CHARITY PLEADING POVERTY; UNITED WAY LOSING DONORS.

Byline: David Cay Johnston The New York Times

Justine and Jasmine Scott, 7-year-old twins, wanted to spend the summer at Challengers Boys & Girls Club, which for almost three decades has provided a haven for youngsters from the dangerous neighborhoods south of downtown Los Angeles.

``My girls didn't want to just watch their grandmother's television while I work,'' said their mother, Loretta Scott, a secretary. ``But with the gangs, it's not safe for them to play in the neighborhood.''

But the club turned them away, as it has hundreds of others in the last three summers, because its allocation from the Greater Los Angeles United Way, adjusted for inflation, has been cut 75 percent since 1990.

The story is the same across the country. Boys & Girls Clubs, Big Sisters, Boy Scouts, Family Service Associations and similar charities are getting less from United Way, forcing them to raise more on their own and to deny help to people like the Scott twins.

Five years after its former national president was found to be converting charity money to his own use, United Way is in crisis, abandoned by 4.5 million people - 20 percent of its donors. And most of its 17.7 million remaining donors give less through payroll deduction, United Way's bread and butter.

If donations had continued to rise as fast as they did in the five years before the scandal, United Way would have raised $4.14 billion last year. Instead, it raised $3.25 billion, down 11 percent from 1991 but up slightly from 1995. (All figures are adjusted for inflation.) And less of that smaller amount helps the poor.

Giving habits change

But it is far more than the betrayal of the public trust by the former president, William V. Aramony, that has battered United Way, the nation's largest fund-raising organization, which this month is winding up its annual fund-raising appeals on behalf of a federation of social service agencies. The nation's giving habits have also changed drastically as corporate downsizing has ripped into the core of United Way's base: large factories and offices.

Not that Americans have turned more miserly. The American Association of Fund-Raising Counsel says total charitable giving by individuals has risen 9 percent, or $10.7 billion, since 1991, while United Way is down 11 percent, or $400 million. But donors are often leaving out the neediest causes - social services in poor neighborhoods.

Since 1991, donations to social service charities, a big chunk of which goes to United Way agencies, have fallen 5 percent. The big winners have been health charities and hospitals, up 25 percent to $13.9 billion; education, up 21 percent to $18.8 billion; and religion, up 12 percent to $69.4 billion.

This shift has been an added blow to the poor, coming as the government has cut spending on social services. The decline in support is most severe in older cities and in California, long a United Way trendsetter.

Donations to the New York City United Way campaign fell 17.5 percent between 1991 and 1996. A confidential study last year of large California United Ways by Bain & Co. showed donations falling 7 percent annually from 1991 through 1994; they have since been essentially flat.

L.A. donations down

Donations to the Los Angeles United Way last year were half what they were in 1990. There were also declines in Orange County and San Diego. The United Way in Vallejo, north of San Francisco, ran a $600,000 deficit and is now folding into the United Way of the Bay Area, the first of what is likely to become a wave of consolidations among the 1,300 United Ways.

Thomas A. Ruppaner, president of United Way of the Bay Area, said the confidential Bain report ``is telling us that we are going out of business unless we fundamentally change.''

The core of United Way's problem is the loss of millions of donors who once had money deducted from their paychecks. And the trouble is compounded by slower wage growth for those who still donate.

Detailed national figures are not available, but in a typical case, the United Way of Central Indiana found that the average payroll gift last year was $91.42, down one-third from 1991.

The number of factories and offices holding United Way campaigns is also shrinking. Nationwide data are not available, but in Indianapolis, for example, the number of workplaces with campaigns last year was 11 percent below that of 1991.

Many people also mistakenly believe that Aramony, who is in prison after being convicted of fraud and tax evasion, is still in charge. ``Only 4 percent of the public knows that we have had a change in leadership,'' said Betty Beene, the third United Way of America president since Aramony.

United Ways are more efficient than most people believe, a survey commissioned by United Way of America found. Of those expressing an opinion, 60 percent wrongly estimated United Way overhead at 40 percent or more.

``There is a disconnect between what United Ways do and what people think they do,'' Beene said, ``and the reason for that disconnect is our ineptness at explaining what we do.''

How to cope

Within the 1,300 United Ways, sharp divisions have arisen about how to cope with the drop in popular support, the new demands of corporations and increased competition for donations.

Many United Ways are marketing themselves as a force that will solve community problems like youth violence and drug addiction. Many agency directors, though, say that is not the proper mission and that their job is not to solve social problems but to provide services that society will always need.

``If United Way sells itself as a problem-solving agency, they will be out of business in 20 years,'' said John Brewster, executive director of the Boys & Girls Club in Santa Ana. ``I don't solve problems. I help kids develop on their way to being adults.''

To cope with less, some United Ways, like the one in Sacramento, have begun dictating precisely how member agencies can spend their money. Nonprofit agency directors who used to count on what they referred to as ``golden dollars'' from United Way to pay overhead and run the programs they felt were best say the change gives United Way too much power.

The most radical approach was taken two years ago in California by the United Ways in Orange and San Diego counties. They dropped the system of having volunteers allocate money and substituted annual applications for money, opening the process to all charities and in essence becoming grant-making foundations.

``We drive the agencies nuts because they don't know from year to year what they will get,'' said Bruce Boland, chief professional officer of the San Diego United Way.