Redirected charity pledges kept quiet

In little-known policy, United Way shifts gifts to cover lost donations

Redirected United Way pledges kept quiet

July 26, 2002|By Kate Shatzkin | Kate Shatzkin,SUN STAFF

Jo Ann Knight, a cashier at the Rotunda Giant in Baltimore, donates $1.50 of her weekly paycheck to the United Way of Central Maryland - earmarking it all for a charity that rescues animals.

So she was unhappy to hear of a little-known United Way policy that redistributes a portion of that gift - up to 20 percent, officials say - to make up for the lost pledges of the employees who stop working at Giant each year without completing their pledged donations to United Way.

"That's not fair," Knight said when told of the policy. "They shouldn't take from anyone to go to someone else's fund."

FOR THE RECORD - The headline of a July 26 story mischaracterized the United Way of Central Maryland's policy on uncollected pledges. United Way withholds a portion of most gifts that are made by payroll deduction to make up for unfulfilled pledges to a number of charities, but the rest of each gift goes to the donor's designated charity. While the policy has not been advertised or published, it has not been kept secret from anyone who inquired about it, as the headline implied. The Sun regrets the error.

The diminished gifts are an unadvertised fact of donating to United Way. For almost every donation a worker makes through deductions from his or her paycheck, a percentage - which varies widely, depending on turnover at the employee's company - goes to make up for another pledge that was never paid.

While the practice isn't secret, it isn't published, either. Drew Langloh, a senior vice president at United Way of Central Maryland, said the policy on uncollected pledges would take too much time to explain to the approximately 200,000 donors who give to the campaign each year.

The United Way of the National Capital Area, which covers Washington, D.C., is under federal investigation after criticism of financial management of the charity, including the practice of forecasting a percentage of expected annual pledges that would be uncollected and holding back that percentage from every gift.

At the end of the year, when the shortfall was less than predicted, the Washington-area United Way would keep the difference for use on administrative costs or pet projects.

Langloh said the practice at the Central Maryland charity is fairer. Because United Way pays out gifts to agencies as the money comes in, no forecasting is involved. And spreading the shortfall among a company's employees based on how much that company collects - so that each chosen charity gets a bit less - makes more sense than using a blanket rate, he said. "Whenever possible, we try to apply the pledge loss at the lowest possible level," Langloh said.

Here's how the practice works:

During the United Way's annual campaign drive, employees of participating companies fill out pledge cards indicating how much money they will give and where it should go - to the pool of more than 100 United Way member agencies, to particular agencies within that group, or to nonprofits outside the United Way network.

The problem arises when companies send the payroll deductions to United Way. Of the 2,000 companies that participate in the Central Maryland campaign, only about 200 give the charity information about which donors left and didn't pay the rest of their gifts. In those cases, the agencies that were to get that money - whether they are part of the United Way network or another chosen nonprofit - forfeit the rest of the donation from that employee.

But at the rest of the companies, United Way payroll deductions are simply pooled and forwarded to the charity every month or quarter. If the pot is less than what was pledged for that period, the United Way has no information by which to sort out which employees have left, Langloh said.

A few companies, such as the spice manufacturer McCormick and Co. Inc., will honor the lost pledges. But in most cases, United Way subtracts an equal percentage from the donations of each employee based on the company shortfall - and each agency gets less than it would if every pledge was paid.

For the 39 percent of pledges earmarked for specific nonprofits, the reduction would come in addition to a United Way administrative fee that ranges from 13 percent to 17.5 percent.

Depending on how much turnover a company has, the percentage could range from close to zero to as high as 20 percent for retail stores such as Giant, Langloh said.

He would not provide more exact information about companies' rates of uncollected pledges, saying it would violate their confidentiality. Spokesman Patrick Smith said employee donors who want to know their companies' rates may find them out by calling United Way.

Representatives of several companies contacted, such as Constellation Energy Group and Giant, said they did not know their rates of uncollected pledges. They raised concerns about privacy and extra paperwork as reasons they didn't give United Way specific information about payroll deductions.

"It would be difficult because of the number of associates we have working here," said Barry F. Scher, a spokesman for Giant Food Inc., which has about 16,000 employees in Maryland.

According to financial statements for the United Way of Central Maryland, 7.7 percent of $42.1 million in pledges made in the 2001 fiscal year was not collected. On average, United Ways across the nation fail to collect about 6 percent of what is pledged in their campaigns, said United Way of America spokesman Philip Jones.

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