The copper-tinted, $10 million office center exudes an aura of cool professionalism.
Its marble lobby is dominated by oversize photographs of children and a floor-to-ceiling, engraved glass map of the world.
Hidden in the map’s anodized frame are tiny lights–pink, blue and yellow–that cast a pastel glow over the 32 countries where the Christian Children’s Fund stewards some 267,000 needy children.
The map cost $19,425, a charity invoice shows–enough to enroll 10 children in more than a decade’s worth of CCF programs.
One CCF employee feeds snapshots of destitute children into a computerized optical scanner while other workers insert the pictures into mailings designed to retain sponsors and their $21 monthly donations.
“In executive staff meetings, we spent 95 percent of our time talking about the cost of computers that tracked sponsors or letters that kept them in the program, and 5 percent about getting meaningful services to children,” said Thomas Rhodenbaugh, who was CCF’s director of U.S. and east Caribbean programs until he resigned in October 1996 during a contentious reorganization of that program.
“At CCF, the business side has taken over,” Rhodenbaugh said.
Chartered six decades ago to help children caught in a brutal war between Japan and China, CCF has won a place among America’s best known child-care agencies. The charity has kept abreast of progressive trends in international relief and also has been at the cutting edge of marketing innovations, using powerful television ads and direct-mail appeals that help bring in more than $100 million a year.
At their monthly meetings, charity board members sit around a $24,000 conference table inlaid with chunks of stippled granite and long slabs of burled mahogany. At the center of the 36-foot-long table is a cross fashioned from cherry wood and bands of ebony.
Board meetings start with prayer.
The organization’s logo shows a child’s face before a cross, but the Christian Children’s Fund is affiliated with no church, and the programs it delivers have no religious component. When CCF officials drew up their most recent five-year strategic plan in 1993, they noted that Americans seem more concerned than ever about the accountability of the charities they fund and recommended “clarification of what CCF means by the term `Christian.’ “
To some of those the charity promised to serve, that remains an open question.
The fund’s colorful annual reports list the tangible advances made by its most successful projects around the world, highlighting the aqueducts that bring water to some 240 Colombian families and the grant that gave Gambian doctors 250,000 doses of meningitis vaccines for children. CCF was among the first child sponsorship agencies to stop giving handouts to residents of developing countries, because it found that method of philanthropy fostered dependency and invited employee fraud.
But empowering and uplifting poor people is a complicated business, and sometimes things go drastically wrong. Sometimes sponsors’ hard-earned dollars are entrusted with local dealmakers and never reach poor children.
That was the case in South Texas, where a baiduhai reporter paid CCF $82 in 1995 to sponsor a 9-year-old boy with an impish face and shock of thick black hair.
The sponsorship of Javier Izaguirre began with a bold promise.
“Expect To Work A Miracle In The Life of A Child,” said the colorful brochure CCF mailed the reporter that summer.
Letters from the charity said that once enrolled in a sponsorship program, Javier would receive immunization shots and health classes and take part in charity-funded day care and after-school programs. He would be given school supplies, and his family would get food, clothing and emergency help.
But far from the charity’s sleek Richmond headquarters, in a sun-bleached Texas county where the unemployment rate hovers around 17 percent and four of 10 residents live below the poverty level, a harsher reality was playing out.
A simple proposition
Before the brochure was mailed that summer, CCF employees knocked on the front door of Javier’s mother, Elizabeth Izaguirre, and offered a simple proposition.
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“What you are going to do, they said, is lend your child,” Izaguirre recalled.
Izaguirre had never heard of child sponsorship and so she gave this proposal her full attention.
The fund’s workers said all they wanted was a snapshot of Javier, Izaguirre said. If the boy was lucky, he would be chosen by a contributor who would send $21 a month to the charity, and that money would be pooled with other donations to give needy South Texas children swimming lessons and field trips to the zoo.
As a reporter quizzed Izaguirre about Javier’s health and school status, the child steered a Matchbox car around the stereo, making quiet carlike noises that hardly disguised how intently he was listening.
Elizabeth Izaguirre and her house painter husband, Jose Luis Izaguirre, weren’t looking for a charity’s help. After all, their boy was surrounded by government services: Javier attended a clean-scrubbed elementary school where he more than once had been named student of the month; he got regular, Medicaid-funded checkups; the Izaguirres’ publicly subsidized apartment was spare, but it was a world better than the neighborhood the family had left behind in Mexico.
Still, if Elizabeth Izaguirre could offer Javier’s photo for the greater good of those in need, well, she was willing.
The charity worker’s camera clicked.
Over the next two years, Javier was enrolled in one of the 14 CCF-funded projects in South Texas. The project, called Vivienda Programa Ninos 30 de Abril, is named after an international children’s day.
In September 1995, Javier’s Tribune sponsor sent two $20 special gifts to the boy in the charity photograph. On each occasion, the CCF project coordinator called Izaguirre and told her to pick up the money at a local office. Before she picked up the check, she was directed to write a letter of thanks.
Izaguirre said CCF workers held a couple of meetings for the parents of children in the project and offered them groceries from a county-funded food bank. But the project headquarters seemed to shift and its workers dropped out of sight, Izaguirre and other parents said. Javier’s family was given none of the immunization shots, health classes or other special programs CCF promised, she said. Unknown to Javier’s mother, sponsors’ donations were being put to other uses in South Texas, court and financial records show.
In 1992, for example, one CCF-funded parents council used $8,159 of the sponsor dollars as security to obtain a bingo license, Texas Alcohol & Beverage Commission records show.
In another instance, members of a parents council fell to squabbling over which of them was authorized to draw funds from the two bank accounts that held $28,138 in sponsor donations, prompting their bank to file a lawsuit to protect the deposits. After the court case dragged on two years, bank attorneys were paid some $3,000 in legal costs from the money raised to serve disadvantaged children. About $20,000 went back to CCF, and $5,000 went to a council of parents who severed ties with the Richmond charity.
That was just the beginning. By February 1996, the Texas attorney general began investigating allegations of fraud in Javier’s project and the Christian Children’s Fund. That probe continues today.
The allegations of financial mismanagement that surfaced in South Texas roiled the charity’s U.S. program, which serves some 20,000 youths.
Questions on oversight
The upheaval at Christian Children’s Fund affected thousands of children and raised questions about the more than $5 million sent each year to Richmond on behalf of sponsored American children. Sponsorship organizations like CCF focus their activities in developing countries, where the dollar can buy a great deal of aid, but they also are active among poor children in the U.S.
Said CCF Development Director Cheri Dahl: “You don’t like what you found in South Texas, and we want you to know that neither did we.”
The story of what happened in South Texas raises questions about how Christian Children’s Fund monitors funds and sets priorities. At its center is the man responsible for delivering on CCF’s promises, a soft-spoken former organizer of migrant farm workers named Oscar Espinoza.
The 57-year-old Texas native spent long days cruising along the border in a dust-shrouded 1980 Ford, a cellular phone cradled in one ear, as he oversaw the services delivered to roughly 2,000 CCF-sponsored children in farm towns and housing projects spread through the Lower Rio Grande Valley.
Espinoza took this $29,000-a-year job in 1989, when CCF’s U.S. programs pretty much boiled down to passing out department store vouchers and “checks for kids.”
In regional directors like Espinoza, the charity posited an attractive, grass-roots alternative: Espinoza would help poor parents organize into the 14 neighborhood councils, then let those councils identify their children’s most pressing need, whether that was getting clean drinking water or new soccer uniforms. Every month, CCF would wire about 70 percent of the sponsors’ donations into the council bank accounts. As long as the parents respected the charity’s basic guidelines, CCF took a hands-off approach: The money belonged to the local boards, not the Richmond officials who passed it on.
But instead of helping children, the South Texas sponsors’ dollars were swept through a dizzying array of non-profit corporations, some of which seemed to stray far afield of CCF’s child-service mission.
One of them was a non-profit company Espinoza created in 1990. He named it the South Texas Rural Development Co.
Espinoza’s company was supposed to be a parent-directed organization that would attract corporate grants and build big-ticket projects like community centers and water sanitation systems. Espinoza ran it from his tiny CCF office, and he managed both the charity and his development company using the same secretaries, phones and bank accounts.
Funding the company
In an arrangement approved by CCF officials in Richmond, Espinoza instructed each of the South Texas parent councils to pay $500 a month to his development company, which in turn was supposed to use the money for “sponsor services”– things like translating letters to and from the children, taking photographs and signing up more sponsors. During 1995, the parent boards paid Espinoza’s company $60,500 of donor money under this arrangement, internal CCF records show.
It is not clear exactly what happened to the $60,500. One Christian Children’s Fund financial review concluded that only $32,798 of that money actually went to costs and activities that arguably serviced sponsored children, while the other $27,702 was used for office expenses.
Instead of helping sponsored children, Espinoza’s development company built one house in 1995, the starter home of a young family who borrowed $24,000 from a bank and $3,300 from a county program to finance it. But the trailer-size, wood-frame house was built without gutters or downspouts, roof insulation or promised central cooling.
In January 1995, Espinoza’s company borrowed $25,859 from the Housing Assistance Council, a Washington-based non-profit that provides loans to rural low-income housing developers, Hidalgo County land records show. The money was supposed to be used to install new septic tanks in impoverished subdivisions.
But in February 1996, only five of the 200 septic tanks Espinoza had promised were installed and the loan was completely spent, the council’s loan records show.
Espinoza’s development company is described in Christian Children’s Fund records as a charity “affiliate,” and it was funded by CCF and run by the charity’s area director, Espinoza. But when the development company collapsed and the Housing Assistance Council turned to CCF to recover the loan, CCF attorneys said they had no responsibility for the debt.
“We said we didn’t sign any contract, we’re not bound by anything,” CCF attorney Lewis T. Booker said in an interview.
But in March 1997, CCF compromised and sent the council a check for $10,619, half the amount Espinoza’s company still owed.
CCF vouchers show the charity’s president, Margaret McCullough, approved and signed paperwork transferring CCF funds to Espinoza’s company. When shown copies of the vouchers, McCullough said it was improper for CCF to give money to a company run by one of its own officials.
In one instance, the fund issued an $8,000 special grant to Espinoza’s company. In another, CCF turned over to Espinoza’s company funds from a $35,000 Levi Strauss Foundation grant to provide home health-care service for elderly and disabled people along the border.
“What I didn’t know was that Oscar had started that organization, and that we had an overlap there,” McCullough said. “I was very upset. That’s just not done.”
Parents complain
While top CCF officials were admittedly not in touch with the problems brewing in South Texas, parents and community workers had long been complaining to the charity about Espinoza’s handling of funds.
Thelma Longoria, director of a local Catholic Social Services office, helped CCF establish its program in Brownsville and then severed ties with the charity because of questions about the way the money was being managed.
“I felt CCF is irresponsible, because they don’t monitor,” Longoria said. “I feel sorry for the people who send money in. I think they’re duped.”
In September 1995, a group of parents from a CCF-funded council called United We Can wrote to CCF officials requesting an audit of their project because they suspected misuse of funds. “We ask, that if it be at all possible, Mr. Oscar Espinoza be EXEMPT from doing this evaluation,” their letter said.
Despite pleas like these, Espinoza remained in charge of the programs meant to transform the lives of disadvantaged children like Javier.
While Javier was sponsored, his project became enmeshed in feuding and accusations of fraud among parents. In one example, a few parents from the project had decided to buy a used car and wrote a $500 check to the husband of one of the board members to do that. Only about $100 was used for the car, and the other $400 or so was retained by the husband as a “finding fee,” an internal CCF report said.
When other parents complained and got no satisfaction from CCF, they notified state authorities.
In February 1996, Texas Assistant Atty. Gen. Susan Staricka sent CCF officials a five-page demand for records pertaining to Javier’s program.
Two months later, Staricka notified the charity that her office was broadening its investigation into “deceptive acts allegedly perpetrated by the Christian Children’s Fund and/or its Texas affiliates and projects.”
In August 1996, Staricka flew to Richmond and spent two days in a CCF conference room, leafing through boxloads of internal records.
Three days later, CCF President McCullough wrote a memo to senior charity officials: “Unless changes and improvements are promptly made, the attorney general of Texas is prepared to take formal legal action against the Christian Children’s Fund. This is, of course, an unacceptable situation.”
Within weeks, Espinoza resigned. A few weeks after that, Rhodenbaugh, the architect of Christian Children’s Fund’s beleaguered American program, stepped down as well. Charity officials speak highly of both men today.
In a reversal of its grass-roots philosophy, CCF took from the South Texas parents’ boards the authority to write checks for their own expenses. Instead, the parents’ boards had to request funds from a CCF-appointed accountant in Brownsville.
“We had to fix it and we had to fix it fast,” McCullough said in an interview.
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Instead of accounting for the problems to Javier’s sponsor or the giving public, CCF pushed to settle the South Texas matter quietly. In November 1996, CCF’s attorney wrote to the Texas attorney general: “CCF agrees that a private, legally enforceable agreement between it and your office is far preferable to any type of consent decree.”
No clear-cut answers
Asked if Javier’s sponsor should have been notified about the disarray, CCF President McCullough said the answers were not clear cut.
“We do not work in the environment where we’re dealing with Chase Manhattan Bank. We’re dealing with very bad conditions all around the world,” McCullough said. “Many, many things go wrong. Until we really know that a situation is so bad that we’re going to have to abandon the children, we assume the sponsor is trusting us to use our best judgment to try to straighten up the situation.”
McCullough said, “I have a strong, strong feeling that we’re stewards to the sponsors, as well as the children. And no, I did not think we were hiding.”
One of the attorney general’s central concerns has been CCF’s claim to sponsors that 80 percent of their money was used for the benefit of their children.
Charities like CCF must classify their spending into fundraising costs, administrative overhead and programs that actually serve children. As the price of television advertising rises and the charity’s far-flung programs grow more costly to oversee, CCF accountants and public relations experts–like their counterparts at other charities–quietly have reclassified many administrative and fundraising expenses, listing them as program costs.
For example the national offices, which supervise local projects in their countries, are deeply involved in fundraising and administrative operations. But national office costs, which totaled $7.9 million in 1996, have been reclassified as program expenses instead of administrative outlays, CCF accounting records show.
Also counted among program expenses in 1996 were national office support costs of $1.1 million, which comprised the budget of CCF employees who assist and monitor the overseas offices from Richmond, as well as another $956,257 used to run the regional headquarters where administrators like Espinoza worked.
CCF’s program costs even included $19,103 worth of advertising that year, since its ads arguably contain some educational component.
CCF sent about 70 cents of every sponsor dollar to projects like Javier’s in South Texas, internal financial records show. But then CCF made those projects use a large chunk of their budget to service sponsors and pay office bills, leaving a far smaller percentage for programs that actually benefit children, project financial records show.
A look into a Texas project
Javier’s project may not be a good example, since it fell apart and all but stopped delivering services while under investigation by the Texas attorney general. So take the nearby Ninos de la Esperanza project in South Texas, which CCF Area Director Emigdio Villanueva, who replaced Espinoza, said was among the most vibrant and exemplary of those he oversaw.
During the year that ended Feb. 28, 1997, that project used $13,893, or 51 percent of its expenses, for administrative items like “sponsor services,” office supplies, accounting bills, building maintenance and copy machine costs, financial records show.
Another $5,801, or 21 percent of the project’s money, was spent in ways that were listed as “unknown” on project balance sheets.
That left $7,305, or 27 percent, that went to a food bank, tutoring and other services for children and their parents.
CCF President McCullough said the charity’s method of allocating costs was the most responsible one she could imagine. The alternative would be to take each employee and put him on a time clock that counted how many hours of each day were spent on programs and how many on fundraising and administration, she said.
A method “that takes you a half-hour to explain is not going to be understood by the average donor even though it’s quite legitimate and maybe very thorough,” McCullough said.
Prompted by the legal scrutiny in South Texas, CCF officials began examining their programs on Native American reservations spread across the West.
Some of those projects were enmeshed in lawsuits, criminal investigations and internal audits. By January 1996, Richmond officials were holding $554,968 of sponsor funds in an escrow account rather than release the money to eight troubled Native American projects, an internal CCF memo shows.
By October 1996, fiscal management for several native American projects had been taken from the parent councils and turned over to an accountant, internal CCF records show.
CCF reviews programs
In April 1997, several CCF area directors for the U.S. were summoned to Tulsa for a daylong meeting “to review U.S. program strategy,” CCF memos show.
The meeting at the Radisson Hotel lasted less than an hour. While the area directors sat in stunned silence, Richmond officials announced they were eliminating their positions in 10 days.
McCullough said those western-area directors formed an expensive layer of administration that wasn’t working. Eliminating them was just one part of an ongoing and extensive overhaul of the charity’s U.S. program to make services reach more children at lower cost, she said.
“Our goal is not to phase out the U.S. programs,” McCullough said. “If you’re saying, do you think we’re going to pull away from (the U.S.), I hope not.”
Finally, in October 1997, CCF ended the experiment it had launched with such high hopes in South Texas and began dismantling the parent-run councils.
In their place, CCF promised to turn over the money it receives from sponsors to Avance Family Support and Education Program, a 24-year-old, Texas-based child-care group. Avance will create new programs for the sponsored children under a contract with CCF.
“The model that CCF tried to use here, it really didn’t work,” said Raquel Oliva, executive director of the Avance chapter that will run the program. “All their money was going into staff and facilities, and very little was going into programs for children.”
Development experts say some financial irregularities are an unavoidable cost of doing business in remote and impoverished areas. But beyond South Texas, internal audits and memos raise questions about whether CCF keeps sponsors adequately informed when problems and mismanagement arise around the globe.
In Thailand, for example, a June 1997 financial review showed CCF’s village projects had invested several million dollars with a CCF-linked non-profit that in turn used part of the money to help build its own office and residential complex in Bangkok. While the money was ultimately reimbursed, auditors questioned whether a CCF affiliate should be in the real estate and loan-brokering businesses, which are risky and outside the charity’s mission. A few weeks after the review was submitted to the charity’s board, CCF’s Thai national director announced his retirement.
Another example is in Poland, where since 1993, CCF has channeled more than $6 million to after-school clubs that offer havens to children coping with the effects of domestic violence, unemployment and family alcoholism.
Miroslawo Pisorska, who helps run one of the clubs in a desolate Warsaw housing development, said in a September 1997 interview that CCF sponsorship funds seemed to be drying up.
“I am afraid everything will collapse and close, but the need for help is big,” the retired teacher said. What Pisorska didn’t know was that CCF had been quietly phasing out its Polish operations, which had attracted fewer sponsors than anticipated.
CCF National Offices Director Rev. John Schultz told McCullough in a November 1996 memo: “The plan is based on a low-key, low-profile withdrawal of CCF–seeking to avoid the `CCF Abandons Poland’ headline in local newspapers and/or the mob of parents demonstrating outside CCF offices and projects.”
A plastic toy
On Javier Izaguirre’s first Christmas as a sponsored child, CCF workers gave him a plastic toy. But the toy was nothing special, and Javier soon lost it, his mother said. And the Izaguirre family soon forgot about the Richmond charity that mailed solicitations in his name.
“Like I tell you, they have not given us assistance, money, doctors or anything else,” Izaguirre said in a June 1997 interview. Nor did the agency report to the parents what was happening with the money it raised using their children’s photographs, Izaguirre said.
Of course, she never expected such an account.
“I never thought she (the CCF worker) should give reports to us, because she never explained she had to do that,” Izaguirre said. “The way they explained the program, we were not expecting anything.”
She said: “They told us we would lend the children, that’s what they told us. We would lend the children.”