Nearly 200 small charities in the Washington region could lose funding as the powerful United Way of the National Capital Area changes the rules for groups to qualify for its millions of dollars of giving each year.
The changes, which United Way outlined in a letter to nonprofit groups last week, target smaller charities that collect less than $50,000 in fundraising annually. At a time when many groups are facing severe budget cuts, the decision could be fatal for those that rely on United Way as a major lifeline.
United Way says that it wants to make a greater impact by giving more money to bigger charities and that the new requirements are a response to donors who want to see clear evidence of what their dollars are accomplishing.
“The money is spread so thin that it’s often hard to see the impact,” said Kerry Morgan, a United Way spokeswoman.
When asked how United Way determined a group’s impact, Morgan said, “That’s something we are working to understand.” She added that the organization is providing workshops and consultations to help charities meet the new requirements.
But some groups and experts say a charity’s fundraising ability is the wrong standard for figuring out whether it deserves United Way’s support.
“They’re only going to support the big guys while the small guys have to tough it out at a time when spending money has been the worst it’s ever been,” said Burton Goldstein, treasurer of National Capital Therapy Dogs. The group provides animal-assisted therapy to people in health facilities, shelters, schools and libraries, according to its Web site, and gets half its funding from United Way. The $50,000 requirement “would be 10 times what we could bring in, and there’s no way we can do that.”
He believes his group can survive because it relies solely on volunteers, but he thinks the change could force some nonprofit groups to fold.
United Way’s change affects roughly one-third of its 730 member groups, which include organizations as varied as charter schools, groups that help the homeless and local theater companies. Last year the organization took donations from about 800 businesses and more than 102,000 individuals, and distributed about $23 million to charities.
The changes come as United Way, whose national organization dates back to the 1880s, struggles to stay relevant. The group is designed to act as a conduit between charities and busy individuals who don’t have time to research which groups to support. But the world of giving has revolutionized in recent years, as the Internet has made it easier for people to find groups they care about and give directly online.
United Way’s D.C. chapter, which supports more nonprofit groups than any other United Way local affiliate, has also had to restore its reputation after being rocked by financial and management scandals about a decade ago. In 2002, former chief executive Oral Suer was charged with stealing as much as $1.5 million from the organization.
The current chief executive, Bill Hanbury, has spearheaded an effort to raise the bar for which groups qualify for United Way support.
In 2009, when he arrived, he cut charities that were based in the Washington area but did not run services in the region. Since then, the number of nonprofit groups covered by United Way has dropped 34 percent.
Denise Erskine-Meusa, founding president and chief executive of the Black Aesthetics Institute, said she doesn’t know what will happen if the arts education group loses funding from United Way.
“They’ve been a godsend, and for them to tell us ‘You’re not getting any money’ is distressing,” said Erskine-Meusa, who said she was willing to give up her pay to keep her group afloat. “I’m going to try hard. I’m going to have to be creative, but it’s hard when I don’t have a lot to begin with.”
The organization, founded in 2002, teaches young people how to express themselves through filmmaking and art.
In addition to requiring that organizations be able to raise more than $50,000 a year, United Way is also mandating that they have been in business for at least three years and have spent 35 percent or less on overhead expenses. Existing United Way member groups also must have received at least $5,000 in United Way funding in the previous year.
Some nonprofit experts say that raising standards for charities will weed out the low performers.
“It’s a good move,” said Chuck Bean, the president of the Nonprofit Roundtable of Greater Washington, a nonprofit membership organization. “It’ll enable them to focus on high-
performing organizations. It won’t be without pain.”
But others said that small groups have the advantage of being good at adapting during tough economic times since they tend to have less money tied up in mortgages and other big, fixed costs. “They’re more nimble,” said Rebecca Thomas, vice president of direct services, strategy and innovation at the Nonprofit Finance Fund.
She added that looking at financial results alone isn’t enough. “The number one way to determine an organization’s effectiveness is the results that its mission achieved,” she said.