September 29, 2010; Source: Star Tribune | This article about a charitable foundation linked to a private corporation raises several questions that concern many in the nonprofit sector. The nonprofit in question is the Starkey Hearing Foundation, established by Bill Austin, CEO of Starkey Laboratories.

The foundation raises money to buy hearing aids—from Starkey Laboratories—for children. That’s the first item worth flagging: the foundation buys from the corporation that established it, but with third party money, so unless there is a sharp write-down on the cost of the hearing aids, the foundation is serving as a market for the corporation’s key product.

Second item: Austin is quite adept at associating with celebrities like Bill Clinton, Ozzy Osbourne, Muhammed Ali, and Steve Martin, to raise money for the foundation—$7 million of the foundation’s $9 million in revenues in 2009 came from a gala event this summer. Although Austin claims to be the financial angel for the foundation, he doesn’t seem to have much money in the operation—almost all of the funding comes from the gala and other donations.

The Starkey Hearing Foundation is a foundation established by a corporate CEO, but neither he nor the corporation are the major givers. In fact, the foundation gives to the corporation, spending $4.4 million to buy Starkey hearing aids and batteries in 2009. Over the past four years the foundation spent $16.5 million on Starkey products.

Third item: There are expenses meant to generate revenues that seem to fall short. Next to the $4.4 million for hearing aids, the foundation’s next biggest expense was $3.1 million for international and U.S. “mission trips” for Austin and others, but they generated only $1.3 million in donations. The Star Tribune cites a $1.9 million expenditure for Hear Now, described as a program to help lower income Americans get hearing aids, but it generated only $870,000 in donations.

Also, charities serving the local deaf community don’t seem to have received much from the Starkey Foundation. For example, the Pacer Center in Minneapolis received $15,000 in 2009 after receiving $30,000 a year from 2006 to 2008. The Minnesota Association of Deaf Citizens was told by Starkey Foundation officials that the foundation didn’t give away grants, but the Elton John Foundation has received some $1.2 million from Starkey over four years, Garth Brooks’ Teammates for Kids Foundation got $1.49 million, the Grammy Foundation $300,000 last year, and the Horatio Alger Jr. Foundation received $200,000 in 2008. (Note: Austin received a Horatio Alger Award and lifetime membership in the Horatio Alger Association that year, joining other rags-to-riches role models such as Clarence Thomas, Condoleeza Rice, Steve Wynn of Wynn Resorts, Denzel Washington, and the late Ed McMahon.)

Austin’s wife Tani explains the grants to celebrities’ charities as helping celebrities that have helped the Starkey Foundation: “We help each other. Hearing is one thing. But life has complex issues . . . We try to respect good causes that help people in special ways.”

How does Bill Clinton figure into this? Austin plans to collaborate with the Clinton Global Initiative. We suggested last week in an NPQ Newswire that CGI tended not to be particularly picky about the causes and partners it attracted. The Austins flew to New York for the Clinton Global Initiative annual gathering where the Foundation’s press release announced that Bill and Tani received a standing ovation as they were introduced by the former president.

Our look at the Clinton Global Initiative’s list of commitments, a searchable database, failed to find mention of the Starkey Foundation, Bill or Tani Austin, or hearing aids, but perhaps the former president hasn’t updated his website lately. This all sounds like a foundation that merits some close regulatory scrutiny, a little too attracted to famous people and a little inattentive to foundation procedure.—Rick Cohen