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Literacy Partners Inc., gossip columnist Liz Smith's pet charity, may rake in an ever increasing amount of dough from rich New Yorkers, and its pricey galas may provoke oohs and ahs from Gotham's high-society circles, but the nonprofit doesn't meet even the basic Better Business Bureau standard for spending at least 50 percent of its available income on its main task: helping adults learn to read.
The charity's basic work is putting together trained volunteers in small group settings with adults throughout the city who are functionally illiterate. The service is free, and Literacy Partners relies mostly on fundraising appeals and galas, with a little government cash thrown in. Despite an annual operating budget of $3 million, the group has yet to help even 1000 people a year. Instead, for the past three years it has been squirreling away millions of dollars in cash, stocks, and mutual funds, creating from scratch an endowment called the Liz Smith Fund.
A third of the money raised by Literacy Partners comes from its high-end social events, according to a breakdown by the Better Business Bureau. Costing $250,000, the next installment of its biggest annual bash includes "An Evening of Readings," scheduled for May 14 at the Vivian Beaumont Theater, to be followed by a Gala Dinner Dance at the New York State Theater Grande Promenade. Corporate tables run from $10,000 to $50,000; individual tickets are $650 each. Charity officials expect to raise $1.2 million.
The affair will feature famous authors (last year: Dave Barry and Rita Mae Brown; this year: Tom Brokaw and Robert Caro). The rich and famous are honored (previous years: Michael Bloomberg, Rupert Murdoch, Tina Brown; this year: financier Pete Peterson, Oprah Winfrey, et al.). Society mavens show off outfits by designer Arnold Scaasi, who's on the charity's board. And some of the charity's students demonstrate their newfound skills, reading to the audience.
The partyers have a grand time indulging in mutual admiration and the exchange of money for celebrity status. The giant media corporations run by past honorees Bloomberg and Murdoch are both on the list of $50,000-plus donors to Literacy Partners.
Countless hardscrabble agencies trying to teach New Yorkers to read might be astonished at what happens to all that money. For the past three years, Literacy Partners has been setting aside more than a third of its revenues each year for the Liz Smith Fund. The nonprofit is saving the money "for a rainy day," said William J. Higgins, its $90,000-a-year director of development and communications. The fund stands at $4 million; its target is $5 million. Even when it reaches that goal, said Higgins, the charity won't be spending that money on direct services. It will, however, continue its intensive fundraising.
"We're very proud of what we're doing," added Higgins.
The Better Business Bureau isn't beaming. A September 2000 report by its Philanthropic Advisory Service, aimed at enlightening potential donors, concluded that the charity didn't meet one of the Bureau's key standards because it spent only 45.25 percent of its "available support and revenue on program services" during the fiscal year that ended June 30, 1999.
That was the only one of 24 standards that Literacy Partners flunked. But it's not good news. Of the 396 charities the watchdog examined last year, 62 percent got a clean bill of health, and only 26 percent fell short, according to Jennifer Lammers, director of foundation activities for the philanthropic service. Information on the other 12 percent was incomplete.
The bar for spending is set at only 50 percent. "The organizations we reviewed spent an average of 72 percent of their money on their program services," said Lammers.
Lammers wouldn't say how Literacy Partners showed up on her radar. The private agency annually picks which charities to examine based on several factors, Lammers said, including complaints from the public or just plain visibility.
Few charities are as visible as Literacy Partners in the Manhattan social scene. Its powerhouse board of directors, which serves without pay, currently includes not only Liz Smith as the honorary chairwoman but also Parker Ladd, a publishing industry veteran and longtime partner of the designer Scaasi; the pair recently made New York magazine's list of gay power couples. Among the other board members are Peter Olson (head of Bertelsmann's North America operations, which include the giant publisher Random House), Simon & Schuster CEO Jonathan Newcomb, and literary agent Virginia Barber, along with bankers Anne Finucane of Fleet and Doris Meister, the head of Merrill Lynch's wealth management services.
Originally, Literacy Partners was simply a New York City branch of the Literacy Volunteers of America. Five years ago, however, around the time that industry insiders say veteran board member Liz Smith became more deeply involved, it changed its name to Literacy Partners and went its own way.
Everything about the organization celebrates Liz and the galaxy that revolves around her. A testimonial from the columnist adorns the cover of the charity's annual report. The only picture on the walls of the reception area at the charity's headquarters on East 33rd Street is a portrait of her sandwiched between her pals Scaasi and Ladd.
Asked about the Better Business Bureau report, Smith said she knew nothing of it. She defended efforts to build up the endowment, saying that it will give the charity a safety net in times when a celebrity figurehead might be lacking. Not that being a figurehead is any great fun. "It takes so much time, with the black tie and everything," she said. "It's like a crown of thorns on my head."
Three of the charity's top officialsHiggins, president Harris Herman, and Marylee Raymond Diamond, the chief financial officerdon't appear embarrassed in the least at violating the nonbinding standard. "We can look the Better Business Bureau in the eye," insisted Higgins. "We respect them for their rules, but that's not the way we look at it."
In the case of Literacy Partners, the dispute isn't about the numbers, but about how the numbers are used. For example, during the charity's 1999 fiscal year, it spent $1.7 million on program services and set aside $1.1 million for its endowment. All three of the charity's officials said the money for the endowment should be counted as spent on literacy programs. But Higgins acknowledged that, like other organizations' endowments, the growing clump of money is not likely to be tapped for direct services.
Higgins and two other top officials of the charity defended their decision to pump up the endowment and pointed out that Literacy Partners has increased the number of people it serves from 400 only a few years ago to more than 900 today.
The charity's response, included in the Better Business Bureau's formal report, states that the Literacy Partners board simply set a policy of not spending the $1.1 million, which it described as "segregated ininvestment accounts." The charity noted that it had set aside over $300,000 "to fund program expansion." But it added that it expects to spend "more than $250,000" on "a major renovation of . . . administrative space."
The glossy financials of Literacy Partners are a stark contrast to the grim figures submitted by many other charities struggling to raise funds. Tax returns submitted by the Haitian Enlightenment and Literacy Project, of Brooklyn, show that during 1997 the agency spent $64,000 helping people learn to read, but only drew $18,690 in contributions.
Along with other charities that fight adult illiteracy, Literacy Partners cites frightening statistics: 36 percent of adult New Yorkers read at the fifth-grade level. But Liz Smith's pet project is "somewhat unique" in its powerful collection of celebrities and rich contributors, said Tracy Carman, a spokeswoman for Literacy Volunteers of America. "Very few of our local affiliates have those kinds of conditions. It's tough to get celebrities interested. It's easier to get interest in diseases."
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