Ohio United Way Requires Charities to Pass Review by Outside Group

Each year, the Children’s Medical Center in Dayton, Ohio, receives $50,000 or more in donations from the local United Way.

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But this year, the pediatric hospital won’t receive a penny unless it convinces the local Better Business Bureau that the institution meets all 16 of the bureau’s standards for charity fund raising and governance. And the Children’s Medical Center is not the only non-profit organization facing that requirement.

For the first time, local organizations that want money from the United Way of the Greater Dayton Area must prove that they have passed a review by the bureau of their management and fund-raising practices. It will be the first review for many groups, including the Children’s Medical Center. The requirement comes just as the national Council of Better Business Bureaus is trying to expand the number of its affiliates that conduct local charity evaluations.

The Dayton United Way added the review requirement because some of its donors, in deciding which charities to support, were choosing organizations that neither they nor United Way knew much about. Some of the organizations were located in other parts of the country.

In the past, the United Way itself would determine how to distribute money raised through on-the-job campaigns. But Dayton, like many other United Way affiliates, decided to give donors the option of earmarking their gifts for specific non-profit organizations. Any charity was eligible to participate as long as it provided United Way with proof that the Internal Revenue Service had granted it charity status and evidence that it performed some loosely defined health or human-service mission.

“We recognized that donors really thought we were doing some sort of review of those organizations,” says Nancy K. Schiffer, executive vice-president of the Dayton United Way. “We also recognized that we really had lost some focus on our local community.”

The United Way affiliate sought help from the Better Business Bureau of Dayton/Miami Valley because it already was evaluating local groups. It publishes free reports on nearly 400 organizations and summarizes its findings in the free quarterly publication “Giving Smart From the Heart.” Under the new system, non-profit groups must meet Better Business Bureau standards before they are eligible for gifts earmarked by Dayton United Way donors.

There are exceptions. Charities in neighboring towns are exempt from the review requirement if they are affiliated with another United Way. If they are not, they must pass review by the Dayton United Way and, if located outside the region, must also demonstrate that they help people in the Dayton area. Local charities that want to receive additional money from a pool of undesignated gifts must meet bureau standards and submit to further scrutiny by United Way.

“What we are hoping to do is to instill confidence in giving locally and expose fraudulent activity,” says the bureau’s chief executive officer, Donna Childs, a former member of the Dayton United Way’s board.

Janet Schooley, director of development at the Children’s Medical Center, said the new relationship between the bureau and United Way is “wonderful.”

Still, she worries about the amount of time it will take her to prepare the three-and-a-half page application, which requires her to attach a variety of documents, including her group’s bylaws, most-recent audited financial statements, most-recent tax return, and samples of the medical center’s fund-raising solicitations, which are voluminous.

She worries that the medical center may not meet the bureau’s standard that a group spend at least 50 per cent of its income on programs. And she doesn’t know whether the bureau will agree with her interpretation of which expenses should be classified as administrative and which should be considered part of the hospital’s charitable program.

“On my desk right now is one of those lovely applications I get to fill out. The problem is: Once you complete it, who’s looking at the information, and who’s interpreting it?” she says.

Ms. Schooley was unhappy with a bureau evaluation of the local Ronald McDonald House, which works closely with the medical center to help kids with serious illnesses. The charity had raised money under a capital campaign that Ms. Schooley conducted herself. Because the charity did not use the money in the same year it was raised, the bureau reported that the group had spent an insufficient percentage of its income on programs.

Ms. Schooley said the bureau program “helps the donors know who is doing a good job, but it has to be administered correctly.”

Ms. Childs conceded that there were “extenuating circumstances” in the Ronald McDonald case and that the report should not have penalized the charity.

Some observers are concerned about the possibility of additional problems as a result of the affiliation between the United Way and the Better Business Bureau.

Don Sodo, president of America’s Charities, a federation of 77 national charities that raise money through on-the-job campaigns, called the Dayton project “ridiculous.”

Mr. Sodo, whose organization often competes with United Way drives, says United Way should not make either itself or the Better Business Bureau the arbiter of which organizations its donors can support.

“I don’t think it’s the United Way’s business to put itself between the donor and a charity that has been deemed eligible by the I.R.S. to receive a charitable contribution,” he says. “It’s the donor’s money.”