William Landau, MD; Guy Jester; Howard Etling; Howard Margraff; Rich Pisani; John Selhorst, MD
Watchdog Report of The American Institute of Philanthropy
Based on our experience and efforts as a former advisor and a former board member of the St. Louis Gateway Area Chapter of the National Multiple Sclerosis Society, we are of the opinion that a shamefully small amount of the national organization’s fundraising success is committed to tangible patient services and research endeavors.
Multiple Sclerosis is a rare disease, affecting about 250,000 people in the United States. It’s most likely to attack young adults. Symptoms of spinal cord and brain dysfunction may come and go over periods of days to months and repeated attacks cause severe disabilities. Many fortunate patients have few or no symptoms, but the worst cases may become wheelchair bound and dependent. Presently available medications sometimes can ward off symptoms. Multiple Sclerosis is neither contagious nor preventable, an important fact in regard to the MS Society’s extensive expenditure for general public education.
The national organization headquarters in New York receives both direct contributions and 40% of the income of its local chapters. Patient service and research are the focal point of local and national solicitation material: I enclose $______ to fund National Multiple Sclerosis Society research and service programs. “Please help the 3,702 people who depend on us,” stated a 1995 solicitation letter of the Gateway Area Chapter. Another appeal claims that “Your contribution to the National Multiple Sclerosis Society helps fund research and provide services for a quarter of a million people who have MS.”
In 1990, the St. Louis Post-Dispatch published a report of the Gateway Chapter operations. The heads of neurology at St. Louis University and Washington University medical schools had recently been dropped from the chapter’s Professional Advisory Committee and two businessmen from the Chapter’s Board of Trustees had been removed as well. The neurologists emphasized that the Chapter’s plan to develop a second clinic for multiple sclerosis was unjustified without a survey of the number of MS patients in the Gateway area and the severity of their medical conditions. The dissident Board members had questioned whether the Chapter was spending enough money on patient care. Ultimately, the executive director of the Chapter was dismissed and an executive from the national office was invited to direct the Chapter temporarily.
That same year, the then mid-Missouri branch of the Gateway Chapter also experienced organizational problems. A branch leader reported to us that in spite of generating $250,000 that year in contributions, the mid-Missouri branch’s personnel were handicapped by the Chapter’s chronic failure to provide operational support. Utility bills and salaries [for the branch employees] were not paid; requests and communications were ignored; [a] fair share of funds for local service activities was denied.
The [Gateway] Chapter director covertly tried to transfer branch bank funds to the Chapter account. The council of the mid-Missouri branch endeavored in vain to procure status as an independent chapter of the national organization. In their 1992 resignation letter to the national president, the council of the branch complained of the “lack of good faith of your representatives” and stated that they were “unable to embrace your guideline of 5% or less for direct services to MS clients and approximately 16 cents of each donated dollar ultimately reaching research. We believe that the purpose of donated dollars is to provide service and support primarily for local MS clients and research for a cure, not dissipation in administrative expenses.” Thereafter, the mid- Missouri council organized the Multiple Sclerosis Institute, together with the University Health Sciences Center in Columbia, Missouri, and this Institute now includes more than 450 clients in the Missouri area.
The fiscal data that we present here is derived largely from the 1997 audited financial statements of the Gateway Chapter and of the combined National Headquarters and chapters. Our central interest has been the Gateway Chapter, where patient services are centered.
In 1990, the base population of the Gateway area was approximately 2.5 million. At that time, epidemiological data indicated that in this area dwelt 1,450 MS patients, fewer than one-third of whom were seriously disabled by the disease. In 1997, total public support and revenue for the Chapter was $2.3 million, and total net assets were $3.2 million.
In regard to Chapter expenditures, the national headquarters received $617,000 (35% of total expenses), plus an additional $128,000 (7%) earmarked entirely for research. The largest component of the Chapter’s “program services” expenses were Community Services, $302,000 (17%). What sort of services the Chapter provides to the St. Louis community has never been clearly defined. It further appears to us that the Chapter’s $204,000 (11.5%) for Public Education is actually fundraising, publicity and overhead. Why is it necessary to educate the public concerning a disease that is not catching or preventable? We also have found no justification for the expenditure of $27,000 (1.5%) for Professional Education and Training. Physicians and other health care professionals are paid for their services and should be responsible for their own post-graduate education. Larger than the patient services allotment is the $236,000 (13%) for fundraising, which the Gateway Chapter classifies under “supporting services.”
Our central goal has been to ascertain the true cost of services that are most important for the poor and seriously disabled patients, i.e., loan and purchase of wheelchairs, hospital beds, taxi fares, nursing care, medication, professional fees, respite care, etc. How many services delivered to how many patients each month and at what cost? Budgetary analysis indicates that less than $50,000, 23% of the Chapter’s $216,000 in declared patient service allocation, goes directly for patient care. The remaining 77% is largely charged to organizational costs: rent, telephone, and salaries.
A 1992 memo from the national office to the area directors of major chapters suggested as a guideline that 5% of adjusted gross income be budgeted for “Disbursements on Behalf of Clients.” The Gateway chapter spent only 3% on “Intervention programs” in 1997.
The Gateway Chapter does not provide a detailed itemization of its direct patient service expenditures. The MS clinic at Barnes-Jewish Hospital is the only clinic related to the Chapter. The director of the Clinic reports that its only support from the Chapter is a total subsidy of $6,000 for some of the Clinic’s medically indigent outpatients, who number about 150, and a social worker on the day they are seen at the Clinic. The Clinic official was not aware and we could not determine the Chapter’s policies and expenditures for special equipment for the severely disabled or its support for respite care. The Chapter does not support primary physician or other consultant care, or inpatient services not covered by insurance or Medicaid. The Chapter does pay for indigent patients to travel to doctors, for their first physical or occupational therapy visit, and partly pays for prescribed professional counseling service.
The National MS Society and its chapters took in $113 million in fiscal 1997 yet spent only $16 million on direct research grants. (It spent an additional $1.9 million on research grant administration.) The Society and its Chapters also spent $3 million on specific assistance to individuals and clinics. We believe that the nearly $75 million that the Society claims to spend on programs is padded with overhead and includes activities that are not emphasized in the Society’s solicitation letters.
Our conclusion is that less than 20% of the income generated by the national headquarters and it’s chapters provides the patient care and research support that is advertised.
We believe that:
1. Both the responsibility and the remedy for this situation belong primarily to the members of the national and local boards of trustees. They should demand a high level of accountability for all allocations.
2. MS patients and their families should rightfully demand more direct services, especially for those patients who are disabled and poor.
3. Patients, their physicians, and indeed all doctors should demand increased research allocations.
4. Nonprofit health organizations need to implement functional expense categories that better identify what they actually do, and also make publicly available a detailed itemization of their expenditures to achieve those ends.
AIP’s “B” grade for the National MS Society and its chapters reflects the organization’s spending on client and community services, professional education and training, and public education that is not part of a fund-raising appeal, services to chapters, as well as research and patient services. The authors of this article are dissatisfied with the level of spending on medical research and direct patient care by the National MS Society and its Gateway area chapter. They feel that too much program services expense is allocated to overhead, i.e., rent, salaries, etc., and to activities of limited benefit to people with MS and the public.
Joseph C. Despio, President of Finance & Administration of the National MS Society told AIP that direct patient care is “not quite what we do...not part of [our] mission.” He said the National MS Society tries to not use medical facilities and instead tries to help people connect and help themselves. MS chapters have many programs to help people with MS, according to Christina Lipka, Information Services Associate of the National MS Society. She told AIP that each chapter has different community services but all chapters have support groups and newsletters and give out information. There is a system in place to make the community services more standardized in the future, according to Ms. Lipka. Some chapters have peer groups and councelors, who can offer help in a crisis, and provide advice on physical therapy and obtaining an equipment loan. She said that “Professional Education and Training” (more than $4 million in 1998) in the national organization’s financial statements referred to staff training and not to training medical doctors. She did say that the national organization conducts medical seminars because not every neurologist knows about MS and how to diagnose it.
The Society and other charities should more accurately describe their intended use for our donations and be more accountable for how they spend them. The National MS Society emphasizes its research program (15% of total expenses in 1998) and to a lesser extent cites its public policy advocacy, education and programs to improve the quality of life for people with MS and their families. The Society’s lumping of $35 million worth of expenses in “Client and Community Services” in its 1998 year-end financial statement does not make it easy for a donor to determine what is being spent on direct patient care ($3.5 million, or less than 3% of total expenses in 1998).
AIP encourages donors to ask charities what portion of their budget
is being spent on the type of programs that they care most about and factor
it in to their giving decisions.
Copyright © 2004, The American Institute of Philanthropy