The Road to Hell (26 page)

The second misleading thing is that neither the pie chart nor the pamphlet explains exactly what “program services” are. The reason Save the Children and
Money
emphasize the program services statistic is, presumably, that it is seen as a rough approximation for money that actually helps people, as opposed to funds spent on overhead any fund-raising expenses. Program services, one would assume, is what should go to the children in
the folders. Why else trot out the statistic to use for rankings and as pie charts in promotional literature?

But Save's idea of programs is probably broader than that of its sponsors. In fiscal 1994, it included nearly $4.5 million for travel, $3.5 million for supplies, $15.5 million for salaries, and $2.2 million for rents. Save's non-public financial statements show that film, holiday cards for sponsors, the gift shop, and the craft catalog were also charged to program expenses. The total of the sponsors' dollars that actually went in grants to field programs was $45.1 million, less than 50 percent. In turn, just over half of that money was given in grants to other organizations to actually implement projects. Those organizations presumably have their own salaries and administrative expenses to pay as well. None of that is reflected in Save's official representations.

Over the last few years, the pie chart has been more than an illustration used in Save the Children's advertising. It has been a contentious issue within the organization. In 1994, Save's general counsel convinced the organization to remove it from print ads because it put them in violation of solicitation laws. Beyond that, a number of Save staffers and employees have begun to suspect that the organization is more concerned with keeping the proportions of the pie chart intact than with actually helping children.

I asked MacCormack how he thought sponsors might interpret the organization's statements about the amounts of money going to programs. “When they see that on average 82 percent goes to programming, well, they think that's great,” he said. “They think that's what it ought to be.”

“Do you think they understand that the program includes rents and salaries?”

“Well, first, I mean, 82 percent is going to the program, on average, of all…of the hundred million that comes in here…82 million goes to the program…but then if you look at everything that goes in and everything that goes out, 82.7 million goes to…to the program. So that is, that's correct.” MacCormack seemed to have expected the question, while at the same time he acted as if he were puzzled by it. This was the reaction of all the Save executives I spoke with that day: It was as if no one had ever been thickheaded enough to raise that issue before.

But that specific question had come up frequently, from people within and outside the organization. And MacCormack himself had been concerned enough about the deception to raise it in a letter to Save the Children's board of directors. In fact, there are hundreds of pages of reports and
memos from within Save the Children revealing that its top executives have long been aware that the organization is not delivering on its promises.

A
year before I'd met with MacCormack, an internal report by a Save the Children consultant had specifically examined the question of how sponsors' money was being spent. The consultant, Shelby Miller, is a recognized authority in the field of early childhood development, and someone with much more than an outsider's view of Save the Children. For six years she had been a program officer for the Ford Foundation, supervising grants made to Save. When we met early one morning at a Manhattan diner, she prefaced our discussion by telling me that she'd only agreed to talk because Save had done nothing to address the problems she'd found a year earlier despite the fact that she made a series of detailed recommendations for improving Save's programs.

Her criticisms fell into two broad and related categories, developmental and operational.

Discussing Save the Children's operations, Miller's report says the actual amount and proportion of each sponsorship dollar that reached the children is “woefully inadequate.” While sponsorship is an effective tool for raising money, it requires a tremendous amount of administration to track all the individual children, which Miller pointed out in her report: “Typically, there is little or no relationship between those arranging sponsorship and those administering services. However, a huge amount of staff and volunteer time is devoted to the maintenance of sponsorship.” In our conversation, Miller described this as a chasm between what sponsorship means to donors and what it means to the children and their communities. “The chasm has a big price tag. On the sponsor side, you're sold the concept that for $20 a month or whatever it costs, we're going to transform this kid's life through all these kinds of strategies—or whatever it is they put in the ads. On the sponsored family side, it's sold as whatever it takes to sign them up; but it's a much more minimalist promise.”

On the developmental side, she said that Save lacked “a commonly accepted and understood theoretical perspective” on which to carry on and evaluate its own work. It's not enough to just say you're helping children. Childhood development is a science, Miller explained. There's no room for a sentimental,
noblesse oblige
, pity-the-poor approach to the work. “Programs must be carried out over long periods with demonstrations and models and constant analysis to find out what works. Then the programs must
be focused. Few of Save's projects fit these criteria. It's because of a lack of commitment. Save has no detailed objectives, no strategy. It's a freeing experience if you can commit to a strategy. If you know what to do, you don't waste time and money. Then you can commit 80 to 90 percent of your time on what you want to achieve.” The bottom line is this: Save the Children's projects don't work.

Miller's anger with the organization is not over the duping of sponsors but from two kinds of damage she sees the organization doing in the field of childhood development. First, at a time when funds are in short supply, Save is spending money to create the illusion that it's helping. And second, Save is spreading the idea that it's easy and cheap to change the lives of children. “We know how to help kids,” Miller said. “We do. The models and methods are there. The fact is that it costs four to five thousand dollars a year for a preschool intervention. The research has been done. With very few exceptions, Save isn't delivering. Their approach to development work is totally scattershot. The problem with Save is that they're wasting resources and goodwill, and they're doing it in the name of children.” Miller's annoyance grew as she spoke.

She concluded our first conversation with the suggestion that maybe Save the Children should just liquidate all its assets and make a block grant to another agency that is doing some good somewhere.

W
hen I raised Miller's report in my meeting with MacCormack, he briefly stared out the window. His face grew red and then he said, “I haven't read it, so I can't say there but certainly, the sort of the arguments are, that you can't get enough out into the communities…I don't know whether she makes this argument or not, but you can't get the development results, you know…And if that's what's said, then that I wouldn't agree with.”

Whether or not he had actually read a report that his organization had spent $15,000 to produce, MacCormack did know what I was talking about. It was an issue that had been repeatedly brought to his attention by Save the Children's in-house attorney and at least once by the organization's outside auditor.

And MacCormack himself, in the spring of 1993, was extremely worried about the amount of money that the organization was able to deliver to projects. At that time he visited Christian Children's Fund at their headquarters in Richmond, Virginia. MacCormack was in familiar company there because CCF now employs a group of former Save the Children staffers, including at that time its president, Paul McCleary. The purpose of the trip was to do some fact-finding and compare notes. When MacCormack
returned to Westport, he wrote a concerned memo to the board of directors.

It began with the usual self-congratulations: “Save the Children takes justifiable pride in the fact that between 80-85 percent of our income goes to program services.” Then the tone quickly shifts as it focuses on the central problem that has long haunted the organization: “However, this is an average figure. It masks the fact that some of our income streams go 100% to program…. For example, our food aid is 100% program and our public funding from the U.S. government and the United Nations probably averages 90% to program. This means that, on average, a much smaller percent of our private revenues are allocated to programs,” he wrote. In other words, 80 percent of a sponsor's contribution does not go to program expenses, even under the organization's broad definition of what program services are.

As the memo continues, MacCormack eases his own concerns by invoking the magic word
leverage:
“In general, we use these private funds to leverage other sources of funding, thus achieving a multiplier effect on terms of our private donations.” This concept of leverage was raised in every conversation I had at Save the Children. What it means is that Save receives grants, mostly from the U.S. government, that it must use in very specific ways on specific projects. These are restricted funds. Even though a sponsor donates money to Save the Children with a specific child in mind, sponsorship funds are really the only unrestricted assets Save has. Save has no obligation to spend the money on the sponsor's child, in that child's village, or on projects at all. Save, in fact, uses those funds to pay for administering the restricted money it gets from the government. That's leverage.

The relative calm that MacCormack conveyed to the board was missing from a memo written a day earlier to the files: “Our Save the Children ‘alumni' at CCF consider our situation ‘a disaster waiting to happen,'” he wrote. “As communities often receive a small portion of the sponsor's contributed dollar, they are obviously going to ask questions about where the money goes. All the explaining in the world would not make this question go away or our own strategy look good in an investigative report.”

If MacCormack had any concerns about the small amounts of sponsorship money getting to the field, a year later he hadn't done much about it. Shelby Miller produced her damning report in April 1994. On May 6, 1994, Pamela R. Winnick, Save the Children's in-house counsel, returned from a tour of the organization's projects and wrote a memo to the board of directors, revealing:

1. In some of our programs, no sponsored children are receiving benefits.
   
2. Even in our best programs (e.g. Kentucky), only 60% of the sponsored children appear to receive any benefits.
   

In this memo, Winnick is clearly in MacCormack's camp, worried about Save the Children's public image. She wrote that she was anxious to put Save in a “defensible position in the event of an investigation by a government agency and/or media.” But over the next months she would visit more projects and discover that Save the Children's only concern was their image. A series of memos and letters document her growing disillusionment and frustration with Save the Children.

Winnick first sought confidential outside legal advice from Daniel L. Kurtz, an attorney in private practice who had once served as assistant attorney general in the Charities Bureau of the New York State Attorney General's office. Kurtz reviewed Save's fund-raising materials and compared them with the reality of the organization's projects. He sent his opinion to Save: “We believe that the situation at present is likely to constitute a substantial violation of state solicitation laws.” Kurtz warned of serious problems for the board and recommended that Save change its advertising, which would solve the problem in the short run, until it could change its programs to more closely approximate the claims being made for how funds were spent.

Winnick apparently tried to coax the organization toward revising those claims. A month later, on June 15, she wrote a memo advising that callers to Save's 800 number be told that “83% of SC's overall expenditures goes to program services,” as opposed to 83 percent of
donations
. But if callers insist on knowing more, they should be forwarded to Westport. “Under no circumstances can we make the direct representation that 83% of the sponsorship dollar goes to programs.”

In the summer of 1994, Save's outside law firm, Day, Berry & Howard of Hartford, Connecticut, addressed Winnick's concerns. Their assessment was much more measured and diplomatic, but echoed Winnick's opinions.

Thomas J. Groark, Jr., of Day, Berry & Howard also checked with KPMG Peat Marwick, Save's outside auditors. Edward J. Molloy, a partner in the accounting firm, wrote to Groark on June 30, 1994, saying that he had been in contact with Najeeb Halaby, the chairman of Save's board of directors. “I indicated to Mr. Halaby that there was increasing pressure on all non-profit organizations to provide donors with accountability for their donations and in this regard, I saw even more pressure on SC…. I expressed my concern on the frequency with which problems kept surfacing.
It was obvious that in many programs a gap existed between what was said and what was done.

“In my mind, the sponsorship program is a very difficult and expensive program to administer and can go wrong very quickly…”

Molloy mentions several times in his letter that senior management is aware of the problems and is in the process of correcting them.

On July 7, 1994, Winnick wrote back to the board members: “While I commend Day, Berry & Howard and senior management for concluding that there exist problems with sponsorship, I must, with all due respect, take issue with the implicit conclusion that the problems are being resolved in any significant manner.”