Where Does $100 to United Way Go (2018)?

United Way is one of the most recognizable charitable organizations in the United States and throughout the world.  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 that operate as separate 501 (c) (3)’s. United Way Worldwide is the leadership and support organization for the whole United Way network. Each organization collects funds and makes grants to local organizations, and also contributes a portion of the revenue collected to United Way Worldwide to support operations.

Based in Alexandria, Virginia, United Way Worldwide (UWW) is known as the organization that raises revenue to distribute to other non-profits through grants. At the UWW level, the IRS Form 990 (2018) reports information on revenue, expenses, grants, and other pertinent information that is beneficial to those supporting or considering a donation. So, if you made a $100 donation to UWW and want to know how your donation was used, read on.

REVENUE

UWW raised $219 million in 2018 (twice as much as in 2016 when $109 million was raised) which came from the following sources:

• $175  million (80% of revenue):  Contributions, Gifts, and Grants
• $ 28  million (13% of revenue):  Membership Dues
• $ 16   million (7% of revenue):  Courses, Conferences, Promotional Materials, Service Income, Etc

As illustrated above, the largest source of revenue is from contributions, gifts and grants, of which $15 million were non-cash contributions (publicly traded securities which are readily convertible to cash).

EXPENSES

In 2018, UWW spent $231 million on expenses, which can be viewed two ways:  by broad general category (program, grants, management, and fundraising) or by specific line item category. Both provide valuable insight into the organization with the latter providing more specific detail on expenses. It is also important to point out that UWW groups program and grant expenses together since their primary role is to make grants but these are separated below so that the reader can see how much UWW is spending to make the grants and also see specifically how much revenue is distributed as grants.

Expenses By Broad General Category

The $229 million (not including $2 million in depreciation) in expenses were reported as follows:

• $165 million (75% of revenue):  Grants
• $ 55 million (25% of revenue):  Program Services
• $ 5 million (2% of revenue):  Management
• $ 4 million (1% of revenue):  Fundraising

As illustrated above, the largest portion of revenue – $165 million – was awarded in grants while $55 million was spent on program services (primarily compensation for the 280 employees and consulting fees from outside consultants).

UWW spent more than they raised but were able to cover the expenses because the organization had $64 million in net fund assets at the beginning of the year, which was reduced to $51 million at year-end.

Using the above information,$100 in revenue was used as follows:

$100:  Revenue

-$ 25:  Program Services

-$   2:  Management

-$   1:  Fundraising

-$ 28:  Subtotal Program, Management, and Fundraising Expenses

$  72:  Revenue Remaining

-$ 75:  Grants

-$   3: Amount Overspent

As illustrated above, UWW spent $103 for every $100 in revenue collected. The organization was able to do this because they had $64 million in net fund assets and could absorb the loss.

Expenses by Specific Line Item Category

The $229 million in expenses were reported as follows:

• $165 million (75% of revenue):  Grants
• $ 32 million (14% of revenue):  Compensation-related Expenses
• $ 25 million (11% of revenue):  Fees for Services by non-employees
• $  4 million (2% of revenue):  Travel and Conferences
• $  3 million (1% of revenue):  Office-related Expenses

As illustrated above, after grants, the largest expense for UWW is compensation-related costs ($32 million for 280 employees which equates to $114,300 per employee) followed by fees for services.  According to Schedule O of the IRS Form 990, most of these fees were paid to consultants ($22 million) for unnamed consulting services.  However, the 990 does report that 62 independent contractors were paid in excess of $100,000 with the five largest recipients listed below:

• $9.5 million:  Salesforce Org of San Francisco, CA for digital platform consulting services
• $3.1 million:  Beyond the Horizon of Dallas, TX for digital integration consulting services
• $1.0 million:  Pin Business Network of Denver, CO for consulting services
• $ .9 million:  Birdsall, Voss, and Associates of Milwaukee, Wisconsin for consulting services
• $ .8 million:  Fifty & Fifty of San Diego, CA for consulting services

Using the above information, $100 in revenue was spent as follows:

$100:  Revenue

-$ 14:  Compensation-related Expenses

-$ 11:  Fees for Service by non-employees

-$  2:  Travel and Conferences

-$  1:  Office-related Expenses

-$ 28: Subtotal Compensation, Services, Travel, Conferences, Office, Advertising, and Other Expenses

 $  72: Revenue Remaining

-$ 75:  Grants

-$  3: Amount Overspent

As illustrated above, UWW $28 out of every $100 in revenue reports to pay foremployee compensation, outside services, office, and travel and conferences.

GRANTS

UWW distributed $165 million in grants, $128 million of which went to domestic organizations and $37 million (387 grants) to foreign organizations (primarily Europe and East Asia and the Pacific).

Domestically, UWW made 3,987  grants greater than $5,000, with the 25 largest recipients listed below:

• $1,455,322:  United Way of Greater Houston of Houston, TX
• $1,336,920:  Fondos Unidos de Puerto Rico of San Juan, Puerto Rico
• $1,045,239:  Vanguard Strong Start for Kids Fund of Warwick, RI
• $1,034,014:  United Way of Central Iowa of Des Moines, IO
• $  938,461:  St Jude Children’s Research Hospital of Memphis, TN
• $  888,796:  American National Red Cross of Washington, DC
• $  839,818:  United Way of Central Carolinas, Inc. of Charlotte, NC
• $  828,058:  United Way of Metropolitan Dallas of Dallas, TX
• $  734,877:  United Way of Greater St Louis of St Louis, MO
• $  652,192:  Greater Twin Cities United Way of Minneapolis, MN
• $  513,382:  Heart of Florida United Way of Orlando, FL
• $  453,203:  United Way of New York City of New York City, NY
• $  447,831:  Austin Pearce Academy of Austin, TX
• $  366,991:  United Way of Beaumont and North Jefferson County of Beaumont, TX
• $  359,751:  American Cancer Society of Atlanta, GA
• $  335,535:  United Way of the Coastal Bend of Corpus Christi, TX
• $  329,904:  Valley of the Sun United Way of Phoenix, AZ
• $  327,870:  Community Abundant Life Ministries of Oklahoma City, OK
• $  327,429:  United Way of Greater Los Angeles of Los Angeles, CA
• $  321,049:  United Way of Central Jersey of Milltown, NJ
• $  307,679:  Central Texas Food Bank of Austin, TX
• $  289,800:  United Way of Central Carolinas, Inc. of Charlotte, NC
• $  288,945:  United Way of Greater Philadelphia and Southern NJ of Philadelphia, PA
• $  286,803::  American Heart Association of Dallas, TX
• $  280,800:  United Way of Metropolitan Dallas of Dallas, TX

It is important to note that donation dollars to UWW have the overhead costs (28%) deducted before being awarded in grants.  The grant awarded to another 501 (c) (3) deducts their overhead costs and then utilizes the funds, which means donation dollars would go further if United Way were bypassed.  For example, nearly $1 million was awarded to St Jude Children’s Research Hospital. St. Jude deducted about 29% for fundraising costs, put about 21% in the endowment and awarded about 50% to the hospital (who used 43% putting the other 7% in savings). So, that $1 million grant was used to pay $290,000 in fundraising costs, $210,000 in the endowment, and $500,000 to the hospital who used $430,000 and put $70,000 in the endowment.

As illustrated above, most grants are made to other United Way organizations.

NET FUND ASSETS

At the beginning of the year, UWW had $64 million in net fund assets. After deducting the revenue spent in excess of revenue and changes in assets (pension), and adding $1 million in unrealized gains, UWW had $51 million in net fund assets at year-end, $36 million of which was unrestricted, $11 million of which was temporarily restricted, and $4 million permanently restricted.

To read the IRS Form 990 (2018), click here.