United Way or the highway?

A West Coast correspondent draws our attention to the big change at San Diego’s United Way, one that foreshadows a nationwide change in direction by the workplace-giving giant.  (See the article from the San Diego Union-Tribune, below.)  From now on United Way will award grants only in the areas of homelessness, child abuse, and life skills education (whatever that may be).  While narrowing its focus, the agency will broaden its reach: any nonprofit (not just those certified by United Way) may apply for support.

This sounds like an agency in a big hurry to render itself obsolete.  United Way certification, while a pain in the butt to secure, is actually evidence of an organization’s having received the serious management assistance United Way can offer.  If certification no longer provides preferential access, fewer groups will bother to get the help they need to receive it–which also happens to be help every nonprofit could use. 

So if United Way is reducing its role as the sector’s management guru, is it at least maintaining its role as repository of the community’s collective understanding about what needs doing?  Well, not quite: only 15% of what it collects is available for discretionary granting; the rest goes directly to agencies designated by donors. 

With only that small sum to give, it makes sense to focus on a small number of problems.  But the sum is so small because apparently 85% of United Way donors don’t share the group’s vision; they’re just passing the money through.  If United Way were asked to certify an agency that only spent 15% of its money on its mission, it would probably ask: is it really worth the administrative costs to keep it running?

United Way revises way funding is disbursed; Competition, demands from donors spur move

By Jeff McDonald

The United Way has been synonymous with charitable giving for decades, the

first and last words in American philanthropy. Its early model of soliciting

pledges direct from the workplace, a few dollars each pay period from

middle-class employees, became the gold standard in fundraising. Last year alone, the United Way reeled in almost $4 billion. But much has changed since three ministers and a rabbi joined together in

Denver in 1887 to fight hunger, disease and other social ills. The 21st

century push toward accountability and transparency among the nation’s

premier charities – plus rising competition and demands from donors for

measureable results – is forcing United Way chapters to rethink the way

they

dole out donations.

Most of the money the local United Way receives is targeted by donors for

specific organizations. But the agency does get to choose how to allocate

about 15 percent of its funds a year. In the future, those funds will go to

three specific needs: homelessness, child-abuse and programs to help people

with life skills.

United Way officials, who have seen contributions drop in the last five

years, say the change is an attempt to be more strategic in resolving

issues

that have long confounded community leaders.

"The United Way of San Diego County needs to make a difference in San

Diego," said Douglas Sawyer, president and chief executive of the

chapter.

"The only way to do that is to concentrate our resources."

United Way chapters adopting the new formula have seen donations rise an

average of 6 percent a year, Sawyer said. Those keeping the traditional

model have been losing an average of 0.5 percent annually, he said.  In San Diego County, the decline was far worse. The 2005 campaign raised

$22.2 million, a 6.1 percent drop from the previous year.

"This is not an effort to just reshuffle the deck," Sawyer said. "If we do

it right, we’ll be able to solve more problems in San Diego."

Vision councils

The United Way board and executive leadership spent most of the past year

designing the new policy. Staff members held community meetings and met with

local charities to explain the transition and to offer tips on how

applicants might qualify for future funding.

But many nonprofits that have received United Way grants to supplement their

budgets will no doubt be left out.

In Orange County, where the new allocation model went into effect July 1,

dozens of nonprofits that were denied grants – including the Red Cross,

Salvation Army and Boy Scouts – complained bitterly, and quite publicly. 

San Diego nonprofits are already thinking about how their niche programs

might qualify under the new rules.

"I’m hoping that under their economic-development arena we have an

opportunity to participate in a more meaningful way," said Mark Berger, who

runs Partnerships With Industry, a Mission Valley nonprofit that finds =

work

for disabled clients and receives the minimum grant of $5,000 a year in

United Way support.

"Our budget is $5.1 million," he said. "It’s not a big deal, but when you’re

raising money, $5,000 is not an insignificant amount to lose."

The United Way of San Diego’s plan to zero in on homelessness, child abuse

and life skills was born out of community dialogues and research, Sawyer

said. Each of the three focus areas will be overseen by a panel of experts,

academics and volunteers called vision councils. United Way’s leaders hope

to expand to five and perhaps seven focus areas within a few years.

Next spring, when it’s time to distribute the money raised during the

upcoming campaign, the councils will consider grant applications from all

San Diego area non-profits – not just the 134 agencies now certified to

receive United Way funds.

Applicants will have to show how the money will reduce child abuse or

homelessness or how it will help teach disadvantaged people life skills.

The

United Way expects to have more specifics about programs they will fund

after the vision councils are appointed.

"We want to get to root causes. We don’t want to be the entity that puts

Band-Aids on problems," Sawyer said.

The competition for donor dollars is much greater today. There are about

8,000 nonprofits in San Diego County that receive $10 billion a year in

revenue.  The San Diego economy has changed in recent years, too. The number of large

employers has dwindled since the recession of the early 1990s, when General

Dynamics departed and other defense contractors folded. The United Way is no

longer able to enroll as many donors in a single effort as it once

could.

Not only that, United Way of America and many of its chapters never

fully

recovered from a 1991 scandal that saw the national chief executive

sentenced to seven years in prison for spending $600,000 on girlfriends,

first-class travel, chauffeured limousines and pricey hotels.

After a wave of negative publicity, the number of United Way chapters

dropped from 2,100 to almost 1,400 today. Donations plummeted, too.

The United Way of America collects annual dues from its member agencies in

exchange for branding benefits, training and other services, but it has no

role in running the chapters.

Prior to the national scandal, the United Way/CHAD drive in San Diego County

was raising $30 million-plus a year, Sawyer said – about $8 million more

than it brought in last year.

Of the $22.2 million collected in 2005, the United Way’s review

committee had discretion over $2.9 million in undesignated funds, which was spread

among 134 certified agencies. Most of money collected went to specific organizations designated by

donors;

participants in the Combined Federal Campaign that targets federal

employees; the Combined Health Agencies Drive (CHAD) that supports 26

health-related nonprofits here; and to United Way salaries and expenses.

Sheila Consaul, the United Way of America national spokeswoman, said

virtually every United Way chapter planned to convert to the new allocation

model within the next few years, so local officials need to prepare their

nonprofit communities for the change well in advance.

"It’s not a cold-turkey kind of thing," she said. "If they’re not going to

fit into the focus areas, they need time to find other opportunities."

One organization watching the United Way transition closely is 211 San

Diego, which operates a Web-and telephone-based information service that

lists social services available throughout the region.

A spinoff program of the United Way that only recently organized as its own

tax-exempt agency, 211 San Diego has been collecting more than $100,000 a

year in core funding from its former partner.

Executive Director Sara Matta is keeping her fingers crossed, because the

211 service does not automatically fall within the scope of the three focus

areas.

"At this moment, they’re funding about 5 percent of our budget, so that’s a

dimension we’re concerned about," she said. "But we’ve had a close

relationship with United Way . . . We need to see what happens."

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2 Responses to “United Way or the highway?”

  1. Ray Lin Says:

    I know this is an old post, but I’m wondering these same things in our community (Colorado). I am on the board of a partner non profit and the buzz is “why should we take the funding hit, while the UW programs keep their funds?”

    What’s keeping smaller non-profits from highering or contracting donor development and management?

    any further insight on this since 2006?

    • Nonprofiteer Says:

      I don’t know that I have any further insight, but I can respond to your question: the only thing keeping nonprofits from hiring/contracting donor development and management is a lack of money. Couple that with the prejudice against agencies’ spending any money on capacity building (as opposed to direct service), and you’ve got a systemic problem to which the United Way may be the answer–or of which it may be the cause.

      Workplace giving overall has declined over the past half-dozen years (presumably because workplaces have shrunk), so I wouldn’t advise any nonprofit to seek United Way certification today. It’s not worthwhile for the little bit likely to trickle down from United Way.

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