08/13/2012 11:28 am ET Updated Oct 13, 2012

A United Way's Misguided Focus on Big Charities

The United Way that serves the nation's capital last month announced a decision that signals trouble for small charities nationwide: It became one of a growing number of United Ways that are limiting their money to large and medium-size groups.

As donors and organizations like United Way focus more of their dollars on big charities, the gap is growing nationally between the haves and have-nots in the nonprofit world. And in a city like Washington, which has many low-income and minority residents, the new policy raises questions about whether the people most in need of money and services will benefit from local philanthropy.

Starting in 2013, the Washington United Way says it will award money only to groups that have at least $50,000 in revenue and overhead costs of 35 percent or less. What's more, beneficiaries must have operated for at least three years. At risk of losing a share of the United Way pot, which last year tallied $23-million, are 100 to 150 of 800 local organizations.

William Hanbury, chief executive of the D.C. United Way, told me in an interview that the new criteria will enable the organization to promote higher standards and ensure its money makes a difference in the community.

He said that he, along with members of the United Way's board and staff, had consulted with a wide variety of nonprofits, donors, and others who have a stake in United Way's operation. He said he found broad agreement that the best way to increase United Way's impact is to support fewer small, marginally productive groups and pay more attention to high-performing organizations. Donors in particular were strongly in favor of the new direction, he said.

Kerry Morgan, senior vice president for marketing and communications at the D.C. United Way, emphasized that her organization was already working with many of the groups at risk of losing money to help raise funds from elsewhere or cut their overhead costs.

While Mr. Hanbury and Ms. Morgan say nonprofits were widely consulted and informed, that does not necessarily seem to be case.

Several big groups supported by United Way that serve minorities and low-income people said they had not been asked for their opinions. A couple of them reported that they had learned of the changes by reading a front-page article in The Washington Post. All of these organizations criticized the new policy, pointing out that many small groups with deep ties to low-income minority residents would no longer be able to provide services that no one else could. They scoffed at the idea that a minimum budget of $50,000 should be the gateway to a grant.

Robert Egger, founder and president of DC Central Kitchen, one of the city's most acclaimed nonprofits, was among the most critical of the United Way decision (and he at one time served as interim executive director of the United Way after it was tarnished by a leadership scandal).

He notes the experience of his own group: "When we first got into the United Way, we were under $40,000. We grew because of the United Way and the opportunity it afforded to get the idea of food recovery and empowerment in front of thousands of potential donors. Sad to think that 'small' programs with promise (like we were) might not get the same opportunity to rise up and flourish."

Ms. Morgan admitted that the $50,000 minimum requirement was somewhat arbitrary but, while open to the possibility of a few exceptions, insisted that such a low floor was an essential part of the strategy to upgrade standards and increase the impact of United Way money. When asked how they would assess that impact, they said they were in the 'nascent stages' of developing measures.

While the United Way board of directors, composed almost entirely of corporate executives and unrepresentative of the community at large, seems insensitive to the needs of low-income residents and their small nonprofits, it has little skepticism about big groups. It never questions why they get to continue receiving money or whether they are doing enough to meet Washington's social-service, health, and education problems.

If the United Way really wanted to increase its impact, why didn't it exclude nonprofits that have big budgets already and do not need help to operate successfully?

A look at the list of the large established beneficiaries of Washington's United Way is revealing. You'll find the American Cancer Society, American Heart Association, National Kidney Foundation, and other major disease organizations, not to mention Arena Stage, the Shakespeare Theatre, and the Wolf Trap Foundation for the Performing Arts, as well as a host of private schools including the exclusive and wealthy Georgetown Visitation Preparatory School. A consortium of Washington universities, the Jewish Federation of Greater Washington, the Salvation Army, and the United Nations Association are part of its roster as is Suburban Hospital, in Bethesda, Md.

Those organizations and many other big groups in the campaign don't really appear to need United Way money to run their programs and services. They are crowding out smaller groups that are slowly being driven out of business. As Mr. Egger and many other observers point out, small organizations with low budgets and many volunteers are where much of the real action in low-income and minority neighborhoods takes root and grows. It is often where innovative practices get started.

By all means, let United Way toughen its standards and improve its measurement skills. But it should apply these criteria to the big guys as well, many of which don't deserve United Way money. But more important, why grant a nonprofit access to money based only on the size of its budget?

Washington's United Way is denying groups with potential to become important players, like D.C. Central Kitchen and Casa de Maryland, the chance to grow. It is neither a fair nor an intelligent strategy, and it's not one that other United Ways and donors elsewhere should follow.

Pablo Eisenberg, a regular Chronicle contributor, is a senior fellow at the Georgetown Public Policy Institute. His e-mail address is