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Wednesday, Jun 7, 2023

Nonprofits Doing More with Less

In business, tough times are reflected in a loss of customers and market share. For nonprofits, though, tough times mean an increase in demand at exactly the same time that their revenues are most likely to diminish. In its Fall 2008 newsletter, Giving USA Foundation provided an analysis of charitable contributions over the past 40 years. In years of no recession, the foundation reported, giving grew at an annual average rate of 4.3 percent, adjusted for inflation; but in recession years, the average annual change in contributions declined between 1 percent and 2.7 percent on average. In 1974, the only full year of a recessionary period in recent history, giving decreased by 5.4 percent. All indications are that the United States can expect to see a downturn of similar duration and local nonprofits are already anticipating a decrease in charitable contributions and have been planning accordingly. “I would say starting back in last March we started to see a downturn in giving from our general support base,” said David Phillips, president of the Mission Hills-based Children’s Hunger Fund, “and I would say for the year, if you would just take what is typically our general support base, their giving was down about 30 percent for the year.” He went on to add that thanks to some unexpected major gifts from individual donors, and increased in-kind corporate giving (product donations), the charity was able to make its $130 million budget for 2008 anyway. “We’ve taken a very conservative approach this year,” said Phillips about planning for 2009. “We really put together a no-growth budget on the cash side and we have essentially put a freeze on any new hires.” Whether a nonprofit depends on private donors, corporate philanthropy or government funding matters little to their concern for the near future. “For nonprofits in general, it’s a really scary, nerve-wracking time,” said Marianne Haver Hill, president and CEO of Meet Each Need with Dignity (MEND) in Pacoima. “Every funding source we are hearing about looks like it’s going to go down.” Private citizens and powerful foundations alike have seen the value of their investment portfolios demolished, forcing many to cut back. Corporations faced with the decision to lay off staff or make charitable contributions understandably often choose the latter as the first place to cut. Many in the nonprofit sector are looking hopefully to the new Obama administration. In a recent speech to the Las Vegas chapter of the Association of Fundraising Professionals, Canyon Country-based fundraising consultant John Kelleher said that while the current economic environment is sure to have a negative effect on charitable giving, “Clearly, it is our hope that the new administration will do much to revive the economy, which will help charitable giving in both the short-term and the long-run.” He cited not only President Barack Obama’s personal track record of philanthropic giving and volunteering, but also his many campaign pledges to increase the involvement of the government and individuals in supporting charities. But Kelleher also said that Congress itself could be one of the bigger challenges facing charities in the future. The Senate Finance Committee and the House Ways and Means Committee have both suggested holding hearings in the coming year to discuss a variety of changes to charitable giving tax rules and reporting procedures, he said. Proposals have already been put forth that would include giving the Federal Trade Commission jurisdiction over nonprofits, setting a floor for charitable gift deductions for all filers, eliminating the charitable deduction for noncash gifts and requiring a charity to become accredited through some third party in order to attain tax-exempt status. “Just take a moment to think about how those changes would burden your daily routine and your budgets,” Kelleher warned his audience. Some good news Not every company is planning on cutting its charitable contributions. The Wells Fargo Foundation of Greater Los Angeles is going to keep its giving at the same level as last year, said Jonathan Weedman, regional vice president of the foundation. The organization is the largest corporate donor in the region according to the Los Angeles Business Journal. “Somebody asked me, ‘how can you not cut your budget, how can you continue to give away that much money?'” said Weedman. “Our response was, how can we not?” The foundation has given money to many local organizations for years and Wells Fargo personnel serve on many of their boards. But that doesn’t mean they will be throwing money around. Funding will likely go to well-established groups that have already proven they know how to get the biggest bang for their buck. “These are precious dollars,” said Weedman, “We’re going to take a little sharper pencil to some because truthfully I think some organizations that are struggling or are on the fence are not delivering as they should.” Recognizing the severity of the problem, the Wells Fargo Foundation is organizing a summit, tentatively scheduled for March, that will bring together all of the groups to which they’ve given more than $5,000. The gathering would include somewhere between 300 and 400 nonprofit leaders from throughout the region who would come together to figure out “how the hell we’re going to get through this mess,” said Weedman. Experts will also be invited to offer advice that nonprofits can implement immediately. Some of those we spoke with have already begun making changes to everything from spending to fundraising. “Only about 5 percent of our revenue goes to overhead and fundraising,” said MEND’s Haver Hill, “but we are still looking at ways to streamline operations — energy savings and those kinds of things — looking at any possible way we can cut back on expenses to let our donors know that we’re really investing their money as wisely as possible.” That sentiment was echoed by Philips of the Children’s Hunger Fund. In addition to looking for ways to streamline spending, “We’re definitely trying to be more strategic in our approach (to fundraising),” he said. “Much more of my time is focusing on higher-end donors, just believing that there is a small percentage of society that is able to make money even in a recession.”

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