Is the United Way Relevant in the Internet Age?
May 14, 2019
In the Internet age where giving directly to charity only requires a few clicks of a mouse or touches on a smartphone, is the United Way with its workplace giving campaigns even necessary? While the mechanics of directing money to a charity are as simple as ever, giving wisely is as challenging as ever. So if you are looking for a useful way to address the most pressing needs in your community, the United Way may be the best way to go.
Raising Billions Each Year, But At Declining Rates
Even as the Internet age speeds towards the year 2020, the United Way Worldwide (UWW), which has a mission to improve lives by mobilizing the caring power of communities around the world to advance the common good, continues to raise billions of dollars in support each year. UWW collected so much in cash donations in 2017 that The Chronicle of Philanthropy (the Chronicle), an independent news organization that serves the philanthropic sector, ranked UWW as America’s #1 “favorite” charity. The Chronicle’s first-time, exclusive ranking of “America’s Favorite Charities,” the 100 cause-driven nonprofits that raised the most cash support in 2017, was published in October 2018.
United Way Worldwide achieved the top spot on the Chronicle’s “America’s Favorite Charities” list by raising over $3.26 billion in cash support in 2017. UWW easily out-paced the second- and third-place charities on the list, Salvation Army and ALSAC/St. Jude Children’s Hospital, which raised approximately $1.47 billion and $1.31 billion, respectively, in 2017. (The Chronicle excluded the value of government grants, donated products, and contributions to an organization’s donor-advised funds from its calculation of total cash support for the ranking.) Although UWW raised more than 2.2 times the amount of cash support as the Salvation Army did in 2017, the Chronicle points out that UWW has experienced a declining trend in giving since 2007, with a 10-year rate of change at -27.9%. (The Chronicle’s 10-year percentage change is inflation-adjusted and based on three-year averages for 2005-07 & 2015-17.) Furthermore, reporting near the end of 2018 revealed that several of the largest United Ways in the country – including Greater Twin Cities United Way, United Way of Greater Cincinnati, and United Way of Greater Philadelphia and Southern New Jersey – were falling short of fundraising campaign projections, which, following years of declining revenue, has led to cutting or narrowing grantmaking and/or employee layoffs.
The United Way is not alone in its struggle against declining contributions. As part of its analysis, the Chronicle notes that “many organizations that count largely on small donations from average Americans are looking back on a grim decade.” The Chronicle cites UWW among that group, as well as “some of the nonprofit world’s [other] oldest and most revered giants,” including the American Cancer Society and the Jewish Federations of North America. “United Way and the others don’t lack for critics who contend that their brand is tired, their fundraising outdated,” according to the Chronicle. Brian Gallagher, UWW’s CEO since 2002, however, predicted to the Chronicle that changes at the organization – such as rapid growth in its “various affinity groups,” the recently launched “Philanthropy Cloud” network platform created with Salesforce.org to rejuvenate workplace giving, and the “courtship” of wealthy donors – will soon help reverse the trend of declining giving to the United Way.
CharityWatch believes that giving to the United Way remains a practical and efficient way for donors to support their local communities. Since our charity ratings focus on national organizations, however, we do not provide a letter grade rating for UWW or any of the nearly 1,800 independently operated United Ways that are governed locally and primarily raise and spend funds in their own community. For this reason, we want to provide donors with more information about the United Way and how to research your local United Way to help guide your community-focused giving decisions.
Do You Know the United Way?
The United Way traces its roots all the way back to 1887 when a Denver, Colorado woman, a priest, two ministers, and a rabbi recognized the need to work together in new ways to make Denver a better place. Their idea became the nation’s first united campaign, raising $21,700 and benefitting 10 Denver area health and welfare agencies. The organization they created collected funds for local charities, coordinated relief services, counseled and referred clients to cooperating agencies, and made emergency assistance grants for non-referable cases. This “movement” evolved and modernized, being known by different names, before becoming “the United Way” in 1970.
In 2019, with nearly 2.6 million volunteers and 9.6 million donors, the United Way is engaged in close to 1,800 communities across more than 40 countries and territories worldwide to advance community-based and community-led solutions, according to unitedway.org. The CEO of United Way Worldwide, Brian Gallagher, describes the organization as a “franchise nonprofit,” wherein UWW owns the United Way name and brand mark and licenses it to local volunteer groups to do business in their community. The local United Ways have to follow certain rules around such things as governance, financial management, ethics, and legal issues, but they operate as independently incorporated nonprofit organizations. There are about 1,130 local United Ways in the United States.
The work of the United Way focuses on education, financial stability, and health, “the building blocks for a good life and a strong community.” UWW measures its impact in the areas of childhood success, youth success, economic mobility, and access to health. In each of those areas of impact, UWW made an investment of between $215 million and $256 million in 2017, according to UWW’s Annual Report, in support of services such as: high-quality early childhood programs, childhood literacy, youth out-of-school time programs, access to affordable housing and financial products, job skills training, physical activity programs, healthy food access/nutrition programs, and pregnancy and newborn baby healthcare. Some “featured programs” of the United Way include its “2-1-1” confidential health and human services hotline; the “Born Learning” early learning initiative to help kids start school ready to succeed; “Mission United,” which connects veterans and their families with needed services; and “MyFreeTaxes.org,” an online, free tax preparation service for anyone earning less than $66,000 a year. The United Way claims to impact 61 million lives every year.
Encouraging Collaboration and Engaging Donors in Communities
How are some local United Ways working to strengthen their communities and engage donors? The summaries below provide a few examples of how the United Way works to invest in communities.
(1) United Way of Metro Chicago (UW-MC) implemented the United Way Neighborhood Network Initiative in 10 communities across the Chicago region. UW-MC describes the Neighborhood Network as a “strategic initiative to address local community challenges by driving focused collaboration to achieve lasting change.” The initiative is based on the “collective impact” model, which is “designed to break down siloed systems and practices in order to achieve more efficient and effective impact in communities.” UW-MC serves as the “backbone organization” in the collective impact model, according to uw-mc.org, by: coordinating, participating & creating a “toolkit” for communities; creating shared planning & measurement platforms; bringing a region-wide, community-wide lens to inform planning & actions; working in partnership with community leaders; providing best practice training, capacity building, leadership development & networking for community leaders; enabling access to corporate resources; and providing long-term sustainable funding.
(2) United Way of Dane County (UW-DC) in Madison, Wisconsin launched a “new investment process…as a first step toward multi-generational, holistic strategies that support families with young children,” according to its February 2019 press release. With the change, UW-DC “hope[s] to create more coordination across programs and systems and reduce barriers to economic opportunity.” Family stability and mobility from poverty are the focus of the new process.
UW-DC “will invest in programs and collaborations that enhance the strengths of families living in challenging conditions to help them meet their goals in [the three] areas of education, income, and health,” according to the UW-DC website. It describes that the process is built on four new investment categories: 1. Cross-System Investments (two or more organizations working across two or three of the areas); 2. Single-System Investments Proposal (two or more organizations working within one of the areas); 3. Program-Specific Investments (one organization delivering one program within an area); and 4. Community Innovation Investments (micro grants that advance the work aligned with the community’s Agenda for Change). UW-DC believes that the “Cross-System” investment category, in particular, with its focus on collaboration across multiple programs, will allow UW-DC to support families to reach their full potential. The new process, which allows organizations to apply jointly for collaborative funds, also is expected to potentially benefit local service providers through a streamlined funding process and the sharing of data and results.
(3) Heart of West Michigan United Way and Greater Twin Cities United Way have been trying to attract, re-energize, and engage donors in new ways.
The Heart of West Michigan United Way (HWM) is running community impact tours in an effort to build trust and engage donors, according to a report by The Nonprofit Times (The Times). The idea is company coordinators can learn about community needs, along with how the United Way is serving those needs, and then share that information with co-workers. The Times reports that HWM hosts between six and ten bus tours per year and tailors tours to a group’s area of interest. Through its tours for donors, HWM has made progress showing the importance of collaboration among area agencies to address community issues, according to a marketing manager cited by The Times.
In October 2018, Greater Twin Cities United Way (GTC), which has been trying to attract and re-energize donors, met with 900 donors and prospective donors at a first-time event called “Together We Thrive” held in the Minnesota Vikings’ football stadium. In addition to raising funds for GTC, the event offered three area nonprofits a chance to compete for special grant funding while connecting with the community by presenting a brief pitch about their new initiatives. After the presentations, GTC let the audience participate real-time by using their phones to vote for the charity they believed showed the most promise, with the winner receiving the largest grant. A total of $125,000 in special funding was awarded to the three charities as part of GTC’s Community Impact Accelerator Awards. The event was designed “to better connect with donors outside of the office – a key part of United Way’s new strategic plan,” according to a report by the Star Tribune. GTC’s Interim CEO told the Tribune that events with donors and nonprofit leaders are about growing trust and confidence. “It was a really smart way for the United Way to engage people and raise money in an innovative way,” an attendee of the event said, per the Tribune.
Why Giving Locally Through the United Way Makes Sense
The majority of the United Way’s program activity consists of grantmaking in the local community. For example, in looking at a few of the local United Ways referenced in the above examples, the United Way of Metro Chicago (UW-MC) reported making approximately $40.7 million in grants in fiscal 2017, which represented over 88% of its approximately $46.1 million in reported program spending, according to its tax filing. The Greater Twin Cities United Way (GTC) and United Way of Dane County (UW-DC) had similar grantmaking percentages as a portion of reported total program spending in 2017, at about 86% and 84%, respectively. Furthermore, for UW-MC, GTC, and UW-DC, donor designated grants (i.e., contributions to the United Way that donors direct to specific nonprofit agencies) represented about 44%, 39%, and 22%, respectively, of their total grantmaking expenditures in 2017. Given its reliance on workplace giving campaigns, such donor-designated contributions to the United Way can be common.
In most cases where a charity is acting as an intermediary for donor contributions, doing nothing more than passing on those funds to other organizations that operate charitable programs, CharityWatch advises donors it would be more efficient to avoid the intermediary (and its overhead) by giving directly to the charities that are actually conducting program services. The United Way, however, is different in that it often is adding value beyond its grantmaking by assessing the unique needs of the local area in which it operates. Value-added services provided by the United Way may also include implementing strategic initiatives, encouraging collaboration among local agencies, and mobilizing resources to strengthen the community. Furthermore, local United Ways may make an impact by getting directly involved in community programs, like UW-MC with its implementation of the Neighborhood Network Initiative in certain Chicago area communities. For these reasons, when making giving decisions concerning how to support your community, relying on the knowledge and value-added expertise of your local United Way may be your best option.
Will Philanthropy Cloud Rejuvenate Workplace Giving?
Millions of people every year donate to their local United Way through workplace giving campaigns run by their employer, whereby a contribution to the United Way is included as an automatic payroll deduction. The United Way and its forerunners have been relying on such charitable giving payroll deductions since the 1940s. Participating in United Way workplace campaigns is a convenient and efficient way for donors to support their community. Through volunteer opportunities, the workplace campaign “also strengthens connections between employees and their community,” according to UWW. The UWW website notes that “United Way has long partnered with 60,000+ companies worldwide on workplace giving, employee volunteerism and other social purpose activities.”
As the United Way’s total annual contributions continue to decline, however, its historical reliance on workplace campaigns has been seen as part of the problem. Today’s employer-employee relationships have changed from decades past when employees were much more likely to spend their entire career working at the same company. The globalization of the world economy, fast-paced advances in digital technology, the increasing percentage of millennials in the workforce, and a downturn in the number of individual donors have also presented challenges for the United Way’s workplace campaigns, according to UWW’s CEO, Brian Gallagher. In response, the United Way has had to move away from its long relied upon “business-to-business model” to establishing a relationship with individual workers, Gallagher told the Chronicle in an April 2018 interview. UWW hopes to accomplish this and rejuvenate workplace giving with the help of “Philanthropy Cloud,” “a revolutionary new marketplace for giving” launched in 2018.
UWW describes Philanthropy Cloud, which was created in partnership with Salesforce.org, as “the only global platform that connects employees, customers and partners with the causes they care most about.” Companies that purchase the platform incorporate it into their internal IT network, but the application can be personalized to each employee’s profile, based on the individual’s philanthropic interests, location, and preferences. Philanthropy Cloud tracks an employee’s volunteering and giving history, and allows employees to make a donation to any charity they choose, at any time of the year. An employee’s Philanthropy Cloud personal profile is also “portable” from company to company.
The UWW website claims Philanthropy Cloud “makes employee engagement dramatically easier, more efficient and more effective;” “helps companies streamline, modernize and expand philanthropic programs;” and “gives companies an advantage in the talent war” for young employees. Salesforce.org touts that Philanthropy Cloud “will empower the next generation of citizen philanthropists to find their passions, invest their money and talent, and drive social impact in their communities.” Gallagher believes Philanthropy Cloud will benefit not just the United Way but “the whole sector,” also helping to build the capacity of other nonprofits.
How to Research Your Local United Way
Donors should always be familiar with the program activities and financial efficiency of any charity to which they are making a donation, regardless as to if it is a large, nationally-known charity or a small, local charity. Whether giving through a workplace campaign or on an individual basis, the same is true for donors to the United Way.
Researching large charities that have a nationwide reach can be relatively easy given the availability of state registration filings and reliable, third-party resources like CharityWatch. It may be more difficult to research local charities, especially since local charities may not have easily accessible financial audits and are not included among the charities rated by CharityWatch. This, however, should not discourage donors from giving to their local United Way or other community-based charities. Rather, before giving locally, donors can use the tips provided below to guide their research and giving decisions.
Tips for researching local charities, including your local United Way
- Visit the charity’s website. Each of the local United Ways has its own website, which can be found through the “Find Your United Way” link at unitedway.org. The websites of other local charities should be accessible through a general Internet search. Take time to explore the charity’s website, with an eye out for scrutinizing some of the following:
- What are the charity’s mission and goals? Is the mission clear and one that you want to support?
- What are the charity’s current programs? Does the charity provide detailed descriptions and examples of its programs? Does the charity quantify the impact or results of its programs?
- Does the charity provide its financial information or an annual report? Are there links to view or download its most recent IRS Form 990 tax filing and audited financial statements?
- Is there a news or events blog to check on the charity’s current activities in the community?
- How many people are on the charity’s board of directors? Who are the people on the board? Who is on the executive or leadership team? Does the experience of the leadership team appear to align with their position and responsibilities at the charity? (Look for potential red flags such as a board with less than three people or a board or leadership team dominated by members of the same family.)
- Does the organization provide its tax-exempt status (e.g., 501(c)(3) or 501(c)(4)) and tax ID number? (If its tax-exempt status is not provided, it may be a business rather than a nonprofit organization.)
- Study the charity’s most recent IRS Form 990 tax filing. If not posted on the charity’s own website, donors should be able to find a copy of a charity’s IRS Form 990 from third-party websites, such as Foundation Center by Candid or ProPublica. The Form 990 is full of useful information for donors, including some of the information noted above, such as: a description of the charity’s mission and program accomplishments; the composition of its board of directors; and disclosure of related parties among board members or officers. A charity also must report its revenue and functional expenses in the Form 990 (in Part VIII & IX, respectively). This allows donors to check on the charity’s financial efficiency regarding program spending and the cost to raise funds. (See the next main bullet point, below, for more detail on how to calculate a charity’s program spending and fundraising efficiency.)
Additional items donors can scrutinize in a charity’s IRS Form 990 include:
- To which organizations is the charity making grants? A charity’s grants in the amount of $5,000 or more to any U.S. organization or government agency must be reported by name on Form 990, Schedule I. To verify a charity’s grantmaking, donors can contact those organizations directly. A charity must also report, by geographical region, grants of $5,000 or more made to international organizations (on Schedule F).
- Has the charity engaged in transactions with interested or related parties? The details of such transactions must be reported on Form 990, Schedule L.
- Does the charity use professional fundraisers to raise funds? If the charity reports more than $15,000 of expenses for professional fundraising services, the names of, and the dollar amounts raised by and paid to, those fundraisers must be reported on Form 990, Schedule G, Part I.
- Does the charity maintain written policies covering conflicts of interest, whistleblowers, and document retention (found on Part VI, Section B)? Does the charity maintain contemporaneous documentation of its board meetings (found on Part VI, Section A)?
- What is the charity’s fund balance or total net assets (found on the Balance Sheet, Part X)? Does that fund balance appear reasonable relative to the charity’s total expenses?
- Does the charity benefit from a significant amount of gifts-in-kind (non-cash donations)? If the charity receives gifts-in-kind valued at more than $25,000, those items must be reported on Form 990, Schedule M.
- What is the compensation of the charity’s officers, directors, trustees, key employees, and highest compensated employees (found on Part VII)? Bonus payments and other compensation details for employees who received more than $100,000 in reportable compensation for the year are reported on Form 990, Schedule J.
- For 501(c)(3) public charities, the charity’s historical contributions raised over the past five years are reported on Form 990, Schedule A, Part II.
- Calculate the charity’s program spending percentage and cost to raise funds. The financial information in a charity’s IRS Form 990 filing will allow donors to calculate the charity’s program spending and fundraising efficiency. Program spending efficiency can be calculated by dividing the charity’s Total Program Service Expenses (Part IX, Column (B), line 25) by its Total Expenses (Part IX, Column (A), line 25). Fundraising efficiency can be calculated by dividing the charity’s Total Fundraising Expenses (Part IX, Column (D), line 25) by its Contributions (Part VIII, line 1h), and then multiplying that total by 100 to yield a cost to raise each $100 in funds. (As part of the calculations we perform for our ratings, CharityWatch makes certain adjustments to the aforementioned Form 990 reported totals, such as deducting from total contributions: donated goods, government grants, contributions from related organizations, and net losses from special events; and deducting from the line 25 expense totals: donated goods and investment management fees.)
Charities that are Top-Rated by CharityWatch usually have a Program Percentage that is 75% or higher and a Cost to Raise $100 that is $25 or less. CharityWatch calculated the financial efficiency ratios for four local United Ways mentioned in this article (Dane County, Greater Twin Cities, Heart of West Michigan and Metro Chicago), based on each one’s most current available Form 990. Their Program Percentages and Cost to Raise $100 ratios ranged from 83% to 89% and $9 to $13, respectively. Although these financial efficiency ratios are within a range that CharityWatch would consider well-above average, keep in mind that that would be expected for the United Way since such a large portion of its program spending consists of grantmaking, which requires significantly less overhead than operating charitable programs that directly serve client needs.
- Be alert for news stories about the charity in the local media. Do an Internet search on the charity to check for news about past accolades or potential wrongdoings. Are you aware of the charity’s local reputation? Does the charity garner local media attention for having a positive impact on the community? Search the Internet to check for past news stories about the charity, including the possibility of scandal or potential wrongdoings that may raise a red flag. For example, some local United Ways have recently made news in unfavorable ways. A former information technology vice president at United Way of Massachusetts Bay and Merrimack Valley was indicted for the alleged theft of $6.7 million from the charity, according to a February 2019 report in The Nonprofit Times. In November 2018, multiple media outlets reported that the former CEO of United Way of Greater Cincinnati (UW-GC), Michael Johnson, who was the organization’s first African-American chief executive, alleged that the UW-GC board chair was making “subtle threats” against him and creating a “hostile work environment.” The Times reported that United Way Worldwide pulled the United Way of Santa Rosa’s charter in March 2019 amid a federal law enforcement probe of the now former United Way affiliate’s finances; the organization has been directed to return all donations from payroll deductions.
- Visit the physical location of the charity. Ask to take a tour. Seek out volunteer opportunities. Seeing how the local charity operates with your own eyes can be a great way to assess the charity’s activities and engage as a potential donor. As noted above, the Heart of West Michigan United Way has found success engaging donors with its community impact tours. Becoming a volunteer allows for a first-hand experience in how the charity accomplishes its mission and interacts with the community.
We all want to live in a healthy, thriving community, and donating to your local United Way can be an easy and effective way to help support that goal. With that in mind, the next time you are considering donating at the local level, CharityWatch hopes this article will help guide your giving decision.