Finding another way; American's generosity is coming with a price: having a say in where their money goes. And that's where HR kicks in - Workplace Giving - Statistical Data Included

HR Magazine, Sept, 2002 by Vicki Contavespi

Americans opened their wallets with unquestioning generosity after the terrorist attacks last year. But in a kind of aftershock, some organizations that took in the money were accused of mismanaging it. Complaints have been leveled at large, venerable institutions such as the American Red Cross, as well as at little-known charities that found themselves awash in Sept. 11 donations.

Consequently, pressures have increased for greater accountability in the world of charitable giving, and workplace giving programs will likely feel the effects. HR professionals who institute and manage their companies' workplace giving programs can expect to find employees increasingly interested in knowing where their charitable donations go--and how they are being used.

As a result, HR professionals will need to know financial and other details about organizations that benefit from workplace programs. They'll also have to stay current on technologies for informing employees about charitable organizations, collecting and channeling donations, and keeping program administration costs to a minimum.

The Sept. 11 Effect

The personal tragedies and the heroic actions stemming from the terrorist attacks not only generated an outpouring of donations for victims but also, as a result, cast a spotlight on major charitable organizations. And some turned our to be managing funds in ways that donors disliked.

The Washington, D.C.-based Red Cross, for example, collected more than $900 million in the aftermath of Sept. 11. The organization intended to hold a large portion of that money in reserve for future calamities, but the public demanded that donations for Sept. 11 victims go only to those victims and their families, prompting the Red Cross to reverse course.

In July, the National Capital Area chapter of the United Way of America confirmed that it was under investigation by a federal grand jury. The chapter's financial records, among other things, have been subpoenaed, and the chapter is cooperating with the investigation.

The chapter has been under fire for several months, accused of various questionable practices involving the amounts it withholds from contributions for overhead and its spending for administrative purposes.

The chapter, based in Washington, D.C., is one of about 1,400 local United Way chapters under the umbrella of the United Way of America, based in Alexandria, Va. United Way chapters collect contributions and channel the funds to organizations as designated by the donors or as chosen by the United Way chapter, which keeps a percentage to cover its administrative costs.

The controversies over spending practices have involved only the Washington-area chapter and were raised last year by a departing board member. This past summer the chapter announced a tightening of its financial controls and appointed former U.S. Transportation Secretary Rodney Slater, now a Washington attorney, to head a task force to review the chapter's ethics, policies and procedures.

Donors in the Driver's Seat

These controversies put charitable organizations on notice that donors want their money to go where they think it's going. Daniel Borochoff, president of the American Institute of Philanthropy, a charity watchdog organization, says employees are increasingly interested in naming the recipients of their contributions. "More and more people want to be able to choose their own groups," he says, calling it "the 'donor choice' option.

As a result, employers may be called on to give employees more workplace giving options--especially since charitable contributions don't appear to be slowing. (See "Time to Give" on page 54.)

Some companies, including Sears and Microsoft, have opened their doors to virtually all charitable organizations.

Sears uses focus groups and surveys to determine the types of organizations that its employees want as recipients of workplace giving programs, while still offering the United Way's umbrella system as an option. "We allow them to pick the charity of their choice," says company spokeswoman Peggy Palter, "and we assist them in finding volunteer activities." Administering such broadly inclusive programs could potentially cause financial and other headaches, but Microsoft has worked around such problems. For example, the high-tech giant uses technological tools to manage its workplace-giving program: Employees use the corporate intranet to make their donations online.

The company also holds down costs by outsourcing program administration to the J.K. Group, a Gaithersburg, Md., firm that manages large companies' workplace giving programs, among other activities.

Another outsourcing option is America's Charities, a Chantilly, Va., firm that administers workplace donation programs for employers. Using the firm's pledgefirst.com web site, employees can learn about specific charitable organizations, for example; make donations through a payroll-deduction arrangement; and track their volunteer hours.

Evaluating Efficiency

While it is important not to overlook the administrative aspects of expanding a workplace giving program, HR's most important role will be investigating recipient organizations carefully. A useful tool for such research is www.give.org, the web site of the Better Business Bureau Wise Giving Alliance.