United Way is an international network of over 1,800 local nonprofit fundraising affiliates. Prior to 2015, United Way was the largest nonprofit organization in the United States by donations from the public. Individual United Ways mobilize a single fundraising campaign to raise money for various nonprofits, with most donations coming through payroll deductions.
United Way Worldwide
United Way organizations raise funds primarily via workplace campaigns, where employers may solicit contributions on United Way's behalf payable through automatic payroll deductions. After an administrative fee is deducted, funds raised locally by United Way are then distributed to various nonprofit agencies within those communities. Major recipients have included the American Cancer Society, Big Brothers/Big Sisters, Catholic Charities, Girl Scouts, Boy Scouts, and The Salvation Army.
Membership in United Way and use of the United Way brand is overseen by the United Way Worldwide umbrella organization. United Way Worldwide is not a top-down organization that has ownership of local United Ways. Instead, each local United Way is run as independently and incorporated separately as (if within the United States) a 501(c)(3) organization.
Local United Ways pay membership dues to United Way Worldwide for licensing rights to the United Way brand and must meet criteria to maintain their membership status (including independent review boards, audits, and restrictions on marketing tactics). The membership dues to United Way Worldwide are a portion of the total funds raised by each local United Way. U.S. affiliates pay a membership fee of 1% of their total funds raised to United Way Worldwide.
Functions
United Ways are federated fundraising bodies that mobilize a single fundraising campaign to raise money for a diverse range of nonprofits. United Ways raise funds and determine how to best distribute them.
Fundraising
thumb|Example of a United Way pledge form where employees can choose how much to donate and where to designate their funds
United Ways raise funds primarily via company-sanctioned workplace campaigns, where the employer solicits contributions from their employees that can be paid through automatic payroll deductions (in the same way tax withholdings and insurance premiums are deducted from an employee's net pay).
Nonprofit agencies that partner with United Way usually agree not to fundraise while the United Way campaigns are underway.<gallery>
File:United Way thermometer.jpg| Local United Way fundraising thermometer poster
File:United Way Centraide.jpg|United Way of Canada's campaign kick-off event where the annual campaign goal of C$31 million is announced
File:United Way Campaign 2015 (26071811701).jpg|Savannah River Site employees reach United Way campaign goal in 2015
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Distributing funds
Money raised by local United Ways is distributed to local nonprofit agencies after an administrative cost is deducted. In 2002, the average administrative fee was 12.7%. Where United Way distributes the funds depends on if the donor designated or restricted their donation to a specific organization or cause.
Designated donations (donor-choice)
Almost all United Ways allow donors to specify (designate) which nonprofits should receive their funds. Some United Ways let donors choose which focus area or social problems (like helping kids or the elderly) they wish to support, which allocates their gift to a relevant subset of their charities in its network. Some United Ways allow donors to direct their gifts to any nonprofit (either inside or outside United Way's preferred charity list) while some only let donors give to any charity in their region or anywhere in the country.
Traditionally, United Ways would grant funds that can be used for any purpose by the recipient nonprofit. However, many United Ways have started giving funds to nonprofits only to be used for specific programs run by the nonprofit (e.g. a workforce training program at the local chapter of St Vincent de Paul). These funds are provided in the form of contracts in which the nonprofit must deliver programs and are subject to review and audit by the United Way's volunteer committee.
History
Origins in the Community Chest movement
The organization has roots in Denver, Colorado, where in 1887 Frances Wisebart Jacobs, along with the Rev. Myron W. Reed, Msgr. William J. O'Ryan, Dean H. Martyn Hart and Rabbi William S. Friedman began the Charity Organization Society, which coordinated services between Jewish and Christian charities and fundraising for 22 agencies. Many Community Chest organizations, which were founded in the first half of the twentieth century to jointly collect and allocate money, joined the American Association for Community Organizations in 1918.
The first Community Chest was founded in 1913 in Cleveland, Ohio, after the example of the Jewish Federation in Cleveland—which served as an exemplary model for "federated giving".
The success of the Cleveland Community Chest led to a modest spread of the concept to other cities. World War I helped disseminate the concept of the Community Chest as the model for federating giving was used to support wartime fundraising efforts. Of the 300–400 War Chests that existed during the war, most converted over to becoming Community Chests after the war ended. Mirroring the changing terminology, the American Association for Community Organization changed its name to the Community Chests and Councils, Inc in 1927.
Further consolidation into United Funds
World War II also impacted the Community Chest movement. National health research charities, like the American Red Cross and the American Cancer Society, gained government support during the war. These health agencies used their centralized headquarters and nationwide fundraising reach to run separate and competing local fundraising campaigns alongside the Community Chests.
This outgrowth of objections from business and labor leaders led to the formation of the first United Fund in 1949 in Detroit, Michigan. Under the motto of "Give Once for All", the United Foundation hosted a single campaign that included Community Chests, local charities, and some of the national charities. With federal government's move to allow compulsory Social Security and income tax withholdings in 1942, the technology of payroll deductions became a vehicle to allow employees to give incremental gifts. The strong economy in post-war economic boom helped these campaigns to grow at a rate of 5–10% annually. The new logo was designed by graphic designer Saul Bass in 1972. Aramony traveled to major cities to persuade the affiliates to adopt the logo and brand name.
In 1973, United Way of America formed a partnership with the National Football League.
Competing with alternative funds
United Way faced competition from competing federations (called "alternative funds") that focused on a narrower set of issues that resonate strongly with donors, including championing controversial issues have excluded from United Way funding or that do not appeal to United Way's predominantly male, white, corporate membership. These alternative funds challenged the central thesis of the United Way model – that one umbrella organization can serve both the donors' interests and community's needs. The competition for access to the workplace giving was called the "Charity War" among professional fundraisers at the time. Due to the competitive philanthropic environment, United Ways has lost market share. In 1988, there were 450,000 nonprofits in US and United Way share's of US charitable contributions was 3.16%; by 1999, there were 715,000 nonprofits, and the United Way's share decreased to only 1.98% of donations. The trend of alternative funds continues to today with only 25 percent of the companies conducting a traditional United Way–only campaign (according to a 2009 survey by the Consulting Network).
It was later found that Aramony used the company's dollars to fund luxurious expenses, including flights on a Concorde and $90,000 for his limousine service. Aramony had spun off two for-profit enterprises using United Way of America funds, the Partnership Umbrella and Sales Service/America. The suspicious set up raised questions if the companies, which were designed to offer bulk discounts and other cost-savings to local United Ways, were actually being used for Aramony's personal enrichment. Partnership Umbrella had used United Way of America funds to purchase and decorate $1.2 million of real estate in Alexandria, Miami and New York, including a $459,000 condo in New York City for Aramony.
Aramony, who was due to retire in July 1993, submitted his resignation on February 27, 1992, during a teleconference with local United Ways. Aramony said he was retiring "to put things back in proper focus ... because media attention is overshadowing the importance of the work of United Way and the countless accomplishments we have made together." Two associates, Thomas J. Merlo and Stephen J. Paulachak, were also convicted and sentenced to prison.
IBM vice president Kenneth W. Dam was named interim CEO after Aramony's departure in 1992. Elaine Chao was selected as president after Dam and stayed on until 1996.
Beene's centralization efforts
Betty Stanley Beene took over in 1997. Beene advocated for a more-centralized system where United Way of America would take the lead on issues that affect all local United Ways and attempted to set national standards for all United Ways. This proposal would require that each local United Way undergo a thorough public self-examination of their effectiveness every few years.
United Way of America, under Beene leadership, paid Cap Gemini America $12 million to build charitable-pledge software for the United Way Information Network, a centralized national pledge processing center. The national center aimed to make donations more efficient and attractive to companies with national footprints. However, these plans competed with the regional pledge processing centers operated by four large regional United Ways. The software was riddled with issues and was unable to process gifts in its first test run. A review of the software by Deloitte & Touche found 400 serious problems. United Way abandoned the project in 1999 and came to settlement with Cap Gemini in 2000.
Some local United Ways intensely rejected these plans, and withheld their dues to United Way of America as an act of protest. The United Way in Rochester went so far as to obtain the legal right to alternative names in the event the United Way broke up. These issues would, in part, lead to Beene's departure in 2001.
Allowing donor-choice
United Way officially embraced a policy of donor designation in 1982, allowing donors to select which nonprofit organizations would receive their gift. However, United Ways resisted donation designations and the roll out of the new policy was described as a "glacial pace" in a 2000 piece in Fortune. In one case, the growth of amount of donor-choice contributed to the near-bankruptcy of United Way of Santa Clara County as the organization continued allocated the same amount year after year as their general fund pool shunk. The practice written about in Eleanor Brilliant 1990 book on United Way: "...whether or not the money passed through the United Way allocations process seemed to be less important than making the largest nationwide counting of monies raised in the campaign. Undoubtedly, initially corporations were not concerned about this reporting system (and) had been making every effort to keep up both the reality and the façade of increased philanthropic dollars." The Atlanta information and referral service was conceived to help navigate people to find the best programs for their need (e.g. homeless shelters, tax preparation, after-school programs, rent assistance, etc.).
The program spread and in 2005 all or part of 32 states and Washington, D.C., had access to 211, reaching almost half the nation's population. The Community Impact suggested that funds were no longer a guarantee and that grants were competitive and performance-based driven by a nonprofit's ability to achieve outcomes related to United Way goals.</blockquote>
New reporting standards
In the wake of the Enron scandal, United Ways in 2002 faced questions on their accounting practices and discrepancies between different United Ways. In some cases, United Ways were double counting donations made across United Way territories which inflated their impact. These practices made their expense ratio seem lower by artificially inflating reported contributions. United Way of America imposed new rules requiring all affiliates to adhere to a shared standard of reporting revenue and overhead costs, with the 150 largest affiliates required for the first time to submit financial information to outside accountants. Some United Ways were not able to meet the new standards and the board disaffiliated these 61 United Ways.
Some experts believed that the subsequent decline in United Way's 2002–03 campaign were the results of these accounting changes. In one case, the new reporting standards, which ended the practice of counting the value of in-kind donations in campaign totals, caused the United Way of Volusia-Flagler Counties in Daytona Beach to eliminate around $400,000 from its campaign results.
After the failure of the United Way Information Network and out of fear that the new for-profit companies would court their corporate supporters, a group of United Ways developed the online United eWay system to bring the traditional pen-and-paper pledge cards online. The software prototype was developed by a consortium of 50 United Ways with technical assistance from Microsoft. The product was run as a United Way of America subsidiary until it was purchased by CreateHope Inc. in 2008 and spun off as a separate for-profit company TRUiST, Inc.