United Way in Salem suspends grant program, leaves nonprofits in a bind

More than two-dozen nonprofit groups are without funding they'd been promised by the United Way, a longtime pillar of local philanthropy that was on the verge of closing a few months ago.

The United Way of the Mid-Willamette Valley is now under new leadership, operating in the black and launching an education initiative, leaving the jilted nonprofits with dwindling hope that the Community Impact Grants they’ve banked on for years will be reinstated.

"I absolutely wish we could help every organization with the dollars they need; it’s just not possible,” said Ron Hays, in his fifth month as the chief executive officer. “If we can help them in the future, we will do that.”

In the meantime, United Way is trying to refocus its mission and stay solvent. And the nonprofits, which assist foster children, domestic violence victims, the homeless and others, are scrambling to find new donors.

The promise

Rewind to a Jan. 5 meeting at the United Way headquarters in Salem where former CEO Randy Franke met with the funded agencies.

Representatives from 20 of the 26, according to meeting minutes, were present to hear how United Way had pulled money from its reserves to fund the most recent two-year grant cycle and how its workplace donations were down considerably.

A transition plan was unveiled, including the announcement that the grant process would be reviewed and changes would be made. During the transition, Franke told them the current contracts, for grants ranging from about $7,500 to $40,000, would be extended for one year.

VIDEO: United Way suspends grant program, leaves nonprofits in a bind

That was a big relief to the nonprofits that rely on those dollars to help serve some of the most vulnerable in Marion, Polk, and Yamhill counties.

Franke conceded the grants would likely be reduced by 25 percent. For those receiving $10,000 or less, however, he said the amounts would not be reduced.

Still, the leaders of some of the most visible and trusted nonprofits went home thankful they could count on United Way support, at least for one more year.

The estimated total amount promised, based on a 25 percent reduction from the original contracts, was about $389,000.

The reality

The transition timeline for United Way included reviewing the grant process by July, but before that happened, things unraveled.

The volunteer board of directors faced an almost impossible task of balancing the budget.

Since 2010, United Way finished its fiscal year in the red three times, ranging from $101,000 to $382,000 in the hole. If not for bequests from supporters who named the agency in their wills, it would have been six years of red ink.

Dipping into reserves had become routine, and not everyone on the board agreed with the direction United Way was headed. Two members, both with accounting backgrounds, resigned.

The outlook seemed so gloomy the board seriously discussed closing the chapter at it's April meeting. Founded in 1937, it has long been a champion and resource for local nonprofits, serving more than 100,000 people last year through its Community Impact Grants.

Franke resigned on May 1 after nearly five years at the helm. Within just a couple of weeks, Hays was brought in to right the ship.

A group of community leaders, according to Hays, stepped up to pay his $105,000 salary so it didn't come out of operations. Franke received annual compensation of $86,235, according to United Way's most recent available Form 990 from 2015.

The decision

Hays, 65, has an extensive background in nonprofit management and strategic planning. He most recently served as president of the Department of Mission Advancement, a philanthropic subsidiary of Larry Tokarski’s Mountain West Investment Corporation.

Before that, Hays was president of Marion-Polk Food Share, which experienced tremendous growth during his seven years at the helm. He also has provided consultation to a number of nonprofits over the years, including the Salem YWCA.

He was tapped in 2013 to be the interim director of the YWCA, which was on the verge of bankruptcy. Under Hays' guidance, staffing cuts were made, services were put on hold, and within less than five months, the 100-year-old organization had folded and was reorganized as the Center for Community Innovation.

Now Hays is focusing on United Way's problems. He didn't sugarcoat his assessment when he first met with the board, advising members that things had to change.

In July, letters were mailed to the funded agencies, informing them the board had voted at its late-June meeting:

  1. "To move ahead with changing the fiscal year from July through June to match the calendar year. This will help us with the fiscal alignment we need ...
  2. "To suspend funding allocations for the next three months which will allow time to align our funding with our operational goals.
  3. "To not extend funding of grants from the 2015-2017 allocation cycle."

The third item was a zinger for all those nonprofits and programs now facing significant budget gaps.

Hays defended the decision, noting the board never officially approved the funding extension back in January.

“Maybe the promise shouldn’t have been made,” he said, understanding how painful the decision was for some nonprofits. “They would feel greater pain if we closed the doors and never funded them again.”

The shock

The letter came as a surprise to executive directors at organizations such as CASA of Marion County, Center for Hope & Safety, Garten Services, Northwest Human Services, Boys & Girls Club of Salem, Marion and Polk Counties and Salem Interfaith Hospitality Network.

Many were braced for future changes to the grant program, but never expected the promise that was made six months earlier to be broken.

United Way has changed its mission before over the years, reassessing priorities and shoring up its financial stability, but no one recalls the chapter failing to follow through on a commitment.

The news shook some organizations more than others. When contacted, many of the top executives were hesitant to voice their disappointment out of fear they might be "blacklisted" from any future funding opportunities.

"It just makes us get more creative, fundraise more and work harder," said Shaney Starr, CASA's executive director.

She and her colleagues cling to the hope that United Way eventually will resume the grant program.

“It’s obvious they’re doing some reorganization," said Tim Rocak, chief executive officer at Garten Services. "I trust it will be for the better.”

The impact

In the meantime, nonprofits dependent on United Way funding are trying to shore up their programs.

CASA of Marion County would have used its grant to train volunteers who advocate for foster children.

The Center for Hope & Safety, in collaboration with St. Francis Shelter and Helping Hands Resources, would have spent the money on a program called Pearls, which helps domestic violence victims and boasts a 92 percent success rate.

Garten Services may have to downsize its Summer Youth Employment Program, which provides six weeks of paid community work experience for youths with disabilities.

Northwest Human Services sought the money for emergency assistance for clients needing help with rent, utilities and medications, especially in rural areas where they may not qualify for other resources.

The Salem Boys & Girls Club would have put its grant toward theclub’s Health & Dental Services Center, which provides dental services to low-income and uninsured students, as well as health education programs to all member youths in grades 1-12.

Salem Interfaith Hospitality Network would have used its money to help at least three families with children get out of homelessness.

The operation

Suspending the grants was not an easy decision for Hays and United Way board members.

Many of them are friends with the directors and CEOs of the affected organizations. They all share a passion for nonprofit work, investing their time, energy and resources.

"I care. We care," Hays said. "Many people care, but they also need to make wise decisions."

United Way takes pride in its record of being able to allocate resources to community partners, projects, and programs that have focused on education, financial stability, health, and basic needs.

But the landscape for fundraising has changed, and workplace campaigns, which United Way has always relied heavily on, are no longer enough.

Workplace campaigns give employees at small businesses, companies and corporations opportunities to donate, volunteer and speak out for causes that matter to them.

Last year, United Way ran 140 workplace campaigns in the three-county area raising more than $1.13 million, of which $227,000 was designated to specific nonprofits. This year's fundraising campaigns are underway now.

Hays believes the Mid-Willamette chapter needs to modernize the way it raises money and reaches donors. He doesn't know what that looks like yet. No one does.

"I believe United Way has a purpose in our community, but it’s not a purpose of the past," he said. "It has to be modernized. You can’t function on tradition. Change is extremely difficult. Sometimes it’s painful."

The changes

The downfall for many nonprofits, Hays explained, comes because they fail to follow basic business principles, develop a sound strategy and execute that strategy.

Correcting business practices was the first step for United Way, including changing the fiscal year to align with how and when revenue flows into the agency.

Hays said the current financial problems are rooted in decisions made over the past two decades by well-intentioned leaders and board members.

"We're changing to be more accountable, more responsible," he said. "We won't spend money before we get it. We won't make commitments until we know what we have."

United Way has a staff of eight employees, not including Hays. Seven are full-time and one is three-quarter time.

Salaries and related expenses in its current budget are $412,070 out of more than $1.15 million in total expenses. According to its 2015-16 Annual Report, United Way spends 14 percent of its budget on administrative costs.

After adopting a balanced budget in June, which included not hiring for one position and eliminating another, the board is now focused on strategy. That includes new funding priorities.

United Way just launched a program called United for Classrooms, which commits giving $200 to every public elementary school classroom in its the three-county service area. That's 1,490 classrooms at a cost of nearly $300,000.

The board unanimously approved the new initiative, which Hays recommended.

"They feel it’s one of the areas we can make an impact right now, something that's tangible," said Hays, referring to teachers as first-responders.

The hope is that United Way can lessen the pressure on teachers, who are known to spend money out of their own pockets to provide basic clothing and school supplies for their classrooms.

The first recipients were in the North Marion and Yamhill Carlton school districts.

"We're rolling out as we have revenue," Hays said.

The timing of the new program doesn't sit well with the unfunded organizations. The $300,000 that will be doled out to classrooms, $200 at a time, could have been divvied up among the 26 nonprofits that were promised grant extensions.

"Teachers need help in classrooms, but the United Way is missing out on leveraging larger sums of money to make a significant impact on social issues in the Mid-Valley," said T.J. Putman, executive director of Salem Interfaith Hospitality Network.

The network's congregations provide shelter, meals and compassionate assistance to families experiencing homelessness, an issue Hays said the board is poised to look at next.

"We want to work on the most emergent needs in the community, and they will change," Hays said. “We’re scrutinizing very carefully what we fund."

“Forward This” appears Wednesdays and Sundays and highlights the people, places, and organizations of the Mid-Willamette Valley. Contact Capi Lynn at clynn@StatesmanJournal.com or 503-399-6710, or follow her the rest of the week on Twitter @CapiLynn and Facebook @CapiLynnSJ.

© 2017 KGW-TV


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