from oil-related companies.

Steve Delfin, head of corporate development at United Way national headquarters in Alexandria, Va., said mergers and the decline of many large corporations are forcing local United Ways to reassess their sources. That means United Way wants to draw more funds from smaller companies and individuals.

“Historically, where United Way has found contributions has been where it has been the easiest--the big corporations,” Delfin said. “We have lived off that for the past 30 years.”

Still, Johnson said, this year’s $19-million goal is realistic. But if United Way does not learn to tap the public and small companies more effectively, he said, future fund-raising could be seriously jeopardized.

More Volunteers

“The immediate impact, I think, is slight, at least for this year,” he said. “But the long-range impact is going to be greater.”

To lessen that impact the local United Way is planning to double its volunteer fund-raising force to about 10,000 by next year.

Johnson also foresees cultivating bigger individual contributors, those capable of donating $10,000 or more each year. The $71 million in private donations raised to build the new Orange County Performing Arts Center is encouraging, he said.

“There is a large group of people out there who are capable of contributing large sums,” he said.

Both Johnson and Carroll, however, are optimistic that a late charge before Dec. 16, when the campaign culminates, will be just enough to reach the goal.

Carroll said the local United Way’s decision to talk openly about its counterpart’s problems in Los Angeles helped.

“If we had tried to dance around it, we would have been hit very hard. We still should have a good, solid year,” Carroll said.