Scandals Shake Faith Of Donors In Good Causes Collapse Of New Era Philanthropy May Hamper Charity Fundraising

The New Era scandal likely will hurt giving to charities, yet will cause far less damage than the United Way affair, top fund-raisers predicted last week as they reported a healthy 1994 for charities.

They reasoned that charities caught in New Era’s schemes are guilty of bad judgment, not the fraud that former United Way head William Aramony committed in the early 1990s while reportedly freely spending the charity’s money.

“The New Era matter may be a near-miss for the non-profit sector… . It’s a third cousin (to the United Way affair),” J. Patrick Ryan, chairman of the American Association of Fund-Raising Counsel, a 60-year-old group founded to promote ethical standards in fund-raising.

Martin Grenzebach, chair of the AAFRC Trust for Philanthropy foundation, added that in the New Era case, “It wasn’t charities that committed malfeasance. They made errors of judgment.”

The Foundation for New Era Philanthropy collapsed into bankruptcy this month amid accusations that its work matching charities’ money was a scam.

Last year, no such blights marred the charity sector.

Helped by a buoyant economy, charities garnered nearly $130 billion from companies, foundations and individuals, a 3.6 percent gain from 1993, said the AAFRC, which represents fund-raising consultants.

“It was a good year. The climate was generally healthy,” Ryan told a news conference to disclose results from “Giving USA,” an annual report issued by the AAFRC Trust For Philanthropy.

About 88 percent of charitable donations came from individuals, 7.6 percent from foundations and the rest from corporations.

Corporate giving appeared sluggish, rising just $60 million or 1 percent to $6 billion, the report said. By comparision, individual giving rose 3.89 percent in 1994.

But the numbers belie the “deep, strong and growing” corporate support for nonprofits, said Ryan. The true level of company giving is “hidden” by new donation methods, he said.

For example, he said that Merrill Lynch encouraged direct employee contributions to victims of the Oklahoma bombing. The company responded to the $100,000 direct contribution from employees by contributing $25,000 of its own. Only that $25,000 is tracked by Giving USA.

Gifts of time or products also are not measured, he said.

By type, the biggest jump in donations involved international charities, most likely due to the Rwanda crisis, said the group. International charities received $2.2 billion, an increase of 18.8 percent from 1993.

The only sector in which donations dropped was human services groups, which provide direct help to people in need. Such groups received $11.7 billion, a 6.1 percent drop in gifts from the previous year.

Counsel leaders attributed the drop to the occurrence of fewer U.S. disasters. “The most widely publicized human service crisis of 1994 occurred outside the nation’s borders, in Rwanda,” said Grenzebach.

Whatever the giving climate in 1995, counsel fund-raisers said that individuals will need assurances that charities are protecting funds from New Era-type or Aramony-type schemes.