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Double trouble: Nonprofits find donations dwindling as service needs rise
(Commercial Appeal, The (Memphis, TN) Via Acquire Media NewsEdge) Jan. 5--The economic nosedive of 2008 hit nonprofit agencies, especially those offering so-called human services, with a double whammy.
As jobs evaporated and business profits disappeared, donations shrank.
Meanwhile, rising unemployment, foreclosures and bankruptcies meant growing needs for services.
And those trends are likely to continue in 2009, according to area experts.
"They're all struggling on their fundraising," said Harry Shaw, president of United Way of the Mid-South. "A lot of folks who provided gifts are either providing a smaller gift than they were or they're not able to make gifts."
United Way had pledges of $22.8 million as of late December toward a 2008-09 campaign goal of $26.6 million.
"I'm not sure exactly where we'll end up because the campaign is still under way," Shaw said. "We're having some great successes at some companies, but we have reduced giving because of job and pay cuts at some companies."
Nonetheless, he and others don't expect the bottom to fall out of charitable giving.
In nonrecession years, donations to nonprofit groups nationally grow an average of 4.3 percent, said Patrick Rooney, interim executive director of The Center on Philanthropy at Indiana University.
During a recession that lasts eight months or more, giving drops about 2.7 percent annually, said Rooney, who produced Giving Memphis 2008, a study of charitable gift patterns in 2007.
That amounts to an average of 7 percent less during a recession year for agencies to operate on than in a "normal" year, he said, and, at a time when they face increasing demands for service.
One organization caught in that kind of a pinch is the Mid-South Food Bank.
Part of the agency's challenge stems not from the economy, but from a 10-year trend: Food collections are falling because national manufacturers aren't producing surpluses the way they used to, said Susan Sanford, president and chief executive officer of the food bank.
Although food bank collection events have been successful, she said, "food drives can't make up for all of it."
People are still giving money, but more of it is coming in cash -- small donations like the dollar and nickel in one envelope -- than by check, Sanford said. The food bank uses money to buy perishable food and other items to make up for the drop in manufacturer donations.
Meanwhile, demand is 10 to 20 percent higher than a year earlier.
"That's related to the economy," Sanford said.
Donations to the Community Foundation of Greater Memphis were lower in 2008 than in 2007, said Robert Fockler, president.
However, gifts to agencies in the Memphis community from donors whose funds the foundation manages were 63 percent higher, through mid-December, than the same period of 2007, Fockler said.
The tumbling stock market has less of an effect on donor fund giving than personal giving, he said.
"It's not (donors') funds any more, so they don't take (losses) as personally as a 401(k) they're going to have to live off of," Fockler said. "People are stepping up because they see the need."
While he believes many of the larger funds will hold the line on grant-making in 2009, he concedes some will be cutting back if the recession continues.
Agencies see that coming.
"There's a lot of fear out there," said Nancy McGee, executive director of the Alliance for Nonprofit Excellence. Agency leaders are "expecting the worst," she said.
"Now is the time for people to get their internal shops in order," McGee said.
The first move Shaw expects agencies to make is to try to cut administrative costs.
"A lot of nonprofits run pretty lean," Shaw said. "They might have to reduce hours (of paid workers) or take some kind of pay reduction if they don't want to discharge people."
On the income side of the equation, agencies that charge fees may have to consider raising them, Shaw said. And, volunteer help may be harder to come by as people scramble to find and keep jobs, he said.
In some organizations, all that won't close the financial gap, so they may have to cut programs, Shaw said. And agencies will have to intensify fundraising efforts in 2009, Rooney added.
"If they stop asking because they think people are not going to give, it will become a self-fulfilling prophesy," Rooney said.
Leo Arnoult, president of Arnoult and Associates, a Memphis consultant to nonprofit groups, agreed.
"Organizations with a strong track record and business plan have great opportunities if they don't fall to the fear factor," Arnoult said. "If they can communicate to the community that they are good stewards. They should hold their positions and even grow."
To see more of The Commercial Appeal, or to subscribe to the newspaper, go to http://www.commercialappeal.com.
Copyright (c) 2009, The Commercial Appeal, Memphis, Tenn.
Distributed by McClatchy-Tribune Information Services.
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