October 2, 2003 | Read Time: 6 minutes
Just as United Ways are starting their fall fund-raising campaigns, United Way of America announced that
donations among the nation’s 1,394 United Ways plummeted 7.5 percent in 2002-3 — far more than the 3- or 4-percent decline that the organization predicted in April.
Over all, United Ways raised $3.71-billion in their 2002-3 annual campaigns, compared with $3.95-billion the previous year. The erosion in donations, the worst United Way has suffered in three decades, means that some charities that depend on United Way contributions have cut programs and staff members. United Way drives were also marred by bad publicity: A management scandal at the United Way in the Washington, D.C., area captured significant press attention, as did embezzlement at a Michigan United Way.
The slow economy and a wave of corporate closings and mergers were the key reasons for the decline, United Way officials said.
While United Way leaders were concerned by the drop, they said the official tally may paint a somewhat gloomier picture than the reality warrants. United Way of America, the Alexandria, Va., umbrella organization, instituted new guidelines for reporting financial information, partly in response to charges that some United Ways were inflating their fund-raising totals by including money that was actually raised or spent by other United Ways.
“Folks took it seriously and reported more conservatively than they have in a long time,” says Brian A. Gallagher, United Way of America’s chief executive. “In today’s environment, you don’t want to be questioned about what should or should not be in your numbers.”
Big United Ways See Losses
More than half of the 83 largest United Ways — those that raise at least $9-million — reported losses, with 17 United Ways reporting double-digit declines, including Chicago (down 22 percent), San Francisco (down 18.3 percent), and Portland, Ore. (down 16.4 percent).
By comparison, only two of the largest United Ways posted double-digit gains: Albuquerque (16.3 percent) and Santa Clara, Calif. (10.1 percent).
Early indications from the 2003-4 campaign are positive, especially among the dozen or so large United Ways that had big losses last fall, says Mr. Gallagher. “In large part, they drove the decline,” he says. “The question is, how are they doing this year? And the answer is, much better.”
Some United Ways are changing strategies for the 2003-4 campaign. Despite a drop of nearly 20 percent in donations last year, the United Way of Salt Lake, in Utah, has set an ambitious goal for next year: an increase of 25 percent, to $10-million. To help meet the goal, the group has started a yearlong advertising campaign that features testimonials from local leaders about why they support United Way.
“People last year were nervous about being next in losing their job,” says Deborah Bayle Nielsen, the organization’s president. “This year people are comfortable that the worst is behind us.” Some good news has begun to trickle in. For example, donations from employees at Swire Coca-Cola, USA, a local bottling and distribution business, have more than tripled so far, to $45,000, compared with last year — and the campaign doesn’t end until Thanksgiving.
The Heart of Florida United Way, in Orlando, is also hopeful this year, although it, like some other United Ways, has opted not to set a campaign goal this year. “We are trying to de-emphasize that the campaign is our only product,” says John D. Hawkins, the group’s president. “A big number tells the community that your only mission is to raise that money, and that doesn’t get the message across why you need that money.”
The United Way is now pursuing new sources of support, including foundation grants, after two years of fund-raising losses.
Even without a public fund-raising goal, however, the Heart of Florida United Way is under pressure to raise more than the $17-million it took in last year, because local needs are great. This year, the 5.7-percent decline in donations to the 2002-3 campaign meant that United Way had to cut support for the 176 programs the group supports by 4.3 percent and reduce its own administrative budget by 5.3 percent. Over the past two years, the Orlando United Way has laid off 21 of its full-time employees.
Corporate Mergers
The Triangle United Way, in Research Triangle Park, N.C., has had to make even steeper cuts. It trimmed grants to the 200 programs it supports by 13.6 percent, says Sarah C. Smith, senior vice president for resource development. The group also shaved its internal budget by $400,000 this year, and instituted a hiring freeze to save money.
Corporate mergers and layoffs were the main factors behind the 15.2-percent drop in the campaign at the Triangle United Way, Ms. Smith says. For example, Nortel Networks, a telecommunications company, reduced the number of staff members in the region by more than half, resulting in a loss of $300,000 in contributions from the company and its employees last year, she says.
Dealing With Scandals
Wrongdoing at two United Ways also contributed to the overall fund-raising decline. A major accounting and management scandal at the United Way of the National Capital Area, in Washington, caused the group to raise nearly $30-million less than the previous year. And in East Lansing, Mich., the United Way’s former chief financial officer was convicted in June of embezzling $2-million.
The scandals prompted changes in how local United Ways report financial information. United Way of America now requires local United Ways to provide the national organization with annual financial reports, pay for independent financial audits, write and adhere to a code of ethics, and have an independent company perform a detailed organizational assessment of the group every three years.
In addition, the 165 largest United Ways, which represent $3-billion of the federation’s $4-billion in revenue, must submit their Form 990 informational tax returns and annual audited financial statements to the national organization. United Way of America has retained the accounting firm Deloitte & Touche to provide an additional audit of the finances and accounting practices of the largest United Ways.
The new standards caused a few United Ways to report staggering decreases. For example, at the United Way of Lake County, in Gurnee, Ill., campaign donations appeared to decline 26.2 percent from 2001-2 to 2002-3, but part of the difference is that the group last year made a change: Spurred by the new United Way rules for tracking contributions, it no longer counts dollars in company campaigns that the company sends directly to specific charities or other United Ways, says Kristi Long, the group’s president. However, if that money had been subtracted from the 2001-2 total as well, the United Way’s donations would have dropped only 6 percent in 2002-3, says Ms. Long.
As United Way fund raisers grapple with the challenges of winning donations, some are looking to the success stories for inspiration. Among them: The United Way of Central New Mexico, in Albuquerque, posted a 16.3-percent gain, in part because of a $1-million gift from an anonymous donor.
And in Fort Myers, Fla., the United Way of Lee County increased its campaign total by 13.4 percent, helped by 11 new donors who gave gifts of $10,000 or more, and 178 new donors who contributed from $1,000 to $9,999, says Jeannine Joy, vice president of campaign and communications. In addition, staff members conducted 142 new presentations about the United Way’s work at companies last year.
Says Ms. Joy, “We still do this the old-fashioned way, going out there and getting face to face.”
