For Charity — and for Profit

Business’s role in federal drive raises tough questions

By the time Patrick Maguire purchased his own consulting business in 1995, he says, he had already made enemies in the

nonprofit world with his aggressive fund-raising tactics.

Colleagues suggested that he choose a bland name for the company, one that would mask his presence. But Mr. Maguire went the other way, naming the business Maguire/Maguire Inc.

“I decided to put the fear of God in our competitors by putting up two Maguires in the name,” he says. “There isn’t any second person Maguire. I’m it.”

Throughout his 27 years as a fund raiser and management consultant, the Bay Area businessman has applied the same fierce competitiveness to helping nonprofit organizations win donations from federal workers through the federal government’s annual charity drive and other efforts to raise money from people through payroll-deduction appeals.

Controversy continues to dog Mr. Maguire, with competitors for donations from federal workers raising questions over his unique relationship as a for-profit company with the nonprofit groups he counsels in the Combined Federal Campaign.

The nonprofit umbrella groups of national and international charities that Mr. Maguire advises have claimed a large share of the dollars contributed by federal workers: Nearly $1 in every $4 donated through the Combined Federal Campaign in 2005, the most recent year for which figures are available, went to 783 charities that were members of the coalitions that have hired Mr. Maguire’s company.

Those coalitions, know as federations, received more than $60-million of the $268.6-million total in 2005. Fifteen federations currently have contracts with Maguire/Maguire, and they expect to channel money from the fall 2007 campaign to 942 charity members.

Meeting the Standards

Over all, more than two dozen nonprofit federations serve as gatekeepers to the drive by screening their member charities to make sure they provide services in 15 or more states, among other federal requirements.

Charities do not have to be members of federations to participate in the federal drive, but about three-fourths of them are.

Federations publicize the campaign to encourage federal workers to donate, and they strive to ensure that their member charities get the money pledged to them.

Charities that belong to Mr. Maguire’s client organizations include big names, like Catholic Charities USA, Covenant House, the Planned Parenthood Foundation, and Shriners Hospitals for Children, as well as many small, less-prominent groups, like the Elephant Sanctuary and the Paget’s Disease Foundation.

Critics of Mr. Maguire question whether his company exploits the nature and spirit of the Combined Federal Campaign — which is largely managed by nonprofit organizations and government-worker volunteers — and shows enough independence from the organizations it counsels.

Several years ago the government responded to questions raised by those critical of Mr. Maguire and investigated his client federations. It found some problems in audits released in 2004 but nothing as serious as his detractors had expected.

Mr. Maguire says his company is guilty only of efficiently helping federations and charities raise large sums of money through creative marketing approaches that are just what the Combined Federal Campaign needs at a time when the percentage of donors is slipping.

“My critics are the desperate housewives of the workplace-funding world, with their animosity about having a private-sector company do what we do,” he says. “They believe viscerally that it is unfair for us somehow to do what we do.”

For-Profit Consultant

No other for-profit consultant involved in the Combined Federal Campaign has such a close relationship with nonprofit federations as Mr. Maguire.

His company’s client federations have no offices or staff members: Their boards of directors hire Maguire/Maguire to do their work for them, which includes collecting and distributing federal workers’ donations.

All other nonprofit federations in the Combined Federal Campaign do such work themselves without relying on an outside for-profit consultant.

Critics of Mr. Maguire say his relationship with his clients creates a conflict of interest for him. They say that the more federations that he helps create, and the more charities that join them, the more revenue Maguire/Maguire earns in fees that it charges for services. They also say the additional nonprofit organizations that become part of the mix of Maguire clients wind up competing with one another for donations from federal workers.

Mr. Maguire is criticized by people involved in the Combined Federal Campaign for helping charities spin off new groups with different names to increase the odds of being noticed by donors who browse through the government’s catalog of more than 1,800 national and international charities.

Maguire/Maguire’s policy of not publicly disclosing its finances also draws disapproval from people who say that it runs against the philosophy of openness that is traditional among key participants in the Combined Federal Campaign.

All nonprofit federations, including Mr. Maguire’s client organizations, must file federal informational tax returns that show details about their financial operations. These returns show how much money Maguire/Maguire has been paid by all of its federation clients — about $2.8-million last year to help organizations participate in on-the-job drives run by government agencies and businesses.

But federal tax returns filed by the client federations and their charity members don’t spell out how much revenue Maguire/Maguire receives from publishers in commissions — an amount that some people believe is substantial — for producing a Web site and an advertising booklet called “The Best of the CFC” that the nonprofit organizations buy space in. Mr. Maguire says the arrangement with the publishers is a good deal for the nonprofit organizations and has helped them raise more money.

Reviewing all of Mr. Maguire’s operations, some critics have raised questions. “This for-profit businessman is taking advantage of federal workplace-solicitation policies to reap private gain,” says Matthew Howe, executive director of the National Alliance for Choice in Giving, an association of federations that promotes accountability standards in on-the-job campaigns. “His business isn’t subject to the same disclosure rules as the nonprofit federations. So from a simple standpoint of accountability and the public’s right to know, it’s not a level playing field.”

Mr. Maguire says those charges are the culmination of frustration by nonprofit-federation competitors that see his clients’ increasing success and panic at their own inability to keep up with changing times in a world in which for-profit companies are helping many charities improve their ability to raise money.

Maguire/Maguire has no legal or ethical requirement to disclose its finances, he says.

“There is an ethical requirement to say how much I’m charging and how much the federations end up paying,” and that information is disclosed, he says. “But how much money is being placed in advertising through me? No company does that, that’s ridiculous.”

Mr. Maguire says he has no conflict of interest: As a consultant he advises his client federations about their options on a variety of topics, including spinning off new federations, but, he says, it is entirely up to them, as independent charities, to make decisions.

His client federations’ move to create new federations and add new charity members does not result in organizations cannibalizing one another’s contributions from federal workers, says Mr. Maguire.

Mr. Maguire says the amount of money his company makes is beside the point and that the real issue is the money he helps raise for his client federations and their member charities.

“Our enemies say Maguire is making money off this,” he says. “Well, damn right we are. And our clients are saving money and making money, and that is why they stay.”

He adds: “Our client federations are happy, donors are happy, competitors are furious. Sounds like I must be doing something right.”

Shared Address

One of the most serious concerns raised by competitors about Mr. Maguire’s client federations has focused on the federal government’s rule that federations cannot use for-profit consulting firms to make their policies or decisions.

Maguire/Maguire provides each federation with a “headquarters address” at the Maguire office in Corte Madera, just north of San Francisco, and the company handles all the day-to-day work of the federations, including helping federations and member charities produce campaign materials (such as brochures and pledge forms) and advertising, and providing acknowledgments to donors.

The company employs 15 people at its Corte Madera office and has four subcontractors elsewhere.

Maguire/Maguire maintains documents through a computer system that board members tap into. It also tracks charity applications for membership in the Combined Federal Campaign for the federation boards’ review, and makes sure that groups get the money that federal workers pledge.

Mr. Maguire says that this arrangement allows federation boards to avoid the hassle and expense involved in maintaining offices and staffs and therefore allows them to focus on “strategic issues” rather than mundane matters, while keeping their full authority over the organization.

“Eighty percent of our time is spent working directly with the federations’ member charities, helping them with marketing, helping them apply and qualify for more workplace fund drives, and helping them do better once they are in fund drives,” he says.

Because his company carries out a wide range of tasks for many federations at once, Mr. Maguire says, his client federations can in turn charge their member charities less money for services than other federations, which results in more money for good works.

The arrangement has drawn criticism from competitors of Mr. Maguire’s client federations. Don Sodo, president of America’s Charities, a Chantilly, Va., federation with 80 national charities in the Combined Federal Campaign, says he thinks consulting companies can play an important role in helping nonprofit groups become more successful.

“However, these for-profits shouldn’t provide all the staffing to run nonprofits,” he says. “When that happens, where is the arm’s-length separation to ensure that the nonprofit doesn’t exist just to enrich the for-profit?”

Federal Investigation

In 2002, several competitors of Mr. Maguire’s clients — America’s Charities and two other nonprofit federations, Earth Share and Human Service Charities of America, as well as Mr. Howe’s National Alliance for Choice in Giving — asked federal officials to take the unusual step of performing special audits of Mr. Maguire’s client federations in the federal drive, telling the government in a letter requesting the investigation to act before “the media or legislators investigate” and “make matters worse.”

In the audits, the inspector general of the Office of Personnel Management found several problems with the federations that the agency’s deputy director said “indicate a lack of responsible governance and a serious breach that could threaten public confidence” in the federations, their member charities, and the Combined Federal Campaign.

In one instance, the audit reports concluded that 10 of Mr. Maguire’s client federations had violated a regulation forbidding them to allow for-profit consultants to make decisions for them.

By using a database printout from Maguire/Maguire to make a “yes or no” decision about membership applications from charities — rather than relying on the actual applications for review themselves — federation board members had “delegated to Maguire/Maguire the decision-making function” of whether charities met a federal requirement to qualify for listing in the federal drive.

The audit reports also said the federations provided “insufficient oversight” over the company’s work.

The federations denied they had violated any regulations, although most of them said they agreed with many of the changes recommended by auditors and would revamp their procedures. In response, the federal government withdrew warnings issued to the federations.

The lawyer for Mr. Maguire’s client federations, Noland MacKenzie Canter III, said the organizations took the audit findings seriously and took steps to make changes, but felt that the findings were about procedures and “not big-ticket items.” The government was “kind of straining at gnats to find violations,” he says.

The end results disappointed Mr. Maguire’s critics.

“This really isn’t about the legality but about the appearances of it all,” says Kalman Stein, chief executive of Earth Share, a federation with more than 50 national environmental and conservation charities in the Combined Federal Campaign. “All that we in the CFC are selling to donors is faith and trust — that we’ll take their hard-earned money and do right with it. People are extremely cynical and looking for reasons not to give, so you can’t give them more reasons not to give. But donors may one day look up at the Maguire federations and say, ‘There is just something wrong with this.’”

‘We’re Bulletproof’

Mr. Maguire, however, says that the government’s audits helped his client federations and his company demonstrate their integrity. After the audits, he says, “we’re bulletproof.”

“OPM ended up doing us a favor,” he adds. “It’s going to be a long time before anybody believes” assertions about “what bad guys we are,” he says.

Mr. Maguire adds that “all anyone has to do is follow the money to see that for our clients compared to the others, more of the money that was given went to the charities and less went to the charities’ administrative costs.”

James S. Green, associate general counsel for the U.S. Office of Personnel Management, says the federal government has no opinion on Mr. Maguire’s business or the quality of his work.

“If federations happen to work with him,” says Mr. Green, “that’s neither good or bad as far as we’re concerned. We look at federations and judge the federations on what they do consistent with our rules.”

Adds Mr. Green: “On occasion, as we showed by our IG audit, we like to remind the federations not to get too comfortable with simply being a part of a Maguire group of federations. They have got to convince us that they are in fact doing their jobs.”

Federation Boards

The federal audits also looked into another question raised by Mr. Maguire’s critics: Were the boards of his client federations “active and responsible” and without “material conflicts of interest,” as federal rules require?

In other words, says Mr. Maguire, his competitors were insinuating that federation board members were his puppets.

“What the accusers were looking for was: Are we controlling things” at the company, says Mr. Maguire. “It was a dastardly thing to charge. If they want to come after me, then come after me. These guys are volunteers, and they are not stupid.”

The federal audit reports found that two federations had “material” conflicts of interest by board members and two had “potential” conflicts. The federations contested the conclusions and took several steps to ensure that such concerns would not be raised again.

Mr. Maguire says he helps federations when board vacancies appear “and there is a call for volunteers among all the board members and member charities.”

On occasion, he says, board members who are selected are acquaintances or former colleagues of his, but more often they are not, and they include accountants, bankers, corporate officials, lawyers, and a Connecticut judge.

One board member who is a longtime colleague of Mr. Maguire’s is David Surbrook, president of Maguire/Maguire’s client federation Educate America: The Education, School Support, and Scholarship Funds Coalition, whose 43 charity members work to improve education standards, among other things.

Mr. Surbrook said he heard about the opening on the board of Educate America in a phone call from Mr. Maguire, who once did consulting work for a nonprofit group that Mr. Surbrook headed.

But Mr. Surbrook says Mr. Maguire never tells him or the federation’s five-person board what to do. “We do our own due diligence,” Mr. Surbrook says. For federations, he adds, “Patrick is the best game in town.”

Spinning Off Charities

The federal government’s audits of Maguire/Maguire’s client federations also delved into another matter that has troubled some of Mr. Maguire’s clients’ competitors.

Mr. Maguire says he has informed charities that are members of his client federations that, under certain circumstances, they might be able to spin off new charities — which Mr. Maguire calls clones, or niche groups — to solicit contributions through the Combined Federal Campaign.

Mr. Maguire says charities can sometimes choose to split off existing programs that have related but differing objectives into separate, fully functioning organizations with different names.

In so doing, he says, the new organizations can legitimately help a charity’s overall cause get increased exposure to federal workers as they look through the directory of eligible organizations.

“I didn’t invent the idea,” says Mr. Maguire. “All I did was note that it could be done and let nonprofit agencies know. I took something that is perfectly legitimate if done right — yes, you can cheat on this, but you can’t get away with it for long.”

Mr. Maguire says his company advised Paralyzed Veterans of America on how it could create separate new organizations for some of its successful programs that could then join the Combined Federal Campaign. The result was the creation of the Paralyzed Veterans of America Outdoor Recreation Heritage Fund (in the Sports Charities USA federation); Paralyzed Veterans of America Spinal Cord Injury Education and Training Foundation (in the Military, Veterans, & Patriotic Service Organizations of America federation); and Paralyzed Veterans of America Spinal Cord Research Foundation (in the Health & Medical Research Charities of America federation).

“It’s good for donors because they can more specifically direct how their money is going to be used,” says Mr. Maguire. “PVA can give them a choice: Do you want to spend here, here, or here?”

When the government issued its audit report, it said that the charities seeking the review had provided federal officials with information about some organizations that they thought might be in violation of the rules.

“Some of their concerns were that agencies were being ‘cloned’ in order to create new agencies,” the audit reports said, and these new charities did not meet the federal requirement that they provide services in 15 or more states to qualify to solicit nationally.

After reviewing the applications from a sample of the groups named,” the federal government “determined that they did qualify for participation as national agencies.”

The government’s finding was greeted with shock by some competitors.

Mr. Sodo of the America’s Charities federation says he thinks that “advising charities to clone themselves is clearly contrary to the spirit and intent of the CFC or any workplace campaign. It’s at least questionable behavior. It’s over-the-top marketing.”

Mr. Maguire says the criticism and reaction stems from jealousy and resentment by the nonprofit federations outside his orbit. “From our competitors’ point of view,” he says, “the issue is only, We didn’t think of it ourselves.”

For-Profit Company

Some people involved in the federal charity drive are concerned that potential donors cannot obtain enough information about key players in the federal drive because the for-profit Maguire/Maguire is not required to disclose its finances, as the nonprofit organizations must do, and has chosen not to.

“This is where the controversy comes in,” says Mr. Maguire. “Yes, we make money doing this every year. But it’s a smaller-by-far percentage of our clients’ income for a lot more services than the other federations deliver.”

“I don’t care if 100 percent of it was profit,” he says. “That’s none of the public’s business or concern. The public’s concern should be: Are the federations getting the best possible deal?”

Mr. Maguire says that the “volume and automation” of his company’s work and practices allow it to provide federations and their charity members with the best return for their money in the Combined Federal Campaign and in campaigns run by state and local governments and by corporations.

Many of the organizations that work with Mr. Maguire say that they appreciate the efforts of his company.

“People have been critical of him by saying, ‘Oh, he’s a business,’” says Sybil Carter, director of corporate services for Habitat for Humanity International and a board member of a Maguire client federation. “But I would rather have somebody who is looking out for my ‘business’ who has a business background and knows what he is doing.”

Nonprofit competitors of Mr. Maguire contend that, in part, because they are not self-interested companies with profit motives, they spend much more time and money helping their charity members enter and participate in local government and corporate campaigns that solicit millions of employees and pay off for charities in the long run.

“Ninety percent of all giving at the workplace does not come from the CFC, it comes from these other employers,” says Mr. Sodo of America’s Charities. “Maguire can say he charges less, but the key in the end is net income and return on investment. It’s like with stocks: Would you really buy a stock just based on what it costs? Most people understand they would not do that.”

‘Proper Limits of Success’

The time may have come for the government to review the rules of the federal drive to make sure they are serving the needs of donors and channeling money to charities as efficiently as possible, according to people involved in the Combined Federal Campaign.

While for-profit consultants have a role to play in the federal drive, the government always needs to be considering the question of “what are the proper limits of success” when it comes to companies that are hired by nonprofit organizations, says Marshall Strauss, president of a nonprofit federation that is a former Maguire/Maguire client.

Mr. Strauss says the federation he heads, Human & Civil Rights Organizations of America, withdrew as a client of Mr. Maguire’s two years ago in part because the federation was “increasingly uncomfortable with the balance between our profile as a federation” and Maguire/Maguire’s profile.

“The challenge is how does our industry discipline itself and properly interact with vendors who understandably figure out there is a lot of money to be made at this,” says Mr. Strauss, who is a former chair of the National Combined Federal Campaign Committee, a voluntary group that advises the federal drive, and who has helped create several new nonprofit federations since severing ties with Mr. Maguire.

Mr. Maguire — backed by officials of his client federations — says the current campaign rules are well-tested and fair. What’s more, he says, “nobody thinks twice about private-sector companies helping charities with direct mail or telemarketing or a capital campaign or a telethon.”

Mr. Maguire says that “the decision to part ways with Marshall’s federation was mutual and had to do with fees as well as other issues.” He adds: “I have to admit that I owe Marshall a debt of gratitude because no client has taught me more about making sure my transactions with the federations are done at arm’s length, and we’ve incorporated what he has taught us into our practice.”

Paul Kalomeris, director of business development at the JK Group, a company that manages corporate employee-giving programs, says Mr. Maguire simply had the foresight to satisfy a “need in the marketplace” that winds up providing a big benefit to charities.

“Whenever you are first to do something, or the leader in something,” he says, “and you achieve success like Patrick has, you will upset people.”