Charity Navigator Appears to Question Continuing Relevance of United Way

Print Share on LinkedIn More

April 11, 2011; Source: Register Guard | In response to questions about its low rating of an Oregon-based United Way, a spokeswoman for Charity Navigator, the charity rating system for donors, appeared to question the continuing relevance of the intermediary.

The situation in question was the one star and two star ratings given to the United Way of Lane County, which has seen declining fundraising revenues over the last five years. Reportedly, the area has seen heavy job losses partly due to pre-recession plant closings starting in 2003 and partly due to the recession itself.

In that environment, the United Way chose to erode its own reserves rather than cut member agencies. By 2007 and 2008 it had only two months of reserves and apparently this, in combination with reduced fundraising receipts, resulted in the one star rating, which signifies “poor performance.” By 2009 its reserves had risen back up to four months and then to just a little less than five months in 2010 and this has resulted in a two star rating.

In discussing the rating however, Sandra Miniutti of Charity Navigator said that the organization had become a “more risky philanthropic investment because they’re shrinking over time.” This seems to ignore the fact that the sustainability of the United Way is not the point of a contribution made through them. In fact, apparently, this United Way was willing to take the hit rather than pass it along to their affiliates who are actually providing the services to community.

We’re not getting it.

Miniutti, however seems to have a larger contextual analysis that she is linking to the situation and this has to do with United Way’s future. “Many people view them as a pass through,” she said. “It was a very necessary service maybe 15 or 20 years ago, but with the advent of the Internet, many donors can find even the smallest charity in their neighborhood and donate to them directly online.”

Maybe so, but we have to admit that the logic of Charity Navigator often eludes us. Here you have a charity pass through that puts itself at the same kind of risk that its grantees are taking and that makes them a less worthy recipient of charitable dollars in the eyes of Charity Navigator. We hope that the people of Lane County are a little smarter than that and recognize that the behavior of this organization during a time of shared economic stress may make them more trustworthy – not less.

We’d love to hear your opinions on this situation.—Ruth McCambridge

  • Jed Emerson

    Couldn’t agree with you more, Ruth. The fundamental problem here is that the focus is on philanthropy as a transaction and not an investment in community or capacity building to pursue sustained change and impact. CN advances the wrong metrics because it is based uponnan outdated vision of philanthropy. Really too bad…

  • phil

    Charity Navigator is not exactly as comprehensive as most people think, but their larger point on the relevance of United Way is spot on in my view. The founding mandate of United Way revolved around aggregating gifts at low cost that benefit a community’s most important social service delivery network. Businesses absorbed the cost of workplace payroll giving and implied coercion was part of the unstated strategy to raise money and meet goals. Shortcomings aside, this was a focused, efficient and effective community tool.

    Today there is increasing employee resistance to workplace fundraising and a desire to personally direct gifts. As a result, United Way’s payroll giving market is shrinking and its cost to serve as an intermediary are rising. The National office now promotes an agenda to embrace cause-related fundraising and advocacy…, youth fitness, financial literacy….to name a few. That change means many United Ways are copycatting the work of local community foundations in many communities via donor-restricted giving. United Way now has a confusing mission.

    United Ways used to be outstanding at organizational fundraising and marketing. Direct service delivery and broad scope social engineering projects are simply not their strong suits. This shift makes them progressively redundant.

  • Siobhan Kent

    I was very surprised to read Ms. Miniutti’s thoughts on United Way as a pass-through organization. While it’s true that many donors choose to designate their donations through United Way to specific local organizations, the non-designated donations go to fund critical community work led by United Way itself.

    United Way of Lane County reports on their website a number of 10-year goals including early education work, financial literacy and stability and increasing access to health care services. When donors give to United Way, rather than designating their donations to a specific charity, their donations help fund these important initiatives (all of which are consistent with United Way Worldwide goal of advancing the common good through health, education and income initiatives).

    United Way is much more than a pass-through organization. It serves as a convener and leader for local nonprofits so that they may work collectively on pressing community issues. The public perception of United Way as a pass-through organization deeply undermines this work.

  • Al Huntoon

    Good post. I suppose that one could argue that Charity Navigator is a kind of pass through itself, an information pass through, one that can be viewed as operating in roughly the same space as United Ways. Increasingly United Ways have acted as local charity evaluators to facilitate more effective and responsive member agencies. While I’m not a huge fan of the United Way approach in general, I do think that it is one way that donors can be assured of oversight of the causes that they choose to support.
    As long as Charity Navigator focuses primarily on admin:program ratios its rating system will only tell a small part of any nonprofit

  • harvey newman

    It is clear that Charity Navigator’s “one size fits all” concept of philanthropy doesn’t work for the so called pass through, particularly for samll and sometimes unknown or even unpopular charities. United Ways often (though not all) provide added value to the lesser known organizations. Current trends with United Ways to separate them from supporting only popular charities has had some success.
    Charity navigator needs to get smarter about variations in how charities work.

  • Glenn Akins

    I wonder if the larger issue here is being missed, and that is the shelf life of the financial model underpining the United Way (and other “pass througs”).
    I have been part of such a system that has been in place since 1925.
    My read of the larger environment is that there are several factors pressing in on this legacy system. Some of these are internal to our system, and some external, beyond our control. Some are generational, some related to demand for demonstrable results and better accountability.
    Charity Navigator is but a visible entity making a value judgement on the viability of this model. Inside our system, this same sort of judgement occurs on a routine basis, with donors (either individuals or organizations) increasingly opting out on the approach, preferring a donor driven allocation of their gifts based on their values.
    First, there was an earthquake……

  • john ford

    Admittedly, United Ways have lost fundraising ground over the past twenty years. In my community money raised is about the same amount as was raised in 1988. Inflation makes this a lesser yield that the 1988 dollars. Where competently staff and where senior community leadership remains interested they can still serve a function as a community convenor when many interests need to be at the table to solve a community problem. United Ways will never have the influence they once had but value remains.

  • Daniel Borochoff

    This is only one of many examples of how Charity Navigator robo ratings make no sense. United Way of Lane County is doing the right thing by honoring donor’s intensions and using their contributions to fund community groups. What a shame it would be if the United Way would cut off funding to charities during this time of great human need just to receive a higher rating from Charity Navigator.

    Daniel Borochoff
    American Institute of Philanthropy

  • Karen Garber

    With over 20 years of experience with United Ways I have found them to be valuable to small non-profits which lack the means to fund-raise on their own but provide important and needed services to the communities they serve. And, I think they have been useful in brining together the service community with business.