Part 1: Gearing up for Controversy
Part 2: Goal of a Community
Part 3: Clif Notes & Big Staffs
Part 4: Inside Pallotta Teamworks
Part 5: Options & Alternatives
Part 7: Devotion Over Dollars
Part 8: 2001/2002 Update: Lawsuits, Loss and LifeCycle
The Camp Pallotta Song
“Hello Muddah, Hello Fadduh
My poor bike is really creaking.
South Dakota had the prairies
They say hydrate or you will die
Take me home, oh Muddah, Fadduh
(written and performed by Willmoed Sisson
Part 6 - Lost and Foundation
by Jim Provenzano
“Your pledges cover the costs of food,
Looking past the controversies of other events produced by Pallotta Teamworks, the AIDS Rides that benefit the San Francisco AIDS Foundation stand as shining examples of large-scale fundraising at its best. No one can contest that millions are raised. This year almost a $5 million gross is expected.
As the Bay Area Reporter reported in Part 5 of this series, extensive raises for high level executives of the SFAF ranging from ten to almost twenty percent are only a part of the SFAF’s budget.
Among the highest is that of Lance Henderson, Director of Finance and Administration, whose nearly $126,000 annual salary is considered standard by comparison to corporations. Others justify it for an AIDS Service Organization (ASO) of this size.
With a client base of 3,500, but services reaching about 150,000 people annually, the SFAF is one of the largest of ASOs. But with some programs cut, social workers positions eliminated and, according to an inside source, an atmosphere of “useless paper-pushing” pervading the green high-rise on Sixth and Market, the Foundation may be suffering from an imbalance of funding priorities taking precedence over client services.
Even the process of dealing with criticism from this newspaper is costly. Dividing Henderson and Executive Director Pat Christen’s salaries by a 52-week, nine-hour work day, just the two of them discussing this newspaper for one hour - an event which did happen - cost the Foundation over $147.
Henderson spoke with the Bay Area Reporter – for almost an hour.
According to Henderson, the 1995 AIDS Ride “brought in about $2.2 million and we’ve seen it increase in size. It now hovers just under the $5 million mark in gross revenue. Our gross budget at the Foundation is just over$18 million. That’s about 28 percent of our agency’s budget. It’s the largest single event that we’re doing.”
“What’s incredibly valuable to us is that it’s entirely unrestricted funds, he said. “We can direct it to the programs that we see fit, and that make the most sense for additional investment. With government funding, which is much more constrained, in our interactions and negotiations with government entities, it’s obviously harder to redirect those funds.”
“When you enter into a government relationship, you often enter into multi-year contracts based upon RFPs (Requests For Proposals). We certainly have government contracts that fund a variety of our programs, but unrestricted funds, similarly money from the AIDS Walk and other fundraising events, allow us to respond more quickly to the changes in the epidemic. With a lot of our treatment support programs, we’ve been able to move faster in making those funds available.”
One question from an employee of Pallotta Teamworks was that with unrestricted funds, riders don’t know where it’s going specifically, that unrestricted equals unaccountable. Some ASOs have shown salaries doubling after the AIDS Ride. Predictably, even though subsequent AIDS Rides took up more of the proceeds, such administrators would not critique Pallotta’s expenses and fees.
When asked how much is too much of a percentage to take, Henderson said, “It’s difficult to make a generic comment. Our overall cost of fundraising and represents 22%, and that represents a mix of many different kinds of fundraising. We expect this event to always come in at under 40 cents to the dollar.”
Comparing the risk that other rides suffered, Henderson considers it a worthy one where the SFAF has not had problems. “We all enter into that arrangement with the risk that, one day there’s an earthquake or something, we share that risk as a contracting agency.”
“Over 40 cents on the dollar would be too much, but that was not our standard the first year when we were first experimenting with the event, trying to figure out if it would work at all in San Francisco. It’s one of those things you need to learn from.”
While other ASOs suffered multi-million dollar ‘learning experiences,’ Henderson remains confident in the process, considering the long term goals.
“We monitor expenditures on literally a weekly basis, and the budget on an annual basis. It is an expensive event to put on. It’s almost hard to explain unless you actually go on the ride.” Henderson will be riding for the fifth year. “I do it for a lot of reasons,” he said. “I love the event, but as the finance director, I care a lot how they spend their money. Being out there on the ride gives me a real feel for where that’s going and whether or not it’s appropriate.”
He doesn’t see inappropriate spending or billing, but if he did, would he do something? “The $3 million we net is absolutely irreplaceable. There is not something else we could do that would bring that net income into this agency to support the programs that are going on right now.”
“When you’re trying to support programs of a scale we’re trying to support, in an environment where fundraising is so competitive, where in fact, in many sectors of private and public fundraising, are pulling back their support of AIDS, it’s irreplaceable funding.”
Of the ride environment, “We have many multi-year riders,” he said. “One of the powers of the ride itself is that it has attracted new audience of participants around the epidemic and who are helping and supporting. As to our recruiting numbers, every year we’re closing the recruitment deadline earlier and earlier, and I think that’s a measure of the success of the event and the confidence people have in how the money’s being spent.”
But if recruitment is easier each year, then why have recruitment costs gone up to over $1,073,991, or 21%, according to SFAF’s CAR4 Summary provided by the Foundation?
“I’m well aware that there are people who have questions about the Foundation and AIDS expenditures,” said Henderson. “Our figures are audited on an annual basis. These numbers are right out of our audited financial statement and this is how the money gets spent, this is what our fundraising sources are.”
“We are well aware that people could chose to think, ‘This isn’t right for me.’ That’s fine. This is a way that a lot of people have chosen to support the agency and the epidemic.”
“One of the powers of the Ride is that it brings attention to the fact that the epidemic is not over. Every year as the ride takes off and rides down the coast, it gets enormous media attention, it brings to the forefront what an important cause this continues to be. I think it has a very positive impact.”
An April editorial in Chicago’s Windy City Times disagrees. “As if 15 minutes of exposure to bicyclists will persuade rural America to use condoms.”
Pledges & Profit
“That’s kind of our role here in being a contractor for this event. We spend a lot of time scrutinizing their budget every year as we enter into contracts with them. I absolutely would not say that they are impervious to negotiations or commentary. We take that responsibility seriously.”
Henderson doesn’t believe Pallotta’s company should be investigated. “It’s important that people not hold them to a standard that’s inappropriate, as if they were a nonprofit organization. And I think that because they’re a for-profit company they just operate in a different regulatory world and we just have to respect that fact.”
One former employee mentioned agreements made giving Pallotta Teamworks bonuses for bringing ride costs under a certain amount. Henderson discounted such negotiations. “There may have been some incentive structure in earlier contracts,” said Henderson. “That creates a potential problem, given the importance that we, as well as Pallotta, put on safety. I know we haven’t done that for the past three years.”
Some riders and critics claim that the general large figures are misleading - pledges aren’t actual money, and some amount of it is never donated. Former Pallotta employee John Haley mentioned the extended payment plans that some riders put off on their credit cards for months at a time.
But Henderson said he’s satisfied with the released amounts. “We’ve given people the information they need to make that assessment. Last year it cost 37.6% to raise that $4.7 million. People saying we’re paying too much for tents or food are second-guessing. They have more than the right to decide that’s what they think, but people who support this ride and the Foundation, the history of accountability that we’ve had over the years, trust us to manage the event and spend our money appropriately.”
“We could publish a lot more information for people and they wouldn’t read it,” he said. “We try to keep it at a digestible form so that most of the riders get the information and their donors get that information. I think it’s a matter of a balance of how much information. As a finance person who makes my living putting numbers out, if you start putting out lots of details, people’s eyes glaze over, and they miss the point.”
In five cities now, questions and problems come up when a majority of the proceeds did not go to the ASOs. Despite this, the relationship between Pallotta’s company and the SFAF remains strong.
“We don’t have any information more than you do about those rides,” said Henderson. “My perception, as someone who’s been managing our ride for the past three years, the critical success factor is our ability to recruit a great number of riders and give them time to raise their funds and do their training appropriately. I think from year one here, it was such a successful event and people had such a good experience. They tell their friends about it and that enthusiasm is very catching. When you have a slow start, don’t get the number of riders signed up, and start to get embroiled in mixed media attention, it’s hard to recover from that.“
One criticism from several regional rides was the disproportionate fees charged versus the size of the events. Should a company like Pallotta’s gauge their fees accordingly?
“There’s a lot of debate in the fundraising community on whether it’s actually ethical to structure your fees in a way where the producers income is tied to the success of the event,” he said. “We are the entity that bears the risk around the success of the event. They bear the risk of hiring staff, doing the event, managing security, insuring against losses.
“I don’t think it’s prudent or appropriate to expect that an event producer bear the risk of whether that event is successful or not when it’s a partnership. It’s not unlike our relationship with the AIDS Walk. It’s our event. I think it’s more complex than whether it should be a sliding fee structure. The costs are fixed. You can’t adjust the medical or camp sites. It’s part of the complication of managing an event of this scale.”
But with the California AIDS Ride turning in increasingly high returns, couldn’t it be more efficient?
“It’s easy to think that a lot of these costs are reproducible, but actually remounting the ride is not starting from scratch. Recruiting riders and feeding them, getting them tented and showered, maintaining safety on the road, putting together all the materials that train riders, are all expensive.”
As the largest ASO working with the largest AIDS ride company, is the SFAF at risk of overlooking questionable spending since they are dependent on those “irreplaceable” millions?
“I don’t subscribe to that argument,” Henderson said. “I can assure you we have lively and vigorous conversations with Pallotta every year about the contracts and whether or not to proceed together or not. This isn’t like we’re trying to wash our hands of the responsibility. Those are relationships we are not privy to.”
When Dan Pallotta, president of Pallotta TeamWorks, which produced the Philadelphia-D.C. AIDS Ride, praised the fundraising event at a February 1998 public appearance promoting his practice of making money by producing benefits. 15 ACT UP members repeatedly interrupted Pallotta’s presentation before 80 Wharton School students on the University of Pennsylvania campus, reminding Pallotta that the local Ride yielded 17 cents for every dollar raised, according to audited figures.
“You basically removed more than $1 million from this city, and people with AIDS got Snickers bars!” ACT UP member Paul Davis shouted to Pallotta, according to Philadelphia Gay News.
“Your production fee was $360,000. How can you justify making that much money on the backs of people living with AIDS?” asked ACT UP member Dawn Acero.
“We made the money off of our own backs, nobody else’s,” Pallotta is reported as saying.
While the protest set off more questions among the previously uninformed audience, in other communities, criticism of ASOs and their contractors has been thorough, if not as confrontational.
The Accountability Project, which monitors and questions spending of nonprofits, specifiable AIDS Service Organizations, regularly lists the 990 tax form information of many AIDS groups.
“Our country is creating a huge sector that’s sometimes replacing government and is spending government money, but has no elected officials and no accountability,” said famed activist Jeff Getty told the SF Examiner in an article about the Project.
The most vocal critic in the Bay Area, is of course, Michael Petrelis, whose other targets include Visual Aid, the artist’s AIDS non-profit which, he asserts, allocates less than 25 percent of its proceeds to artists. The majority is consumed by self-perpetuating administrative costs.
The peak of Petrelis’ ire includes what some consider the height of absurdity: $10,000 donated requests for boulders in Golden Gate Park’s Memorial AIDS Grove, which has a projected budget of $3.7 million.
But Petrelis’ most shocking claims are that, as an openly HIV-positive man, his services from the Foundation were cut off soon after he began criticizing the SFAF, and specifically, Executive Director Pat Christen.
What if an AIDS Rider was critical of the Ride’s goals, finances and that of its recipients? What if that critic was also an AIDS Foundation employee?
'Rich Castro Men'
In a letter to her AIDS Ride sponsors for the 1998 Ride, Fields, who raised $4,000, explained why it would be her last. “The SFAF has seen a growth in hierarchy, bureacracy, unaccountability, inefficiency and impersonality.”
A recent lawsuit filed on behalf of a dozen Latino/a employees of the Foundation have charged the ASO with discriminatory practices in promotions and hiring.
Henderson, and Public Relations spokesman Gustavo Suarez, noted the many other programs the Foundation has developed, including the Gay Life program, it’s subcomponent Black Brothers Esteem, which, Henderson said “provide sexual and emotional support services for gay men in San Francisco with a prevention component to the message.”
While the AIDS Ride brochure prominently displays minorities, specifically Latinas, noticably absent is the SFAF's VIDA program for Latino men with AIDS/HIV, and the Youth Prevention Program serving homeless youth in Golden Gate Park. Both were eliminated.
In her letter, Fields castigated the new Gay Life Program as “satisfying rich Castro men who donate to SFAF, consisting of cabaret events” and “soap opera viewings where gay men discuss why they don’t engage in safe sex and why they’re dateless in San Francisco.”
Henderson sees existing programs as helping prevent HIV in new ways. “We’ve made a really concerted effort in the past three years to redirect a lot of the agency services around treatment support services to respond to the changing environment,” Henderson said. “We now have treatment advocates on staff to provide counseling on treatment decisions, so funding will certainly continue to support those activities.”
But while Henderson did mention the staff that helps with “social work and casework services at a treatment adherence program for homeless populations,” according to Fields, social workers positions have suffered the most cuts. In what Fields called “a bitter process,” the recent unionization of Administrative Assistants involved disputes over differing pay scales.
Fields alleged that development AA’s were given higher salaries than client services AAs. “Fundraisers are given preference over social workers.” She also noted that after the from move 25 Van Ness, accountants and finance officers received private offices, while client services were “jammed together in one big room” divided by non-private cubicles, hardly the proper environment for PWAs to reveal their potential sexual activities, drug use or income and housing problems.
Lobbying efforts, too, took a high chunk out of SFAF’s budget. Saying they believe in expanded access, needle exchange, and an oppostiion to names reporting cost a lot to promote.
Said Henderson, “Our public policy efforts are well-understood, both in the federal and state level.” As well it should. Over $1 million was listed on the SFAF’s 1997 990s as a “lobbying nontaxable amount.” In effect, the SFAF is spending a million to convince politicians to allocate more millions. The actual amount spent was $205,817, as reported in the 1997-98 IRS 990 form, and SFAF reps.
Information accessibility is also being reduced. Citing “too many changes to keep it appropriately updated,” the HIV Resource Guide, will no longer be printed, according to social worker Bob Lehr’s inquiries. Outreach workers and clients are now expected to find the online version or visit the San Francisco Public Library for information. This assumes not only a technical capability, but freedom or availability of SF Library computers.
One of Fields’ other complaints was that although BETA Headline Treatment News, the quarterly publication of SFAF, is produced in-house, frequently “outside writers who are friends of the managers of this department,” are paid up to $500 an article. She cited these articles as frequently error-ridden and submitted late, thus delaying publication time up to a month.
Fields' letter derided the SFAF as cutting back on direct outreach while prioritizing income. “Those youth in Golden Gate Park and the Latino clients with HIV/AIDS are left behind, while management feels entitled to make $165,000 a year, ‘because they care.’”
When Fields sent this letter to one of her sponsors, Brendan Fecht of Los Angeles, he forwarded it to SFAF’s Pat Christen, among others. Fecht was “shocked” by fields’ allegations, responding that “the aggressive, powerful, and ground-breaking executive staff at SFAF would undoubtedly be forced to leave if they could not pay their rent!”
But with weekly gross salaries of over $2000 for nearly all executive-level employees, being kicked out onto the street is hardly a threat.
Not so for Fields. Her letter and response to Fecht had an effect. Despite having already given notice, she was abruptly fired, removed from her desk, and escorted out of the building.
A Flawless Jim
You've indeed found yourself a gem of a journalist in Jim Provenzano. From his insightful profile of tragic gay hero/baseball star Glenn Burke (whom I also wrote about for St. James' Press Gay and Lesbian Biography back in 1997), to the well-balanced "Wheels of Fortune" series on Pallotta TeamWorks and the AIDS Rides, he puts a much-welcome punch back between your pages, especially for those growing numbers of us disenchanted "devotees" of Pallotta.
I was one of 500 riders in the original SF-LA AIDS Ride I (1993), and one of only a handful of riders from the Bay Area. I was so taken with being a "hero" that I went to work in the first SF-based AIDS Ride office the following year as a rider-representative. Once inside, I took to looking the gift horse in the mouth, only to discover a few too many gold fillings.
Unlike some, I'm not one to begrudge Pallotta his salary, though like so many CEOs in our inequitable economic system, it is well over the top. He did bring big-business fundraising practices to the fore, and he has raised millions (yes, and "awareness" … and "empowerment"). But at what cost? When I worked for AIDS Ride II, it was like a steamroller making tracks for every donor and rider anxious to make a difference. Which seems fair enough. But the already-flush SF AIDS Foundation was (and continues to be) the only organization that could afford staff salaries along with Pallotta's fee. And like former employee John Haley, I too found a suspicious indifference when I worked toward getting more services donated, which would have brought costs down and made for more acceptable percentages going directly to those in need. In short, thanks to the hubris of our "empowerment," we drove smaller, needier AIDS service providers to the back of the line. Money (for most of us) does not come from bottomless buckets. When donors give to support AIDS Ride "heroes," they're not likely to give to anyone else.
To those devotees still defending the Rides, I would ask a few soul-searching questions, only because I've been "to the mountain" myself: Do you really want to be part of the AIDS, Inc. machine? Why not give a more precious gift than cash – like volunteering your time to an organization – and then treat yourself to your own bicycling holiday? And beware of salesmen pushing intangibles like "empowerment" and "awareness" while they fatten their bank accounts. It's "think globally, act locally," not the other way around.
For more info, see: Stuart Timmons, "Open Wide, AIDS Ride" in POZ (Oct., '98); Jeff Wise, "Altruism for Fun and Profit" in The NY Times Magazine (September 7, '97); "Wheels of Fortune" in OUT (Oct., '97).
Jerome Szymczak Alameda, CA