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Charity Despair-ity

Melissa Mares Stambor describes how a recession affects charitable giving.

    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