America’s Charities Cuts Into United Ways Business

April 30, 2009       Mark Hrywna      

Competition is getting fierce in the realm of workplace giving programs. America’s Charities on Wednesday welcomed 21 nonprofits that had been part of the United Way of the National Capital Area into a new program called Community1st. The Chantilly, Va.-based organization has about two dozen charities in similar alliances, Children1st and Health1st.

America’s Charities President and CEO Don Sodo said it’s the first time anywhere in the nation that an alternative to United Way’s campaigns have captured as much as 35-percent share of the corporate workplace giving market. “We’ve done something that’s never happened before,” he said.

American Charities has grown steadily since starting the corporate program in 2002, raising several million dollars, according to Sodo. Nationally, America’s Charities had about $34 million in pledges in 2007, the most recent data available, he said.

Past scandals at the UWNCA contributed to a loss of tens of millions of dollars a year in workplace giving to area charities, Sodo said, which sparked discussions of starting a new organization.

Former UWNCA CEO Oral Suer was convicted in 2004 of defrauding the agency of $1.5 million through misreporting expenses and benefits and was sentenced to jail.

There may be some lingering concerns about the Capital Area’s history, but the organization had a new management team in place for three years and come July will welcome a new CEO in Bill Hanbury of Destination DC. “The concerns about history may still resonate with some of our partner agencies, but what happened in 2002 really has not been relevant to the organization we are now or how we operate,” said Lya Britt, senior director of marketing and communications.

In July 2007, Sodo said America’s Charities inquired with a dozen local charities about the possibility of creating a new workplace giving alliance. “That came to fruition last fall,” he said. “We’ll add more charities for next year.”

UWNCA runs more than 3,000 workplace campaigns, raising in the neighborhood of $35 million annually the last several years.

The loss of 21 nonprofits represents a small portion of its program, Britt said, and the organization still has more than 970 partner agencies. The program has 100 more agencies than last year and has remained around 900 to 1,000 the past few years, she added. Britt stressed that United Way works hard on developing relationships with partner agencies, trying to address and rectify issues raised.

“These 21 agencies that left joined a competitor, that’s creating news. There’s not been a mass exodus from our federation or portfolio, we don’t necessarily track when people come and go,” Britt said.

“There had been issues raised that we were addressing, but we had a competitor that was heavily courting a lot of our agencies,” she said, proposing lower fees than what UWNCA charged, Britt said.

America’s Charities boasts of customized campaigns and pledge processing services at an average cost of 6.5 percent. UWNCA recently cut its fees in half, charging a flat 5 percent, according to Britt. That move will result in $1.5 million going back to partner agencies, she said. Britt said United Way’s fee also includes marketing and advertising.

About 20 companies work with American Charities, raising about $8 million in the D.C. area through their employee giving programs, and some 40 corporations selected the organization as its fiscal agent for their programs.

Sodo said America’s Charities has been successful in grabbing market share because of its ability to customize campaigns for each employer and offer a broader range of charity choices to employees, coupled with a high-tech system of donation processing that allows a higher percentage of each gift to go to charities.