It was the kind of cool November evening in Frisco that allowed gentlemen to wear tuxedos without perspiring, while the ladies could still go bare shouldered in their Carmen Marc Valvo. As premium brands flowed from the open bar, guests in the Embassy Suites’ Grand Ballroom pored over four- and five-figure silent auction items like diamond rings and a $10,000 Super Bowl ticket package. Dinner, a live auction, a magic show, and casino games would follow.
From all outward appearances, Star Children’s Charity’s annual Winter Ball was a huge success. Guests, who paid a minimum of $250 per ticket, must have assumed that tens of thousands of dollars were raised by Star, which funnels money to other Collin County nonprofits that serve children. But it’s not at all clear whether Star made money that night (expenses ran north of $200,000). And, if it did make money, Star will have to use those funds to dig itself out of a deep red hole created by making pledges in past years to charities that it couldn’t fulfill. Take a look at Star’s books, ask around in Collin County nonprofit circles, and a picture of profound mismanagement begins to emerge.
“Besides hiding their liabilities and not fulfilling their commitments, they are telling people, ‘You don’t need to support this agency. You can support Star, and we will get the money to them,’ ” says a member of one nonprofit that has worked with Star. The source, like several who spoke to D Magazine, asked not to be named. “Star is just getting in the way and eating up donor dollars with their high overhead.
“This is really important in Collin County, and it involves some of the biggest families, both socially and financially,” the member says. “It’s been a source of great frustration, and it has caused a lot of damage. People are afraid to speak up. All the nonprofits have been waiting for someone to say something, but none of us wants to cross the very people we’re counting on.”
Star began in the spring of 2007 with a reception at Gleneagles Country Club thrown by co-directors Michelle Brennan Hall and Linda Paulk. The founding member roster reads like a Who’s Who of Collin County business leadership. Hall is part of the Brennan family, owners of Brennan Financial Services. Paulk is a DART board member, the president and CEO of Sky Ranch, and retired president and CEO of Snelling Staffing Services. Executive director Ronelle Ianace is the wife of Pete Ianace and the proprietor of Espre Solutions, a media and marketing company.
In the spring of 2008, Star produced a golf and fashion fundraiser, and it closed the year with its first Winter Ball. It made commitments that year to give $1.4 million to its partner charities. Almost three years later, though, it hasn’t delivered even half of that amount.
The problem, critics say, isn’t intent; it’s competence and judgment. “I think they started with a lot of good intentions,” says one nonprofit director. “But they put together an organization with no expertise in how to run a fundraising agency. Sure, Michelle and Linda may have participated in a lot of fundraisers. But it’s like baseball. Just because you’re a good player doesn’t mean you’d make a good manager. And now they have screwed up a lot of charities.”
Case in point: Crossroads Family Services, one of Star’s partner agencies. Over two years, Star promised $100,000 to Crossroads, a nonprofit started in 1991 that provided counseling for at-risk children. “We planned to use the money to set up a children’s play therapy room,” says a former Crossroads member. “That’s what the grant was for and to help pay for a full-time counselor employee. We’d hired, we’d leased the space, and we’d bought a bunch of toys to fill the room up. Then Star said they couldn’t pay us. They’d have to break it up into payments. They didn’t meet that promise either.”
Then came the salt in the wound. “They told us that if we received a direct donation from someone who had heard about Crossroads because of Star Children’s Charity, that donation would count toward the money they were supposed to pay us,” he says. “It was unbelievable. It was one of the reasons we had to go under and merge with the Boys & Girls Clubs of Collin County.”
Michelle Brennan Hall says Star’s nonpayment didn’t cause Crossroads to fold into the Boys & Girls Clubs. She says Crossroads was already facing financial difficulties. And the letter laying out who deserved credit for donations, Hall explains, stated that if a partner agency received a grant—not a donation—from a foundation that Star had solicited, it would count toward Star’s commitment.
What, then, of the complaint that Star merely acts as an inefficient middleman between donors and recipients? Neither Hall nor Star treasurer Michael Urtso could say exactly what percentage of the money they raise has found its way to beneficiary agencies.
A look at Star’s most recent IRS Form 990 provides insight. It shows that in 2008 Star brought in $979,081 in donations and grants. It spent $522,554 on administrative costs and fundraising events. So the organization spent 53 cents for every dollar it raised, quite a high figure. The national average is about 20 cents. That year, Star doled out just $367,764 to its partner charities. 2009 was worse. Star doled out only $294,000, and it spent $1.57 for every dollar it raised.
[inline_image id=”1″ align=”r” crop=””]To be fair, part of Star’s financial problems owe to the economic climate. As the recession waxed, giving waned. Nonprofits everywhere have had trouble raising money and getting donors to follow through on their commitments. Which makes the Newt Gingrich speech all the more curious.
In September, Star invited Gingrich to be its keynote speaker at the charity’s inaugural Executive Summit, where 600 people paid to hear the former speaker of the house talk about “politics, policy, and perseverance.” Star leaders are adamant that Gingrich’s speech was nonpartisan. “It was a message of hope,” Hall says. “I was concerned he might have made it a pulpit for a partisan agenda, but he didn’t.”
That’s a matter of opinion. The Frisco Enterprise reported that Gingrich hinted at his likely presidential candidacy in 2012 and that “Gingrich enforced Republican platforms of limited government, enforced national security, and job creation in place of government handouts. Gingrich applauded Congressman Sam Johnson for his political work.”
It is illegal for a nonprofit to engage in political activity on behalf of (or in opposition to) a candidate. Gingrich is not (yet) a candidate. But seeing as how the speech came just weeks before the midterm elections, the event seemed to put Star on dangerous legal ground. Star won’t reveal how much Gingrich was paid, saying only that he offered them a discounted rate and asked for no travel expenses. His standard fee is $50,000.
Today, Star Children’s Charity is working to get its financial house in order. As of October, it has paid just shy of half of its $1.4 million worth of pledges. “There’s not anyone in Star that isn’t disappointed we are still fundraising,” Hall says. “We are doing our best to get additional sponsors to get those funds out to the agencies.”
Once that $1.4 million commitment is met, Hall says, Star will approach its mission differently. “We would be very conservative in how we would make commitments in the future,” she says. “Have we learned lessons? Absolutely.”
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