Another United Way Invades Reserves

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June 16, 2011; Source: WFAE | The United Way of Central Carolinas has $10 million in reserves but not for long. Following in the footsteps of one of their colleague organizations in Oregon it has decided to pull down $2.5 million to ensure that 90 local nonprofits receive at least what they did last year.

The United Way of Central Carolinas’ fundraising this year fell short of last year’s by $5 million and it could have just cut back on its grants to community groups but as it looked out across the landscape it saw increasing demand for services coupled with reductions in other funding streams and, we assume, it decided not to pass along the loss to organizations and people who could less afford the hit.

Still, the executive director of the United Way says it is now at a tipping point and will need to reset expectations for the future. By the way, if it’s any indication of the basic problem, three nonprofit agencies that will receive an increase from the United Way this year are the emergency shelters for men and women and a program for homeless children in public schools.

We hope that Charity Navigator does not choose to downgrade this United Way as it did in the Oregon case for its decision to take on some of the pain of the local economy.—Ruth McCambridge

  • Daniel Borochoff, Am

    Charity Navigator’s automated system of lowering a charity’s rating score because it dips into its reserve to fund essential programs makes no sense. Charities’ that dip into their reserves to help in a difficult economy ought to be applauded and be considered serious candidates for financial support, regardless of Charity Navigator’s lower rating. The American Institute of Philanthropy takes the reverse position of Charity Navigator and criticizes charities that maintain massive reserves. This aspect of Charity Navigator’s model is better suited for valuing a company for investment purposes than choosing a charity that needs your financial support.