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December 3, 2015

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Where does $1 to United Way go?

by Anne Paddock

We advance the common good by improving education, helping people achieve financial stability, and promoting healthy lives.

United Way may refer to a number of charitable organizations throughout the world but in the United States, United Way generally refers to United Way Worldwide (formerly United Way of America) and/or one of the 1,800 local offices in 40 countries and territories. United Way Worldwide is the leadership and support organization for the whole network which includes 1,256 local offices (approximately 70% of the total number of offices) in the United States (including DC, Puerto Rico, and the Virgin Islands). The states with the most United Way offices include Texas (85), Ohio (71), Pennsylvania (64), Michigan (58), and North Carolina (57).

United Way Worldwide is a 501 (c) (3) – a non-profit organization – and is required to submit an IRS Form 990 annually, as does each of the local offices. The 990 is a tax return that provides details on revenue, expenses, assets and liabilities and is invaluable to those who want to know where their charitable dollars are being spent.

To understand the revenues and expenses of the organization as a whole, the 990 of United Way Worldwide and the 990’s of the local offices need to be analyzed. Given the difficulty of examining all of the local 990’s, (which are generally named United Way along with a geographic location:  i.e. United Way of Central Iowa), an analysis of the 990 submitted by United Way Worldwide will provide the reader with a general understanding of where dollars are spent at the national level.

To understand what happens locally, an individual 990 from a specific local office must be analyzed. Dollars will flow from the national level to the local level (in terms of grants) and vice versa (in the form of membership dues). Collectively, the total dues collected form a large portion of the total revenue collected at the national level but amount to small sums at the local level (both in terms of giving and receiving) because contributions are the primary source of revenue at the local office. Keep in mind that the revenue and expenses differ at each office because resources and needs vary by location, but most importantly, know that a layer of management, program, and fundraising costs exist at every local chapter office.

The most recent Form 990 (2014) submitted by United Way Worldwide reveals the following:

$89.3 million was collected of which $52.5 million (59%) were contributions, $28.7 million (32%) were dues (from the local offices),  $6 million (7%) from course tuition, conferences, program fees, and service income, and $2.1 million (2%) from investment gains, royalties, rental income, and the gain on the sale of assets. $1.7 million in non-cash contributions were also collected.

$80.2 million (90% of revenue) in functional expenses were reported of which $33.3 million were grants and other contributions to organizations outside the US, $3.9 million were grants and other contributions within the US, and $43 million of expenses were reported in the following categories:

  1. $23.9 million (26%) in compensation, salary, employee benefits, and payroll taxes. $5.5 million of this amount was paid to 14 highly compensated employees including $1.5 million to the President and CEO, $524 thousand to the Chief Operating Officer, and $450 thousand to the President of the United Way USA.  79 people received more than $100,000 in compensation.
  2. $7.7 million (9%) was paid to consultants (undefined).
  3. $4.4 million (5%) was spent on travel, conferences, conventions, speakers, meals.
  4. $4.4 million (5%) was spent on office expenses, occupancy, legal, accounting, insurance, IT, fees, and temp staff.
  5. $2.6 (3%) million in miscellaneous expenses and depreciation (a non-cash expense).

Of the total amount collected ($89.3 million), $43 million (48%) was spent on the above 5 categories, while $33.3 million (37%) was given to organizations outside the US, $3.9 million (5%) was given to organizations in the US, and $9.1 million (10%) stayed within the organization (on their balance sheet).

There are different ways of interpreting the above information but the most comprehensive way is to look at the total revenue and expense information reported by United Way Worldwide. In this case, each $1 in revenue was used as follows:

 $1.00: Revenue 

-$0.26: Compensation, employee benefits, etc

-$0.09: Consultants

-$0.05: Travel, conferences, conventions, speaker, etc.

-$0.05: Office expense, IT, temp staff, legal, accounting, etc.

-$0.03: Miscellaneous Expenses

-$0.48: Subtotal Functional Expenses

 $0.52: Amount Remaining to give to organizations

-$0.37: Provided to organizations outside the US

-$0.05: Provided to organizations within the US

$0.10: Amount remaining (kept in the organization)

In summary, for every $1 in revenue, United Way Worldwide spent 48 cents and saved 10 cents for a total of 58 cents before distributing 42 cents to organizations.

450 organizations outside the US were provided $33.3 million (primarily via more than 550 wire transfers) with the largest recipients in East Asia and the Pacific, and Europe.  The organizations are not listed but the geographic location, amount and purpose (“General Charitable Operations” is frequently written) are provided.

99 organizations (all 501 (c) (3)) in the United States were granted a total of $3.9 million with the largest recipients being:

  1. Save the Children Federation:  $291,770
  2. United Way of the Bay Area:  $167,500
  3. Local Initiatives Support Organization:  $242,195
  4. Half the Sky Foundation:  $116,794
  5. Room to Read:  $125,000
  6. Family Health International:  $173,206
  7. United Way of Central Iowa:  $110,000
  8. United Way of Greater Atlanta:  $119,500
  9. United Way of Northeast Florida:  $117,500
  10. Valley of the Sun United Way   $117,500

Each of the above organizations and the overseas organizations (which also include United Way offices) also have their own staff and overhead expenses that relate to management, programs, and fundraising which means that every $1 in revenue to United Way Worldwide is reduced by two sets of these costs (United Way Worldwide and the recipient organization). $1 in revenue would go further by bypassing United Way Worldwide and given directly to one of the 99 charitable organizations in the US that United Way Worldwide gave contributions to or any of the overseas organizations.

Other interesting information from the 990 includes:

  • 44 independent contractors received more than $100,000 in compensation including $5.4 million to the top five contractors ($2.7 million to Turner Construction, $1 million to the Advertising Council, nearly $700 thousand to the Gaylord National Resort – a premier hotel at National Harbor in Maryland, more than $500 thousand to OTJ Architects, and more than $500 thousand to Forum One Communications Corp for technology assistance).
  • A non-compensated member of the United Way Worldwide Board of Trustees also serves as President/CEO of the Advertising Council,which was paid nearly $1 million for advertising services.
  • Nearly $300 thousand was spent on lobbying to influence public opinion and the legislatures.
  • The balance sheet indicates that United Way Worldwide has nearly $76 million in assets – mostly in publicly traded securities ($28.5 million), real estate and equipment – mostly buildings – ($20.6 million), custodial funds, annuity, cash value of life insurance, and deferred compensation custodial assets ($12.3 million), cash and savings ($7.7 million), receivables ($5.2 million), and prepaid expenses/other assets ($1.7 million).
  • Liabilities total $37.3 million with $14.3 accrued pensions, post-retirement benefits, and deferred compensation, $11.5 are planned gifts, $5.5 in accounts payable and accruals, $3 million are custodial funds, $3 million in deferred revenue and grants payable.
  • The net assets or fund balance at year-end was $38.6 million.

In summary, United Way Worldwide has a balance sheet primarily made up of liquid assets and buildings. Their largest obligation is to employees in the form of pensions, benefits and deferred compensation followed by planned gifts which can lead a reader to conclude the organization is more employee focused than assistance oriented. Considering the high compensation of many employees, salaries, benefits, and organization overhead expenses which totaled $43 million this past year (and that $37.6 million was given to other organizations while United Way Worldwide saved $9 million) and a contribution may feel like you’re helping the people of the organization first and the needy second.

The bottom line: Every $1 in revenue had 48 cents deducted out to pay expenses while 42 cents was given primarily to organizations overseas. 10 cents was kept by the organization (think of it as adding to their savings account).

Questions that arise include:

  • Should the top executive of United Way Worldwide receive a compensation package valued at more than $1.5 million?
  • What exactly are the $1.7 million in post-retirement benefits carried as a liability on the balance sheet?
  • Did United Way really have to spend nearly $700 thousand at the Gaylord Resort?
  • Why is United Way Worldwide spending nearly $1 million with the Advertising Council, whose President/CEO is on the Board of Trustees at United Way Worldwide?
  • What international organizations received the funds and how much of the funds were spent on management, program service, and fundraising?
  • How many total employees work for a United Way organization? And, what percentage of total revenue goes towards paying staff salaries and benefits, office, and overhead expenses?

To read the complete United Way Worldwide 105-page IRS Form 990 (2014) click here

1 Comment Post a comment
  1. Shirley Brown
    Dec 7 2015

    Good info. Thanks

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