Charity’s Cutting Edge

United Way’s new ways mean less money for some groups

Family and Children’s Services in Baltimore has been struggling since the local United Way last year withdrew the $300,000 it gave the charity annually so it could deliver groceries and take care of other chores for some 550 elderly people.

United Way said the program didn’t fit its new priorities for giving away money, which focus on helping young people, increasing financial stability for poor families, and preventing domestic abuse.

Emergency grants from foundations and individuals made up for the loss initially. But now the one-time emergency grants are gone, and the charity may have to stop the services for elderly people if it can’t find more money somewhere else, says Stan A. Levi, the organization’s executive director.

That worries him, because the charity’s elderly clients have nowhere else to turn, he says. Other big social-service charities that used to offer similar help have stopped doing so because it’s too expensive, Mr. Levi says. “We’re the last holdout.”

Just a few miles away, however, Baltimore Child-Abuse Center has been expanding its services, thanks to the $150,000 it received this year from United Way.

The group, which typically received $25,000 a year in the past, is using the extra money to provide therapy to abused children and their relatives and teach families with a history of abuse how to curb the cycle of violence.

Shaking Up Fund Raising

Such scenarios are playing out across the country as United Ways make changes that are altering the fund-raising landscape. Local United Ways are a powerful force: The $4-billion they raised last year is more than any other charity network produces.

But United Way’s fund raising has stagnated and as the organization seeks new ways to grow, the national headquarters is pushing all of its affiliates to adopt approaches that have already been tested by many large United Ways.

Under the new approach, United Ways are supposed to stop financing charities with a broad array of goals and instead support programs that meet specific local needs, such as reducing crime or preparing for a disaster.

This spring, United Way announced an even bigger change: It urged all local United Ways to rally around the same three goals: improving Americans’ health, lowering school drop-out rates, and fighting poverty among low-wage workers with families.

United Way says that by concentrating its resources, it has a better chance of making a measurable difference — and in winning more donations. Eighty-five percent of the nation’s 1,287 United Ways have already changed their approach or are in the process of doing so, the organization says.

But many organizations that have been longtime beneficiaries of United Way are now scrambling as the organization changes how it distributes aid and slashes or eliminates assistance it once provided. Most challenging, many fund raisers say, is replacing the money that United Way allowed them to use for basic operating costs like rent and energy bills.

Brian Gallagher, chief executive of United Way of America, acknowledges that some charities can expect to lose United Way money in coming years because they are working on causes that are not a priority, or because the organization determines they are less effective than others with similar missions.

But he says United Ways need to focus on how they can guarantee they are transforming the communities they serve.

“We’ve got to start thinking about how we create real social change,” he says. “It’s time to get serious.”

Challenges for Charities

The new approach taken by United Way has caused many longtime beneficiaries to struggle. Among them:

• The Salvation Army, in Austin, Tex., received $65,000 from the local United Way last year, compared with $270,000 the previous year.

• Major Stephen Ellis, who oversaw the Austin affiliate of the social-services group at the time, says he was told that much of the Salvation Army’s work — such as providing emergency shelter — did not fit into the United Way’s effort to support groups that promote long-term solutions to a lack of low-cost housing. The charity was able to raise enough money from other sources this year to make up for the loss of United Way funds, but now it must devise a long-range plan.

• The Twin Cities American Red Cross, in Minnesota, in May announced its second round of layoffs after the local United Way cut its $1.6-million grant by more than half this year, to $700,000, so it could channel more money to groups that help people who can’t afford health insurance.

• Red Cross had hoped to make up the loss when it was warned of the cut last year, but the troubled economy has made it difficult to find new donors and reduced the organization’s investment income, says Jan McDaniel, the group’s chief executive.

• Big Brothers Big Sisters of Palm Beach County, in Florida, may close a new office in Delray Beach because the local United Way pulled its $100,000 grant this year, saying it wanted to focus its money largely on groups that deal with emergency needs of the county’s residents. United Way’s money had accounted for 18 percent of the youth group’s budget.

While many charities have faced similar struggles, United Ways say they are doing what they can to ease charities through the transition, often by reducing grants gradually to give organizations time to find other income.

Some are offering their longtime beneficiaries other forms of help. For example, the United Way of Metropolitan Atlanta arranged for a local consultant to volunteer to help Clayton County Family Care, in Forest Park.

The charity lost half of its annual grant — or $93,725 — when the United Way three years ago decided it wanted to distribute money to more charities. United Way said it hoped in so doing it could better figure out which charities could do the most to meet United Way’s goals of helping children, the working poor, and people with disabilities.

The consultant helped the charity learn how to better measure and report the results of its work to potential donors, says David P. Ennis, the organization’s executive director.

Now, instead of telling potential donors how many people received its emergency financial aid, the charity tells foundations how many of those people have become financially stable and no longer need assistance.

That change is one reason the group has been able to make up most of the aid that United Way cut. But the group still finds it hard to raise enough money to meet all of its expenses, because most grant makers put restrictions on what they will finance. Says Mr. Ennis: “It’s great to have the additional money, but you feel like you’re working with a set of handcuffs.”

Other charities that have lost United Way dollars have faced a tougher time raising new money.

At the Butts County Life Enrichment Team, in Jackson, Ga., Sandra Haisten, the organization’s executive director, says it has been difficult to obtain money from local foundations and individuals after the local United Way withdrew $34,000 it used to provide for a program to prevent child abuse.

Ms. Haisten says United Way officials told her the program did not make enough of a difference compared with other efforts.

“Having the United Way endorsement is a kind of seal of approval,” says Ms. Haisten. “We received a lot of questions from the public about what we did to lose our funding.”

Unable to raise money for the abuse-prevention program, the nonprofit group stopped offering the service.

In Los Angeles, after losing more than $300,000 in grants from the local United Way, which is focusing support on charities that fight poverty, Breathe LA two years ago signed up with America’s Charities, a group that, like United Way, asks companies and other employers to run charity drives.

But Enrique Chiock, chief executive of Breathe LA, which promotes lung health, says the new campaign hasn’t brought in much money so far, mainly because few employers have agreed to let America’s Charities solicit workers on the job.

In at least one community, the changes pushed by United Way have produced a backlash among donors and others.

Lewis Stess, executive director of the United Way of Hampshire County, in Northampton, Mass., resigned after a meeting with local charities, United Way board members, donors, and other residents, according to a board member and a charity leader who were present.

The charities raised sharp questions about the United Way’s finances and about 30-percent cuts Mr. Stess had announced for charities such as the People’s Institute, which offers child-care programs, and Jessie’s House, a homeless shelter in Amherst, Mass.

Mr. Stess’s replacement, John E. Ebbets, says he has restored most of the money to the 27 organizations United Way has long supported. He plans to set out three goals this fall for United Way-financed charities to meet, but probably won’t substantially change the amounts organizations receive.

“We know that the agencies we support all have impact in our community,” Mr. Ebbets says. “It’s difficult to say to them, ‘Well, you’re not having enough impact.’”

Extra Money

But for plenty of charities and their supporters, the changes at United Ways offer a double blessing. Not only are they getting money from United Way, some organizations say, but the changes United Way encouraged them to make have helped them raise money from other donors, too.

The Children’s Service Society of Wisconsin gets $400,000 from the United Way in Madison and surrounding towns — twice as much as it received under the old United Way system — because it created a program to help the United Way meet its ambitious goal to ensure that 90 percent of 5-year-old children are prepared for kindergarten.

The charity, which used the extra United Way money to start teaching new parents how to further their children’s mental development, has won a three-year, $800,000 grant from Cuna Mutual, a local credit union. Cuna had not supported the charity in the past, but wanted to support the kindergarten-preparedness goal.

“Opportunity knocked, and it’s been exciting,” says Andy Benedetto, a director at Children’s Service Society, whose headquarters are in Milwaukee. “We were marching in place for a lot of years.”

Focus on Results

As United Ways start changing their policies to focus on the three national goals announced in the spring, charities that hope to remain eligible for United Way money should take steps now to prove that they are making a difference, United Way leaders say.

“Make sure you’ve got outcomes related to the work you’re doing, and think about how the work can affect conditions in the community if you can get it to a greater scale,” says Leslie Ann Howard, executive director of United Way of Dane County, in Madison, Wis., one of the first to experiment with the community-impact approach in 1995.

Charities can also prove their efficiency and effectiveness by seeking out groups to collaborate with, says Debra Usher, vice president of Detroit’s United Way. She says her organization recently awarded a grant to a group of grass-roots charities that serve people with disabilities after the organizations agreed to work together to provide better services.

“Think about who’s doing something similar to you, so you can unite forces,” she says. “Collaboration and coordination is going to be the key.”

Above all, charities should not ignore the changes at United Way, officials say.

In San Francisco, the United Way of the Bay Area spent 18 months trying to prepare local charities for possible cutbacks under its new grant-making approach, but about a quarter of its grantees didn’t heed the warning, says Eric McDonnell, United Way’s executive vice president. The grantees did not realize things had changed until they did not receive the money they had been expecting.

“They literally called us and said, Where’s my check?” Mr. McDonnell recalls. “For them, it was really, really tough.”