Big change is coming to the local nonprofit sector, and like most change it won’t be easy.
In the next few weeks, dozens of area nonprofit organizations will find out if they will continue to receive funding from the Capital Area United Way, which has been the lifeblood of many nonprofits, particularly some of the smaller ones. CAUW has reorganized the way it allocates funding to its so-called partner agencies, and under the new system some of the old partners will be left out in the cold.
That CAUW has made this change is a good thing in the long run. The agency itself, like the organizations it funds, needs to become more strategic, efficient and effective. It has to rebuild trust among the donor community, which is aware of the high-profile scandals and high overhead rates that have tarnished United Way’s reputation at the national level in recent years.
It also has to better demonstrate to the donor community, through metrics and data, that the programs and organizations it funds are making a real difference. There are too many other places for those donors to spend their philanthropic dollars.
Still, the short term will be painful. Some local nonprofit organizations receive as much as 50% of their revenue from CAUW. They don’t know how they’ll make up the difference if those funds go away.
The change at CAUW has been years in the making, and for months dozens of volunteers have spent countless hours evaluating each nonprofit organization that applied for funding. It’s a far different system than the old one, under which CAUW basically functioned as a clearinghouse, raising money for its partner organizations then doling out funds to the same ones, year after year.
CAUW Chairman Ralph Bender recently likened the old system to being in a private club: It was very hard to get in and, unless you did something wrong, it was hard to get kicked out.
The new system is about accountability and is based on an impact model, which, as its name implies, rewards those that deliver the most bang for the buck. To that end, CAUW opened the funding process this year to any nonprofit agency service area that provides human services, including nontraditional entities like school districts and parish governments. It evaluated them all on a much tougher, standardized basis; the agencies it funds will be required to file quarterly reports using a new detailed series of standardized metrics.
Now that the process is open, competition is fierce. CAUW funded 49 partner organizations in 2015. This year, 75 hopefuls applied.
CAUW officials are finalizing the list now of who will get funding and will announce their decisions in late April. But those organizations that aren’t getting anything will be notified ahead of time. Bender says CAUW recognizes it will be difficult for them, and to help soften the blow it’s setting aside $500,000 in bridge funding that will be divided among the nonprofits being cut loose.
“We are trying to be very conscious of agencies that have been long-term partners and that are great agencies but maybe don’t fit the new formula,” he says.
There’s no word yet on how much money CAUW will be able to give to its new partners. The final tally from the 2015 Workforce Campaign has not yet been released, though Bender confirms the annual campaign raised more than $10 million, which exceeds the $9.4 million raised in 2014.
Still, of the funds raised in the campaign, only about 60% typically goes to CAUW partner agencies in the form of direct funding. In 2014, CAUW gave $5.5 million of the $9.4 million to its partner agencies. In 2013, it gave $5.8 million of the $8.7 million raised.
As for the rest, a lot of it goes to other funds that benefit the community. A good chunk of it, too, goes to overhead. The high administrative expenses of United Way offices nationwide have been a sticking point for the national organization, and CAUW is no exception. But Bender says the local office is working hard to reduce overhead, and with success. It fell to 19% in 2015 from nearly 23% in 2013 and is projected to drop below 19% this year.
While the changes at CAUW may be good in the long run, they come at a bad time for many agencies. Local nonprofits struggle to raise money from a pie that is increasingly divided among needy competitors. Everyone knocks on the same doors for annual gifts, capital campaigns and golf tournament sponsorships. But in a mid-sized city in an impoverished state there just aren’t that many doors on which to knock.
Yet with even more budget cuts coming to already threadbare social service agencies in state government, the need for such nonprofits is greater than ever. After all, someone or something has to pick up the tab to help the poor, disabled, cancer-stricken and elderly. But who? How?
A growing number of nonprofits are becoming creative, looking inward for ways to generate their own revenue so they can become more sustainable and less reliant on agencies like CAUW and the handful of foundations that seemingly keep all the nonprofits in this community afloat.
But there’s still a long way to go, and in the weeks to come it will get harder before it gets any easier.