Designated gift-giving frustrates United Way

September 13, 2004

At first glance, it’s a real head-scratcher.
United Way of Central Indiana’s annual fundraising blitz brought in $500,000 more in 2003 than it did the year before, but the agency didn’t have any additional money to hand out come grant-making time.
About 20 percent of the $36.6 million raised last year was earmarked for specific agencies, including some that aren’t United Way partners.

And since designated donations are held separately from the unrestricted Community Impact Fund, the slow-but-steady increase in such gifts hasn’t done much to help United Way’s bottom line.

“A lot of people don’t realize the consequences,” said UWCI President and CEO Ellen Annala. “There’s an expectation that we should be able to do everything we’ve always done and still accommodate donor designations.”

But that isn’t the case when unrestricted giving is flat or declining.

UWCI fielded more than 200 proposals for $34 million in grants as part of the most recent funding cycle; it had $21.6 million in unrestricted money to hand out.

Agency leaders hope to increase unrestricted giving to this year’s campaign, which kicked off Sept. 10 with a $36.6 million goal.

They have a tough row to hoe and they’re not alone. Not-for-profits across the country have grappled with similar dilemmas for years, as donors demand control over their contributions.

"Designated gifts are really in the majority now,” said Eugene Tempel, executive director of Indiana University’s Center on Philanthropy. “Donors want to support a specific program or project. That leaves little unrestricted money to take care of everything else.”

And organizations like United Way—which passes most donations on as grants to other agencies—probably have felt the pain more than most, he said. “People don’t want to give through an intermediary,” Tempel said.

That changing dynamic has meant a sharper focus for UWCI and many of its brethren across the country.

“It is no longer enough to say we raise money and allocate it,” Annala said. “We have to look at how we can be more effective, how we can bring to bear all of the community’s resources—not just money—and really begin to impact key issues.”

To that end, UWCI grants in the next three years will target four areas of emphasis: successful kids, thriving families, vibrant communities and connected people. Agency leaders settled on those priorities after reviewing results of a needs assessment conducted last fall.

This year’s pledge cards provide a list of options: the Community Impact Fund—“where it matters most”—four areas of emphasis, a handful of special programs, six central Indiana counties and 108 United Way “partner” agencies.

Donors may well choose to direct their contributions to other health and human service organizations, but Annala hopes some also recognize what UWCI has to offer.

“Our job is to do an assessment, target particular issues, bring other organizations to the table, and try to make something better,” Annala said. “That’s our real value.”

That outcome-oriented approach was a sea change for UWCI when the agency implemented it in 2001, Tempel said, and it may well have kept the local chapter from losing traction in the community.

“The message now is, ‘We work on these problems,’” he said, “as opposed to, ‘We support these agencies.’ Its success in maintaining [unrestricted] contributions comes from that switch.”

Sometimes, donors and United Way leaders are on the same page. More than half the agencies that got designated donations last year also received Community Impact funds.

Others that collected only donor-directed money in the past will be funded by United Way in the future. Second Helpings Inc., for example, will get $152,000 in the new grant cycle for its hunger-relief and job-training programs; donors have been supporting the agency through designated gifts for more than five years.

“Some people feel very strongly about one organization, and we’ve been lucky enough to have some of that support,” Executive Director Gina Brooks said.

She’s equally thankful that others chose to make unrestricted gifts to United Way.

“There’s no better way,” Brooks said. “They know what they’re doing.”

Indeed, even though designated donations have crept up to 20 percent of UWCI’s fundraising total, other United Ways have seen far more lopsided results—exceeding 50 percent in some cases.

United Way of Metropolitan Nashville sent up a red flag when almost half the 1997 campaign contributions were directed “through” the agency, rather than “to” it. By last year, pass-through donations had dropped to 37 percent.

So how did the Tennessee agency reverse the trend?

“We focused on it,” said President and CEO Mark Desmond. “It took a mind shift. Instead of concentrating on a top-line goal, we looked at unrestricted gifts and thought about how to increase them. We made a conscious decision: This is what matters.”

The Nashville agency also has been a national leader in establishing the United Way’s reputation as a problem solver rather than a funding source, Annala said. Desmond’s explanation of the national group’s mission echoed hers.

“This is a dynamic, creative organization that looks at core issues and tries to get at the root cause of them,” he said. “There are always people who need a food basket. But why are they hungry? What’s going on there? Can we get together as a community and do something about it? Those things are at the heart and soul of what we do.”

Such an approach may resonate with some donors, but Kevin Ronnie thinks others still will want to direct their gifts.

Ronnie, director of field operations for the Washington, D.C.-based National Committee for Responsive Philanthropy, is a big believer in donor choice. He sees support fading—workplace giving to United Way grew less than 1 percent nationally between 1996 and 2001, according to a recent NCRP survey—in favor of other options.

“More and more, people are expressing a desire to control their personal philanthropy,” he said. “The ‘Father Knows Best’ philosophy doesn’t work for everyone.”

He just hopes the United Way’s “value added” argument doesn’t discourage donors who feel strongly about supporting a specific cause.

“Choice creates a much bigger marketplace for philanthropy,” Ronnie said. “Without options, some people walk away from giving.”

Annala is quick to dismiss any notion that UWCI wants to be the only option. She knows the United Way campaign is the philanthropic tool of choice for some supporters, and that they may have their own priorities.

In fact, many contributors make both restricted and unrestricted gifts. All United Way can do is make sure they are aware of the options—and the needs.

“Choice is part of our lives, in philanthropy and everywhere else,” Annala said. “We need to make sure we give donors viable options that still allow us to complete our mission and address core issues.

“Donors want to connect with a cause. It behooves us to try to accommodate that.”

Nashville’s Desmond agrees, to a certain extent.

Allowing designated donations “was a logical, reasonable thing to do. We can’t put the genie back in the bottle,” he said. “But we can try to get a handle on it.”


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