United Ways Suffer Worst Fund-Raising Decline in Three Decades

The nation’s United Ways suffered their worst fund-raising decline in three decades in the 2002-3 campaign season, forcing charitable groups that rely on the organization for support to brace for further cuts.

Donations to the country’s 1,400 local United Ways dropped between 3 and 4 percent — a decline of more than $150-million from the $3.95-billion the group raised in 2001-2, according to Brian A. Gallagher, chief executive of United Way of America, in Alexandria, Va.

The majority of United Ways complete their fund-raising campaigns by the end of March, and many begin to distribute grants in April, Mr. Gallagher said. The decline in gifts will immediately translate into a decrease in grants to charities, he said, although he expects that most groups that received funds before will continue to get money now — just less of it.

Some organizations have already felt the pinch from declines in recent United Way fund-raising campaigns, and are concerned they could lose more funds now that 2002-3 campaigns have posted drops. In Chicago, where donations to United Way declined 17.8 percent in the 2002-3 period, Lutheran Child and Family Services of Illinois, which has a $20-million budget, has lost about one-third of its support from United Way since July, according to its spokeswoman, Martha Rohlfing.

Mr. Gallagher attributes the falloff in fund raising to a beleaguered economy, and said that he expects the organization to face little or no fund-raising growth in 2003.

“The market’s down, unemployment’s up, and big business is getting killed,” said Mr. Gallagher, who said that United Ways collectively receive 66 percent of their donations through on-the-job drives, and another 23 percent from companies themselves. “When big business hurts, we hurt with it.”

The fund-raising falloff occurred most visibly in large cities. In addition to Chicago, other cities with declines included Atlanta (-11.1 percent), Dallas (-11.5 percent), and Houston (-11 percent), Mr. Gallagher said.

It wasn’t just the economy that caused fund-raising dips. In Washington, an accounting and management scandal that surfaced last year at the United Way of the National Capital Area contributed to a $30-million decline in donations there. However, Mr. Gallagher said, the Washington situation did not appear to affect contributions outside the region.

But Mr. Gallagher did point to another scandal as one reason the group was suffering. When the former United Way of America chief executive, William Aramony, was convicted in 1995 of stealing more than $1.2-million from the organization, it became “too internally focused,” Mr. Gallagher said.

“We were also treating fund raising as our core business, when really it’s just a strategy. We don’t exist just to raise money,” he said. “We exist to create progress, to help change people’s lives.”

Since becoming president of United Way of America last year, Mr. Gallagher has been trying to encourage United Ways to focus on five or six key causes to support, and to become more involved in issues pertinent to their cities.

By doing that, Mr. Gallagher said, United Ways would alter the way they distribute money to nonprofit organizations. Instead of giving out money to a wide range of groups — as United Ways have done in the past, he said — they would focus on specific problems in neighborhoods, such as truancy or crime, and give a majority of their money to organizations that concentrate on those issues.

While some charities fear that they will be left out if their cause isn’t de rigueur, some United Ways that have already taken this approach to distributing money have found that they end up giving money to more, not fewer, groups than they did in the past.

The United Way of Metropolitan Atlanta was supporting 84 organizations before it started to focus on safety in the city in 1998, said Mark O’Connell, the group’s president. Now, the organization supports 241 organizations.

“We don’t try to be ‘one campaign for all,’ like the United Way used to try to do,” said Mr. O’Connell. “We’ve focused 75 percent of our contributions on one issue, and become more relevant in our communities.”

As part of a realignment of the United Way of America — and unrelated to recent fund-raising declines — Mr. Gallagher announced last week that 43 positions — including 11 vice presidents — from a staff of 218 would be eliminated at national headquarters. Some of the people who lose their jobs, however, will be considered for 35 positions that will be created through a reorganization.

The layoffs, Mr. Gallagher said, will allow the national organization to save money, but they will also free up some resources to be used for other expenses the organization plans to incur as it realigns. As part of that reorganization, Mr. Gallagher said, he will also redirect $6-million in his budget to help companies that run United Way drives collect donations more efficiently, and to improve the way his organization hires and retains staff.

“We want to recruit more young people into our business,” Mr. Gallagher said. He also plans to add a senior-level employee to monitor the group’s new accountability and compliance standards, and a senior person to oversee a new diversity program that will attempt to attract more members of minority groups to work at the organization.