Amid 'new reality,' revenue drops by $10 million for Greater Twin Cities United Way

Hit with a third year of dwindling workplace donations, revenue for the Greater Twin Cities United Way declined by more than $10 million in 2017.

Revenue for the organization fell to $77 million last year, as people increasingly turn to online fundraising and donor-advised funds instead of giving at the office.

The local United Way revenue peaked in 2014 at $101.9 million around the organization's centennial celebration but has slid since then. Greater Twin Cities United Way is the largest among 1,200 chapters in the United States, but CEO Sarah Caruso noted that it faces the same challenges as United Way organizations across the country.

"This is the new reality," Caruso said Monday.

The organization has tapped reserve funds and eliminated five jobs to ensure it is able to pay out the grants already allocated to about 160 nonprofits this year. The United Way will give out $67 million in grants this year, down from $70.2 million in 2016.

Grants are allocated in three categories under their "Pathways to Prosperity" mantra: education, job training and safety net services. About 83 percent of revenue came from workplace campaigns.

"We found a way to make it work. We were not going to let down our community partners," Caruso said.

Caruso presented the 2017 financial results to the United Way governing board last week and said the group is proceeding with a new strategic plan unveiled last fall after a $6 million revenue shortfall in 2016 resulted in 11 layoffs, across-the-board cuts to grants for all recipient nonprofits and the elimination of family violence prevention and elementary school reading programs.

The plan, designed to lessen dependence on workplace fundraising, includes courting individual donors outside the office; promoting giving groups around topics that inspire passion; offering fee-based consulting services to businesses with philanthropic arms, and building United Way's $52 million endowment with legacy gifts to smooth the ups and downs of annual giving.

Six high-profile community leaders, including United Way Board Chairman Tim Welsh, a vice chairman at U.S. Bank, have vowed to give 500 community talks this year about the nonprofit's effects on the community and its efforts to realign its fundraising efforts with the changing times.

"The board fully understands we are in a time of transition. It would be nice if we could make the transition easily. We are going through a bumpy time," Welsh said. "We feel like we have a long-term vision of where we are going."

United Way has also shifted some staff to new positions and eliminated others, including its chief operating officer. The organization now has about 103 full-time employees and spent about 12 percent of its budget on marketing and administration in 2016, according to its website.

"It's really important for United Way to have more boots on the ground for donors and community partners," Caruso said.

The United Way historically has been a trusted liaison connecting middle- and working-class donors with community charities vetted by its staff. In the new era of crowdsourcing and direct online giving, people don't always understand the United Way's value, nonprofits authorities have said.

Its 2016 grants included $1.4 million to the Greater Twin Cities YMCA, $426,000 to St. Paul Public Schools, $425,000 to the Salvation Army, $248,000 to the Boy Scouts' North Star Council and $245,000 to Second Harvest Heartland. United Way also organized 77,000 volunteers to serve the community.

Nonprofit leaders said news of United Way's revenue decline was not a surprise.

Ted Flaum, CEO of Jewish Family Service of St. Paul, said his group has seen its United Way grants shrink over the years. It received $60,000 in 2016 vs. $69,000 in 2015, according to United Way's tax filings.

"We lost a lot of funding last year through the United Way. We are still feeling the ramifications of that," Flaum said. "They are still funding one of our programs."

Given the changing philanthropy scene, Flaum said quiet nonprofits such as his that once relied on the United Way now must do more direct fundraising and brand development. He said he hired a marketing person and the nonprofit's first-ever chief development officer last year. Their work includes counseling services for individuals, couples, children and families, and programs for seniors.

"People need to be more familiar with our mission, our great work and the people's lives we change," Flaum said.

Fundraising experts said the shifting donor landscape, especially among younger donors, is affecting nonprofits across the country.

"We are seeing donors look to give directly to the causes they care about and are increasingly less interested in giving to institutions who do it for them," said Jake Blumberg, who teaches nonprofit courses at Hamline University and the University of St. Thomas. Blumberg also is executive director of GiveMN, which hosts Give to the Max Day. "It's a trend that is likely going to continue. The trends we are seeing are not unique to the United Way."

Many working- and middle-class donors are turning to online tools. Give to the Max Day, an online 24-hour marathon, started in 2009 and last year raised $20.6 million for 5,387 organizations.

Higher-end donors are using donor-advised funds — individual charity accounts that offer immediate tax breaks but can be spent down over many years.

In recent years, United Way Worldwide fell to second place on the Chronicle of Philanthropy's annual ranking of 400 U.S. nonprofits that raised the most from private sources, bested by Fidelity Charitable Gift Fund, which manages 100,000 donor-advised funds.

Fidelity raised $4.1 billion in its fiscal year 2016 compared with United Way's $3.5 billion.

Shannon Prather • 612-673-4804