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The rise in donations earmarked for specific charities troubles United Way

Sunday, October 27, 2002

By Steve Twedt, Post-Gazette Staff Writer

The United Way remains America's largest fund-raising system, and the generosity of its donors is greater than ever.

Melvina Gibson, left, and Tracy Chapman attend a job readiness/job search class as part of the Program for Female Offenders. The trend toward designated giving has hurt this and other charities that depend on United Way's general fund. (Annie O'Neill, Post-Gazette)

Additional coverage:

Fees charged for most donations

Campaign results

But the way those donors hand out their money has changed dramatically and not everyone is happy about it.

This year, for the first time ever, more than half the money donated to United Way of Allegheny County came attached with directions for which agency should get it.

A special Sept. 11 fund pushed these "contributor choice" donations over the 50 percent mark, but that only highlighted an inexorable trend toward earmarked giving.

Since 1995, United Way's community fund donations in Allegheny County have dropped from $23.1 million to $19.7 million, while designated giving has soared from $10.5 million to $19.7 million.

As those designations increase, the United Way has less money to hand out to member agencies from the general fund, which recorded a 7.5 percent drop the past fiscal year, and 11 percent the year before that.

The implication for United Way and its well-honed fund-raising structure is profound.

When funds are designated to a specific agency, United Way becomes more a conduit for charitable giving and less an overseer that directs funds to where it sees the greatest need.

"I believed and I continue to believe that there was something about taking that step [of allowing donor designations in 1982] that undermined the fundamental purpose of United Way," said Howard M. Reiger, president of the United Jewish Federation, which also attracts substantial designated donations.

"If it becomes merely a pass-through, someone is going to wake up one day and say, 'What do we need the United Way for?' "

Local United Way President Bill Meyer has an answer to that.

He argues that the general fund allows United Way to support lesser known or less popular programs that can't compete with the mainstay agencies.

"Every community," he said, "ought to have some level of intermediary looking at these changing needs and seeing that some dollars are available for those needs."

Part Two

Big Charities see United Way slice shrink

Tapping the trend

But Meyer also knows that donors expect their money to go where they intend.

That's why, about eight years ago, United Way stopped subtracting an agency's designated donor dollars from its community fund allocation.

The donors said they wanted the money to go on top of the United Way allocation, Meyer said. "The donor is the customer," he said. "We know who the donor is and why [donors] give."

This year, United Way has tried to tap into the desire of donors to control where their money goes by creating several "critical need funds," which allow donors to choose an area they support, such as children and family services, or job creation, but still let United Way determine which agencies within those areas will get the money.

The growth in designated giving over the past several years seems to have several causes.

Brian Gallagher, president of United Way of America, believes it can be traced to the proliferation of nonprofit agencies vying for limited donor dollars in the mid-1980s.

"Sometimes I think we kid ourselves into thinking that by creating more choice we raise more money. That's just not proven out," Gallagher said. "I think we somewhat dilute our giving if we're dividing our giving among thousands of agencies."

But there also has been a change in how newer generations view philanthropy.

The national Red Cross in Washington, D.C., learned that lesson last year when it held back some Sept. 11 funds for future disaster response efforts. The donor public let them know they didn't like that, and Red Cross backed down.

United Way also may still be battling the lingering effects of its own controversy from 10 years ago, when news reports revealed that longtime national United Way President William Aramony had diverted hundreds of thousands of dollars from the charity for gambling trips and overseas vacations.

The misuse of funds did not include the local chapters -- in fact, United Way of Allegheny County withheld $321,000 in annual dues to national United Way until it had shored up its business practices -- but many think it still colors donors' views.

"You'd be surprised how often it does come up," said Kelley Cahill of the Mile High United Way in Denver. "There is a very high expectation for accountability now, especially for nonprofits."

Disappearing headquarters

The general fund also has been hurt by the disappearance of major corporate headquarters in Pittsburgh.

Local United Way President Bill Meyer -- "I'm not trying to say, 'Choose United Way over Catholic Charities,' "I'm merely trying to say, 'Remember the community, the broad, diverse community of families and neighborhoods that Catholic Charities alone can't serve.' "

Twenty-five years ago, Allegheny County was the third largest corporate headquarters in America.

Each year, United Way officials could count on million-dollar corporate donations from several industry giants for their annual community fund drive. That was in addition to the hundreds of individual donations made by employees of those corporations, as well as other local residents.

Today, Gulf Oil, Westinghouse J&L Steel, Babcock and Wilcox and others are gone, along with their generous corporate checks. Kaufmann's has laid off 1,200 employees. US Airways, struggling in the aftermath of the Sept. 11 terrorist attacks, has suspended its United Way campaign this year as the company reorganizes and union workers face givebacks. Two years ago, the US Airways campaign raised $400,000.

At one time, corporate gifts made up 35 percent of the annual United Way drive. Today, the figure is closer to 20 percent, and more of those gifts are designated for a specific agency or issue.

United Way agencies in other cities, each independently governed by its own board, are seeing similar trends.

The Philadelphia-based United Way of Southeast Pennsylvania historically has accepted all donations willingly, even if they were designated for agencies outside the United Way network. "We considered it a service for donors," President Christine James-Brown said.

But today, about 75 percent of all United Way donations in the Philadelphia area are directed to one of 3,000 agencies, about 100 of which are part of the United Way network. Since adopting the contributor choice option, there has been a steady erosion of the community fund, James-Brown said, and a steady decrease in allocations to United Way programs.

She said the high rate of designation hurts everyone, including the agencies, because only a handful can count on stable funding from year to year. Meanwhile, smaller programs in low-income neighborhoods receive less money because, "It's not a real sexy issue and they don't have the constituency that can support them." Her agency has initiated a donor education program to turn that trend around.

Denver's Mile High United Way, Cahill said, has seen 3 percent to 9 percent decreases in its community fund in recent years, which it also attributes to its high rate of designated donations.

Cleveland gets tough

Some United Ways are taking stronger measures to protect their community funds.

Four years ago, Cleveland's United Way, alarmed at the prospect of becoming a virtual pass-through for donor dollars, instituted a policy that requires donors designating money outside the United Way network to give a minimum of $100, with $50 going to the United Way community fund.

In the year after the policy was implemented, the amount designated to non-network agencies dropped from $2.2 million to $1.4 million, while the overall campaign experienced a $1 million increase in donations.

"This was done as a means to protect the safety net of core services," said Paula Slimak, marketing director for United Way Services in the Greater Cleveland area.

Allegheny County, however, is not likely to follow Cleveland's example, United Way spokesman Bob DeWitt said. "The donors have told us they want choice."

Across the nation, United Way officials are now trying to shift their focus from raising the most money possible to demonstrating tangible results in programs backed by United Way.

"This is the critical strategic question: Are we in the business of raising money, or are we in the business of impacting communities in the highest way possible?" national president Gallagher asked.

"We have allowed our campaign to become a money extraction process, as opposed to a community and information exchange process."

And money raising itself truly isn't the problem. That shows up in the fact that nationally, giving to the 1,400 United Ways has continued to increase, reaching $3.95 billion last year.

Growing tension

The shifting paradigm for giving can complicate the relationship between United Way and the agencies whose programs it helps fund.

To protect the general fund and its new "critical needs" funds, United Way tells member agencies not to promote themselves during the annual campaign and discourages them from publicizing their agency code -- the number donors use to designate money to a particular agency -- at United Way speaking engagements.

But that has not stopped United Way community fund allocations from decreasing, and that in turn puts more pressure on the agencies to promote themselves and publicize their United Way agency numbers.

Locally, Catholic Charities receives the largest number of directed donations every year, sometimes nearly twice that of the next-closest recipient.

That has enabled Catholic Charities to increase its annual budget from $7 million to $13.5 million in the past seven years. But its United Way allocation has remained largely unchanged since 1980, even decreasing slightly in recent years.

"My primary responsibility as executive director is to see to it that Catholic Charities continues to be fiscally viable," Sister Patricia Cairns said. "So when we see the [United Way] program part earmarked for Catholic Charities decreasing, then it spurs us to be a little more vigorous in our attempts to get individuals to support Catholic Charities through contributor choice."

She said Catholic Charities did not aggressively market itself to contributors, except to contact previous donors and perhaps place a notice in a church bulletin. "The fact that we are a faith-based organization helps, we cannot discount that," Cairns said. "I think [donors] realize that our motivation doesn't flow from having the almighty dollar, that our cause is bigger than ourselves."

Then there are programs which have always depended on the community fund, such as the 28-year-old Program for Female Offenders, based in Uptown.

Alyssa O'Toole, director of development, said the program solicited designated donations from its former clients and "people in the criminal justice community."

But its designated donations amount to only about $6,000 a year, which makes up about 5 percent of its United Way allocation. Despite a solid record of success in helping women return to productive lives, the program has a harder time getting donations than, say, the Girl Scouts or the Multiple Sclerosis Service Society, O'Toole said.

"While the program is known and valued within the criminal justice community, we're not as well known to the general public," O'Toole said.

"Also, with the population we work with, many live in poverty and they come from abusive families. They have little or no work history. They're stuck in this cycle. They have substance abuse problems, they have mental health problems."

While the public may be sympathetic to those problems, she said, "When you add the criminal aspect to that, they get less sympathy."

Meyer said he realized the designated giving trend was here to stay.

"I'm not trying to say, 'Choose United Way over Catholic Charit-ies,' " he said. "I'm merely trying to say, 'Remember the community, the broad, diverse community of families and neighborhoods that Catholic Charities alone can't serve.' "

And if the annual campaign became entirely designated donations?

The community "is always going to need an effective fund-raiser," Meyer said.

"But Bill Meyer wouldn't be here because I believe, and a lot of volunteers would say, that's not why they got involved with United Way."

Campaign results

United Way of Allegheny County 1995 - 2001

$ Raised

$ Designated

$ Undesignated

1995$ 33,550,174$ 10,461,140$ 23,089,034
1996$ 33,898,930$ 11,309,426$ 22,589,504
1997$ 35,699,840$ 13,011,895$ 22,687,945
1998$ 35,888,411$ 13,800,537$ 22,087,874
1999$ 36,961,676$ 14,652,564$ 22,309,112
2000$ 37,726,690$ 17,686,037$ 20,040,653
2001$ 39,350,471$ 19,687,890$ 19,662,581

dot.gif Tomorrow: Who gets the most donor choice money?

Steve Twedt can be reached at stwedt@post-gazette.com or 412-263-1963.

Staff writer Steve Levin contributed to this report .

Correction/Clarification (Published Oct. 29, 2002): Although the former Koppers Corp. no longer exists, a spinoff company, Koppers Industries, is still headquartered here. A story in Oct. 27 Sunday editions about United Way incorrectly referred to Koppers as a company that had left PittsburghA. Alhough the former Koppers Corp. no longer exists, a spinoff company, Koppers Industries, is still headquartered here. A story in Sunday's editions about United Way incorrectly referred to Koppers as a company that had left Pittsburgh

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