from the San Francisco Chronicle
Huge Surplus Amassed By Guide Dog Charity
Critics say group sitting on too much wealth
David Dietz, Chronicle Staff Writer
Wednesday, May 12, 1999
©1999 San Francisco Chronicle
While many charities struggle to stay afloat, San Rafael's venerable Guide
Dogs for the Blind never had it so good.
The school, North America's leading facility for teaming the visually
impaired with dog guides, has accumulated so much unspent money that
critics say the operation is abusing its tax-exempt status while
shortchanging the blind.
To the chagrin of state charity regulators and some benefactors and former
students, the school wound up last year with more than twice as much money
as it needed. It spent $21 million but still had nearly $24 million left
over -- at least the fifth consecutive year of hefty surpluses.
With the extra cash year after year, Guide Dogs has amassed a bulging
endowment that now totals about $200 million, far surpassing those of many
of the Bay Area's top charities. The renowned Haight Ashbury Free Clinics,
for example, does not even have an endowment, while the fund at San
Francisco's Glide Memorial United Methodist Church, another major
benefactor of the inner-city needy, totals only $16.7 million.
While Guide Dogs' wealth-building breaks no laws, regulators and
organizations that monitor charities dislike heavy stockpiling of cash. The
National Charities Information Bureau, which sets standards for giving,
advises donors to be wary of organizations that generally hold in reserve
more than two years' spending.
Guide Dogs has set aside an amount of money that would cover its operations
for about 10 years.
``The point is that you shouldn't be accumulating money . . . if you're not
going to spend it,'' said bureau spokesman Dan Langan.
School officials defend the organization's riches, saying they are trying
to perpetuate the operation and need to hedge against investment losses
that would harm the endowment. They also forecast that the number of
students will grow as the general population ages.
``This is acting as prudent managers,'' said Richard Graffis, an investment
adviser who chairs Guide Dogs' board of directors.
But some critics say that the school, which was formed to help blinded
servicemen during World War II, is run these days more like a business than
a benevolent nonprofit organization and that it seems more intent on
enriching itself than trying to determine what more it can do to help the
blind.
``Hoarding doesn't do anybody any good,'' said Yeoryios Apallas, a deputy
attorney general in the state Department of Justice's charitable trust
division. ``Given the incredible needs of the sight-challenged, I cannot
believe that these funds cannot be used more effectively.''
The size of Guide Dogs' endowment is all the more startling, critics say,
because last year the school graduated only 354 students and did not fill
all its classes. It also must compete with nine other such schools for a
relatively small number of students.
According to the American Federation for the Blind, the nation's blind
population of 1.1 million is growing only slightly, and fewer than 10,000
use dogs. Far more -- about 130,000 -- use canes, according to the
federation.
While California law puts no limits on nonprofit organizations reserving
funds, state regulators operate by the standard that charities exist to
give away money, not to save it. Occasionally, officials will put pressure
on organizations they consider to be violating a public trust.
With Guide Dogs, state regulators raised the enrichment issue once before,
in a 1994 letter. But school officials said they have no knowledge of the
state's concern and no action was ever taken.
Particularly upsetting to some critics is that despite the size of its
endowment, Guide Dogs continues to solicit public contributions
energetically. The school, popular with donors since its founding in 1942,
took in $16 million in bequests and donations last year -- a rate of
$44,000 a day.
No one quarrels with Guide Dogs' achievements, which have been captured in
stories many times. Started in a rented house in 1942, the school, now
headquartered at an immaculate 11-acre campus spotted with willows and
Japanese maples, has developed a devoted following among former students
and donors.
It has trained 8,000 blind people in the use of yellow Labrador retrievers
and other breeds -- free of charge -- then continued to support its
graduates, affording them free counseling and even paying some of their
veterinary expenses.
And the public has responded enthusiastically, giving twice as much in 1998
to Guide Dogs as the next- largest training school received. Many
contributors are spurred by the sight of the school's alert and
well-groomed dogs being trained on streets surrounding the organization's
campuses in San Rafael and outside Portland, Ore.
One of Guide Dogs' strongest defenders is Morgan Watkins, associate
director of academic computing at the University of Texas at Austin, who
attended the school and now serves on its board.
``As I sit here and rest my hand on my golden retriever and reflect on the
many times I've been on campus, I think I can say that the services we
provide are excellent,'' he said. ``Are there ways to improve? There are
always ways, and we are trying to do that with constant review.''
Critics, however, complain that by soliciting donations at a time when
Guide Dogs is already earning more money than it can use, the school is
misleading the public and diverting charitable donations from needier causes.
``It would seem to me that anybody who has more than enough revenue from an
endowment to run its operation should not be out there fund-raising,'' said
Ed Eames, a blind Fresno author and co-writer with his wife, Toni, of a
book on dog guide schools. ``When do you let other guys get in and get part
of the pot?''
Besides, some researchers say, the number of people with visual impairments
may not necessarily grow as the population gets older.
Medical advances in areas such as cataract surgery and treatment of
diabetes, a leading cause of blindness, could reduce visual handicaps. And
even if the blind population does increase, the proportion of the
sight-impaired who are drawn to the idea of using dogs will not necessarily
rise, especially with increasing self-sufficiency generated by the computer
age, observers say.
``The fact is we don't really know what's going on,'' said Emilie
Schmeidler, senior research associate with the American Foundation for the
Blind.
Guide Dogs said it has no evidence to back up its growth prediction and is
primarily banking on trends. The school has begun research to get better
answers, officials there said.
While sympathetic to the charity's desire to save money for a rainy day,
critics implore the school to attend more to the current needs of the
blind, even if it means altering the charity's charter to branch out beyond
dog guide training.
``The future for a charity is today -- to take care of the needs of their
constituents,'' said Apallas, the state charity regulator. ``All they need
is to be a little more creative.''
Even Vernon Crowder, a blind Bank of America agricultural economist who is
an unwavering supporter of the school's work, suggested that the
organization is squandering opportunities to increase the mobility of its
students and the sight-impaired in general.
Crowder, who once lost out in a bid to become Guide Dogs' chief executive,
said the school should consider providing basic mobility training for the
newly blind, even if they do not choose to use dogs.
He also suggested that the school put its weight behind research and
development efforts to improve mobility, particularly in adapting
electronic signs so that they can transmit orientation signals to the
visually impaired.
``This is a natural extension of what Guide Dogs is doing,'' he said.
But Richard Bobb, Guide Dog's president and chief executive officer,
rejected any likelihood in the foreseeable future that the school would
branch out, arguing that the organization has more than enough on its hands
to train dogs and pair them with students.
``Our mission is relevant,'' he said.
Apallas said the state has no authority to force Guide Dogs to spend more
of its resources, but it could raise its concerns with school officials.
Regulators cited the wealth issue in their 1994 letter, but there was no
apparent follow-up.
``Excess revenue accumulated during the year seems high,'' Larry Campbell,
registrar of charitable trusts, wrote to the school at the time.
``Determine if more excess income can be used to provide more current
public benefits.''
There was no response from Guide Dogs on file with the Justice Department,
and current school officials said they were unaware of the state's inquiry.
In any event, the letter has had no apparent effect on Guide Dogs, which
has continued to accumulate surpluses.
As the school's wealth has soared, some of Guide Dogs' critics include
longtime donors who are now having second thoughts about helping the
organization.
``I knew they had an endowment, but I didn't know it was to this degree,''
said Carol Spivak, a self-described dog lover who has given generously to
the school since 1988. ``I think I'll reduce what I give.''
Controversy is not new to Guide Dogs. It was criticized several years ago
for being slow to put blind people on its staff and board of directors and
for treating some blind staff members dismissively. It rejects the
accusations.
Currently, five of the school's 235-member staff and four of its 18
directors are blind. There are no blind people in top management.
The school also was caught in a 1994 imbroglio over construction of its $14
million Oregon campus. Critics accused Guide Dogs of heavy-handedness in
winning local government approval of the project, and the school, despite
its wealth, persuaded the state of Oregon to help provide it with a
low-interest building loan from a bank.
The Guide Dogs' endowment has benefited from the longest stock market boom
in history. Typically, the organization taps only endowment dividends for
present needs, plowing back all capital gains or surpluses.
Last year, Guide Dogs spent about $5 million of its $28 million in
endowment proceeds on operations. To use trading profits for continuing
needs would be imprudent, school officials argue.
The school pays most of its expenses with public contributions, which have
risen 52 percent in five years, according to financial statements submitted
by the organization to the Internal Revenue Service. Eighty percent of the
donations to the organization come from bequests.
Just as revenue is up, spending has increased -- particularly on overhead.
With the opening of the Oregon campus, the staff has nearly doubled and
management costs have jumped 185 percent in the past five years. Three of
Guide Dogs' top managers earn more than $100,000 a year, and Bobb received
a 14 percent raise last year, bringing his annual salary to $200,000.
Fund-raising costs have also increased, even as the endowment ballooned.
The school spent $796,171 on development last year, up 10 percent, in line
with a campaign to increase donations. The $16 million in combined bequests
and donations received last year was up about 30 percent from 1997.
``Part of the reason I was brought here is to keep the bar high,'' said
Bobb, a former leasing company executive.
Some of Guide Dogs' competitors yearn to have it so good.
``We obviously wish we could have that budget,'' said Don Robinson,
executive director of Guide Dogs of the Desert, a small, innovative Palm
Springs-area school that strains each year to meet a spending program of
just under $1 million. ``It's a struggle. It's nonstop.''
As Guide Dogs' wealth is scrutinized, critics note that England's largest
dog guide school was under similar fire four years ago, resulting in the
British government drawing up strict rules forbidding cash stockpiling by
charities while asking the public for money.
Robert Gnaizda, a San Francisco public interest lawyer who has sued rich
charities, holds the view that organizations like Guide Dogs should be
subject to periodic state review to determine whether they are fulfilling
their mission and enjoying community support.
``The state would have much greater authority to look into expenses and
might take into account if charities hoarded,'' Gnaizda said. ``This would
be a check against the wealthy getting wealthier.''
----------------------------------------------------------------------------
----
CHART
.
A CHARITY'S OVERFLOWING COFFERS
.
Guide Dogs for the Blind is one of the Bay Area's leading charities.
Critics
say it is too rich and accuse the school of operating more like a business.
.
-- CONTRIBUTIONS
Donations are growing
'94 $10
'95 $13
'96 $19
'97 $12
'98 $16
.
-- EXPENSES
Annual expenses have doubled
'94 $10
'95 $12
'96 $16
'97 $19
'98 $21
.
-- SURPLUSES
Unspent money soars
'94 $11
'95 $14
'96 $11
'97 $21
'98 $24
.
-- ENDOWMENT
In millions of dollars
.
'94 $80
'95 $91
'96 $104
'97 $160
'98 $189(x)
.
(x) - Endowment currently totals about $200 million
Figures have been rounded
.
Source: Guide Dogs for the Blind
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