Charity Despair-ity
Melissa Mares Stambor describes how a recession affects charitable giving.
By MELISSA MARES STAMBOR
Does
a recession affect charitable giving? With unemployment at the highest
levels in 14 years and the holiday season in full swing, many Americans
are feeling fearful about their personal financial situations and that
of the country. In these uncertain times with families trying to save
money, it seems like the first household budget cut would be charitable
giving.
There’s mixed news from nonprofits as
far
as the latest fundraising reports. Some organizations are reporting
that their fundraising programs are not showing any major fluctuations,
while others, particularly smaller, bare-bones operations, say they’ve
seen a huge drop in donations. This comes at a time when the need for
charitable services is increasing.
“We
have seen an increased need from people who are facing foreclosure, job
loss and decreased work hours,” Rev. Michael M. Boland, chief executive
of Catholic Charities of the Archdiocese of Chicago told The New York
Times recently. “We are seeing a lot of renters forced out of
apartments because the owners were foreclosed upon, and we’ve seen an
increase in the number of requests for our emergency services, which
include food pantries and hot dinners for the hungry and homeless.”
While some charities report that they haven’t seen a donation in weeks, others say they’ve witnessed no significant change.
“We
have seen no major effects of the current financial downturn on our
fundraising efforts, which are happening on several fronts,” says Erin
Hogan, the director of public affairs for the Art Institute of Chicago,
in an email. “We
are not altering our projections, and we
are continuing ahead with our plans. We plan via a multi-year cycle
designed specifically to account for fluctuations in the financial
markets, so…we are, like everyone else, watching our budgets and
planning for various contingencies, though not really changing our
plans significantly.”
Many philanthropic
experts echo these ideas and say that they don’t expect giving to drop
dramatically as a result of the recession.
A
study from Giving USA Foundation found that even during periods of
recession, giving still grows; it's just the rate of growth in giving
that slows to some degree. In fact, giving has grown every year except
one since recording began in 1969. The exception was in 1987, and the
drop is commonly attributed to a change in tax law that occurred that
year.
The work of the nonprofit may have some effect on its ability to continue to reach fundraising goals, experts say.
“[In
the past, we have] been able to weather the storm,” says Brian
Flahaven, director of government relations for the Council for
Advancement and Support of Education (CASE).
Edith
Falk, the CEO of Campbell & Company, a national nonprofit
consulting firm headquartered in Chicago, agrees. She says
organizations that have strong membership or affiliation with their
donors, such as schools or religious groups, may see less impact on
giving because their donors are strongly engaged. She says she also
thinks that people will stretch to support nonprofits that provide
services to the needy and might even shift their giving to social
service organizations.
Aside
from watching giving levels, many non-profit organizations have seen
their endowments drop in value in past months. Endowments are
investment funds that create income for the organization, and they can
be severely affected by the rise and fall of the stock market.
“When [institutions] manage endowment, they manage them for the long term,” Flahaven says.
Dr.
Eugene Tempel, president and CEO of the Indiana University Foundation,
also says that well-managed endowments will withstand economic
downturn. The key, Tempel says, is diversified investment planning over
the long term and good communication with donors.
“[The
IU Foundation] has let donors know the status of our endowment," Tempel
says. “Letting donors know that you understand the situation” and are
monitoring the markets and the nonprofits assets and investments are
important, he says.
In terms
of communication, Tempel also urges nonprofits to show their donors
understanding during recession. Donors who have made large pledges
during better economic times may want to extend the time they have to
pay those pledges or make other adjustments to their philanthropic
plans. Nonprofits that are sensitive to these situations can strengthen
relationships with their constituents, he says.
Tempel
says that there are many great opportunities to give, especially to
gift assets whose value have remained unaffected by the stock markets.
Certain stocks, some real estate, gold or other precious metals may be
particularly good gifts at this time. Gifts can also be arranged in
ways that help both the donor and the institution. A gift annuity, a
contract where a charity agrees to provide the donor payments for life
in exchange for a transfer of cash, securities or property can be
particularly useful to both.
“Nonprofits
are working hard to tell their story in compelling ways and to ensure
that their donors and volunteers understand that their gifts and
support are needed now more than ever,” says Celeste Wroblewski, vice
president of external relations for the Donors Forum. “The smart ones
are being clear and candid about the effect of the economy on their
operations—and showing how donors can help.”
Published: December 05, 2008
Issue: Winter 2008 - Annual Philanthropy Guide