Unpaid pledges are keeping United Way of Central Indiana from distributing as much money as it would like to local charities.
The blame continues to fall on a lackuster economy and the inability to collect from the paychecks of Hoosiers who lose their jobs after making the pledges.
The Indianapolis-based not-for-profit said Monday that it will distribute $34.6 million this year, including $21.7 million to 106 local charities. The amount is 3.6 percent less than last year.
United Way is providing fewer dollars in the fiscal year that started July 1 while holding back more in its reserves to cover uncollected pledges. It expects to contribute $2.65 million from its budget, or 6.9 percent of the $38.2 million raised overall in United Way’s 2010 campaign, to cover unpaid pledges from laid off employees.
That’s slightly better than the 7 percent United Way held back from the previous year’s campaign but still much higher than the 5 percent it typically reserves, United Way of Central Indiana CEO Ellen K. Annala said.
“Anytime we’re in a recession we have to up [the amount] a little bit, but we’ve had to up it more,” she said. “It’s just a reflection of what’s been going on in the economy.”
United Way of Central Indiana attracts more than 98 percent of its nearly 76,000 donors from workplace fundraising campaigns. It lost more than 6,000 donors from 2008 to 2009—likely as a result of layoffs during the economic downturn.
Indiana’s unemployment rate stood at 10 percent when United Way kicked off its latest annual campaign in August and improved to 8.2 percent by May. Still, the figure is much higher than the 4-percent to-5 percent jobless rate Indiana enjoyed before the economy began to swoon in mid-2008.
“We’ve seen [uncollectible pledges] go really high the past few years,” Annala said. “Too many people have lost their jobs and can’t pay their pledges.”
United Way agencies nationwide budget amounts for uncollected pledges based on percentages from the past three to five years and adjust them for current economic conditions, said Sal Fabens, spokesman for United Way Worldwide in Alexandria, Va.
United Way of Central Indiana is “right on par” with the national rate, which also is 7 percent, he said.
“Every United Way has to include an allowance for uncollectible pledges in their financials,” Fabens said. “There’s essentially always a difference between what people pledge and what actually comes in the door.”
The $38.2 million the local group raised during its last campaign fell short of its ambitious goal of $41 million. The organization responded by cuting operating expenses 6.2 percent.