Tuesday, August 25, 2009

The Stories of Nonprofits Dying

This article will look at two levels of information about what is happening to nonprofit organizations around the U.S. as the result of the recession. The first part will be news headlines and brief synopsis of the news article with links. This is a sampling of the articles I have read across the country. All have the same message. The second part will be the listing of studies and survey results nationally and locally with links that have been published about what is happening economically to giving and support of nonprofit organization. The first study by Giving USA 2009 had national attention for a 2% drop in giving. There are other studies that did not get the same national splash that indicate the drop is 40% or higher. Each part will be in chronological order from June into August, 2009. I have placed a few final remarks at the end – lessons I have learned from all this. I am very passionate about the mission and work that nonprofits can and do perform and these are sad moments. We will see what the the resilience of the third sector is in the next 15-24 months.

Within two days after this blog was posted two new studies show a worsening position for nonprofit organizations. First, volunteers are reducing the time they spend doing that work. Second the number of wealthy giving of $1M + gifts have significantly dropped in 2009, another sign of reduced support. These stories follow - .

Volunteering Waning in Recession, Report Says By STEPHANIE STROM Published: August 26, 2009

As the recession took hold, most Americans cut back on volunteer work and other civic activities, according to a survey conducted for the National Conference on Citizenship.

That finding undercuts anecdotal reports of volunteers’ flooding nonprofit groups as unemployment has increased and suggests the challenges faced by the Obama administration, Congress and foundations working to encourage greater volunteer service and civic participation.
“They’re not saying they’ve stopped volunteering, but they are cutting back on the time spent on volunteering and civic engagement,” said David Smith, executive director of the National Conference on Citizenship, which conducted the survey as part of a study titled America’s Civic Health Index,

(Snip)

The decline in volunteerism is not good news for nonprofits, which are relying on volunteers to help offset declining revenues. In a study by the Listening Post Project, affiliated with the Johns Hopkins Center for Civil Society Studies, about 4 in 10 of the responding nonprofits said they had increased their use of volunteers, and almost half said they planned to use more volunteers over the next year.

http://www.nytimes.com/2009/08/27/us/27volunteer.html?_r=1&hp

Giving by the Wealthy Drops Sharply in 2009 Chronicle of Philanthropy August 25, 2009

The recession appears to be cutting significantly into giving at the peak of the fund-raising pyramid.

Only two individuals have announced gifts of $100-million or more in 2009, according to The Chronicle of Philanthropy’s database of America’s top donors.

(Snip)

By comparison, The Chronicle documented 21 gifts of $100-million or more in 2008. And 10 of those gifts exceeded $200-million.

http://philanthropy.com/news/prospecting/9278/giving-by-the-wealth-drops-sharply-in-2009

NEWS ARTICLES
2008: Giving Dropped $6.4 Billion; Largest Decline On Record (June 9, 2009)

http://www.nptimes.com/09Jun/bnews-givingusa-090610.html

Texas Association of Nonprofit Organizations (June 9, 2009)

Charitable Donations Fell by Nearly 6% in 2008, the Sharpest Drop in 53 Years

http://www.tano.org/en/art/457/

From the Chronicle of Philanthropy June 10, 2009

Donations to nearly every type of charity faltered in 2008, as contributions declined by 5.7 percent last year after adjustment for inflation, according to the new edition of Giving USA, The Chronicle of Philanthropy reports. It was the steepest decline in the history of the survey, which has been conducted since 1956

http://philanthropy.com/news/?id=8520&pth&utm_source=pt&utm_medium=newsletter&utm_content=lefttop

2008 U.S. Charitable Giving Estimated to be $307.65 Billion (2 percent drop in current dollars over 2007) Posted by: philcrosby on Wednesday, June 10, 2009

http://www.pnnonline.org/article.php?sid=8866

Charitable Donations Fell in 2008, Report Finds - Washington Post (June 10, 2009)

Individual donations dropped by about 2.7 percent from 2007 to last year, corporate giving fell by about 4.5 percent and foundation contributions grew by about 3 percent, according to the report.

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/09/AR2009060903233.html?hpid=moreheadlines

Plan for Dozens of Salvation Army Centers Falters By STEPHANIE STROM Published: by the NY Times June 14, 2009

At her death in 2003, Joan B. Kroc, the widow of the founder of the McDonald’s Corporation, left a grand idea and $1.8 billion to make it happen. She wanted the Salvation Army to build some 30 lavish community centers around the nation, like the $87 million complex she paid for in San Diego, with three swimming pools, an indoor ice skating arena and a 600-seat theater.

But more than five years later, her plan is sputtering.

The gift has always rested uncomfortably with some Salvation Army officials, who have a hard time reconciling the elaborate centers with the Army’s image as a frugal church that serves the needy.

Now, the plan is also proving difficult to finance. The Kroc fortune has been battered by the economic downturn, and raising additional money to make sure the centers can sustain themselves in the future has been challenging.

http://www.nytimes.com/2009/06/15/us/15salvation.html?_r=1&emc=eta1

Guggenheim Will Cut 8 Percent of Its Positions By CAROL VOGEL Published NY Times - June 16, 2009

The foundation that runs the Solomon R. Guggenheim Museum said on Tuesday that despite record attendance, it will cut 25 positions, or 8 percent of the institution’s full-time staff.
http://www.nytimes.com/2009/06/17/arts/design/17guggenheim.html?_r=2&ref=arts

Princeton University to offer early retirement Wednesday, June 17, 2009 BY KRYSTAL KNAPP SPECIAL TO THE Times of Trenton Regional News

The early retirement incentive program is the university's latest move in response to an expected one-year endowment decline of nearly 30 percent, or $5 billion, by June 30. The university draws more than 45 percent of its operating revenue from the endowment. Due to the decline of the endowment, school officials are looking to cut $170 million from the budget during the next two fiscal years.

http://www.j.com/news/times/regional/index.ssf?/base/news-17/1245211525322950.xml&coll=5

Big Grant Makers Cut Staff Members from Chronicle of Philanthropy June 22, 2009
Facing huge losses in their endowments since the onset of the global financial crisis, some of America’s largest foundations are cutting jobs, reports The New York Times.

Last week, the Robert Wood Johnson Foundation, in Princeton, N.J., offered buyouts to 42 percent of its 250 employees. Last month, the Ford Foundation, in New York, offered a similar deal to 140 of its 550 staff members. In December, The California Endowment, in Los Angeles, cut 44 jobs. This year, the W.K. Kellogg Foundation, in Battle Creek, Mich., has closed offices in Brazil, Mississippi, and South Africa, resulting in more than a dozen jobs lost.

The job cuts are coming after grant makers have already cut costs using other methods, says Bradford K. Smith, president of the Foundation Center, a research group in New York.

“I think we’re just at the beginning of this process,” he said, though he added that only a fraction of the nation’s private grant makers — about 4,000 out of more than 90,000 foundations — employed workers other than the founder or family members.

http://philanthropy.com/news/?id=8631&pth&utm_source=pt&utm_medium=newsletter&utm_content=lefttop

Metropolitan Museum Completes Cuts, Buyouts, Losing 357 Staff By Philip Boroff June 23, 2009 Bloomberg.com

New York’s Metropolitan Museum of Art completed job cuts announced in March and reduced staff by 14 percent, or 357 positions, according to a press release.

The Met had said it would cut about 10 percent of its staff. Spokesman Harold Holzer said in an interview that about 40 percent of those offered early retirement packages accepted them, higher than it expected, and the museum was able to close down 15 of its 16 satellite shops, also more than expected.

“We weren’t certain we could close all those shops because of rental agreements,” Holzer said.

The museum said it fired 53 people at the shops around the country and another 74 at its merchandising operation. It has just one shop remaining in addition to its Fifth Avenue museum, at Rockefeller Center.

A total of 95 employees ages 55 or over with at least 15 years at the museum took a buyout, according to the press release. In the past two weeks, it dismissed 74 union and non- union employees, the museum said. Other positions were eliminated through attrition.

http://www.bloomberg.com/apps/news?pid=20601088&sid=aLxXS2MdbOkU

Ford Ahead: The Foundation Tightens Its Belt By MARK HEMINGWAY JUNE 26, 2009 Wall Street Journal

The Ford Foundation recently announced that it would be offering buyouts to one-third of its 550 employees. On the surface, the reason seems obvious: too little money. Right now, the foundation has $9 billion in assets. That may sound like a lot of money, but it is $4 billion less than last year, thanks to the country's financial crisis. And if Ford were a business, belt-tightening would be the expected response. But in the world of philanthropy, Ford's drastic action has come as a surprise.

Now all eyes are on Luis Ubinas, who since becoming president of the foundation last year has been trying to streamline its operations. In some sense, Ford is late to this philanthropic trend. Since the $27 billion Gates Foundation arrived on the scene, its founder has helped spread responsible business practices to philanthropy. And conservative foundations such as The Lynde and Harry Bradley Foundation and the John M. Olin Foundation have shown that they can sometimes outflank bigger, more established liberal foundations by being leaner and more focused. Ford's spending, by contrast, has reached almost governmental proportions. As of last year, it had offices in 13 countries and gave away $539 million to 1,997 organizations. Indeed, for decades Ford executives operated as if immune to the forces of capitalism.

But its extravagance has led to problems far beyond those now being felt by its staff. Ford's financial autonomy fostered a confused philanthropic mission that has the foundation slouching toward irrelevance. Mr. Ubinas, a former McKinsey consultant, may be well-qualified to deal with Ford's fiscal problems. What's not clear is whether he has a well-defined strategy for clarifying its mission and ending its scattershot approach to grant-making

http://online.wsj.com/article/SB124598045813858017.html#mod=todays_us_weekend_journal

Banks Turn Away From ‘Planned Giving’ Wall Street Journal (July 28, 2009) By SHELLY BANJO

While planned giving programs steadily gain popularity with charities and their donors, they’re becoming less popular with the banks that service them.

Some key banks are retreating from this area of financial management, refusing to take on charities with less than $1 million or $5 million in assets. Some are dropping clients who don’t make the cut.

That’s putting a squeeze on smaller organizations, many of which depend on planned-giving vehicles to bring in donations and rely on banks to manage the often-complex programs.
More than 50 charities are scrambling to find a new bank after BNY Mellon Wealth Management—one of the biggest players in the planned giving investment arena—in May gave clients until Sept. 1 to find a new manager.

Comprising charitable gift annuities and trusts, planned gifts have become a mainstay for many nonprofits, particularly in a recession, when donors are squeezed for cash and shy away from outright gifts. Finding a new service provider typically takes up to a year.

http://online.wsj.com/article/SB20001424052970204563304574314882717782344.html#mod=todays_us_personal_journal
Metro Atlanta non-profits saw need rise, donations fall in 1Q By Christopher Quinn The Atlanta Journal-Constitution (July 30, 2009)

Metro Atlanta nonprofits reported rising need and sinking donations through the first three months of 2009.

Those trends track what is happening nationally as the economy torpedoes giving, while the same economy is pushing more people to reach out to nonprofits for help.

“I have been at it 25 years, and I have never seen anything like it,” said Jim Seiler, the Atlanta area commander for the Salvation Army.

His organization built a new 80-bed shelter for homeless families in downtown Atlanta, but now that the shelter is complete, the Salvation Army does not have the money to staff and operate it.
The Georgia Center for Nonprofits released new figures from its quarterly survey Thursday to a group of local organizational leaders. It began tracking quarterly trends at nonprofits at the end of 2008. The strains that showed up then have exacerbated.

Twenty-five percent of the about 200 nonprofits surveyed said donations have decreased, compared to 19 percent during the last quarter of 2008.

At the same time, 61 percent of those surveyed in early 2009 said demand for services has increased.

Nonprofits in 2009 are dipping more often into reserve funds (nearly 40 percent compared to 32 percent) delaying programs (42 percent compared to 37 percent) and cutting staff (31 percent compared to 27 percent).

There are a few bright spots, said Karen Beavor, the CEO of the Georgia Center for Nonprofits. The survey shows nine percent of nonprofits said their foundation grants went up in early 2009. Nonprofits are getting more creative and collaborative to fill the gaps.

But it is tough for everyone, and she predicted a tougher second quarter and third quarter before the holiday lift that charities get during November and December.

http://www.ajc.com/news/metro-atlanta-104753.html

With Donations and Grants Down, Social Service Agencies Feel the Pinch by DIANE CARDWELL Published: August 21, 2009

At a social service agency on Staten Island where budget cuts forced the layoff of a driver, the staff scrambles to arrange transportation to Brooklyn for an elderly homeless woman whose family has agreed to take her in.

http://www.nytimes.com/2009/08/22/nyregion/22nonprofit.html?_r=1&scp=1&sq=donations&st=

Fundraisers’ outlook remains gloomy - August 10, 2009 Philanthropy Journal

Fundraisers for U.S. nonprofits paint a dark funding picture for their organizations, and the next six months are expected to bring only slight clearing, a new study says.

The current environment for fundraising worsened over the past six months, with the Present Situation Index falling to 28.9 percent over the past year to 58.0 on a 100-point scale, the lowest since the Index's inception in 1998, says a report from the Center on Philanthropy at Indiana University.

The Philanthropic Giving Index, which is comprised of the Present Situation Index and the Expectations Index, measures fundraisers' optimism about the current and future climate for fundraising.

The Expectations Index, which measures expectations for the coming six months, is up 10.2 percent over the past six months to 78.2.

However, over the past 12 months, the Expectations Index has dropped 13.2 percent.
Almost nine in 10 fundraisers say the economy is having a negative or very negative effect on their development operations currently, while six in 10 say they expect that to continue over the next six months.

(Snip)

While major gifts are down 23.1 percent and foundation grants are off 39.2 percent, two in three fundraisers say they are still having success with direct mail.

http://www.philanthropyjournal.org/news/fundraisers’-outlook-remains-gloomy

STUDIES
U.S. charitable giving estimated to be $307.65 billion in 2008 Giving in worst economic climate since Great Depression exceeds $300 billion for second year in a row by Giving USA FoundationTM

Glenview, Ill. (June 10, 2009)—Charitable giving in the United States exceeded $300 billion for the second year in a row in 2008, according to Giving USA 2009. Donations to charitable causes in the United States reached an estimated $307.65 billion in 2008, a 2 percent drop in current dollars over 2007.

The 2008 number is the first decline in giving in current dollars since 1987 and the second since Giving USA began publishing annual reports in 1956, says the annual report on philanthropy, released today for the 54th year by Giving USA FoundationTM. ( http://www.givingusa.org/ ) Revised estimated giving for 2007 was a record $314.07 billion.

Two-thirds of public charities receiving donations saw decreases in 2008. The exceptions were Religion, Public-Society Benefit and International Affairs. The other types of charities (or subsectors) examined in Giving USA are: Arts/Culture/Humanities; Education; Environment/Animals; Health; Human Services; and Foundations, says the report, which is researched and written for Giving USA Foundation by the Center on Philanthropy at Indiana University.

http://www.givingusa.org/press_releases/gusa/GivingReaches300billion.pdf

New Report Finds DC Area's Nonprofits Lack Funds to Weather Economic Crisis Wednesday, June 24, 2009
Washington, DC – Most nonprofits don't have the financial reserves needed to weather the current economic crisis, according to a new report released by the Urban Institute and funded by the Eugene and Agnes E. Meyer Foundation in Washington, DC. The study, the first of its kind, examined the operating reserves of more than 2,500 nonprofits in the Greater Washington area, ranging in mission from soup kitchens and job training centers to schools and local arts groups.

Operating reserves—cash and other liquid assets without donor restrictions that can be tapped when income falls short of expenses—are an important indicator of an organization's financial health and its ability to survive challenging times. The study reviewed financial data for Greater Washington's locally-focused nonprofits over a six-year period from 2000 to 2006.

Among the report's key findings:
  • In 2006, a time of relative economic stability, nonprofits in the Greater Washington area had a median operating reserve of 2.1 months of expenses. Most nonprofit financial management experts recommend a minimum of three.
  • 57% had operating reserves of less than three months of operating expenses; 28% of those had no reserves at all.
  • The percentage of organizations with less than three months in operating reserves increases with size, making large organizations (those with annual budgets of $5 million or more) especially vulnerable to the economic downturn.
  • Arts, culture, and humanities organizations had the highest percentage of groups with less than the minimum reserve (62%); environment and animal organizations had the lowest with 46% falling below recommended levels.
  • Nearly one in six nonprofit organizations that filed tax returns in 2000 appeared to have gone out of business or had shrunk below the IRS reporting threshold ($25,000 in revenue) by 2006; these groups had lower operating reserves and were more dependent on private contributions than the organizations that survived.
http://www.meyerfoundation.org/newsroom/press_releases/504

2009 Data Sheds Insights into Giving USA Study
Horsham, PA, June 24, 2009 — A recently released study from the Giving USA Foundation reported that charitable giving from 2007 to 2008 dropped 2% (measured in current dollars; giving declined 5.7 percent in inflation-adjusted dollars). A further analysis released today by DonorPerfect fundraising software examined giving results from a sample of their clients between 2008 vs. 2007. This analysis also looked at client results from the first quarter 2009 vs. 2008. It revealed 2008 charitable giving was greatly affected by a steep decline in donations seen in November and December 2008. It further revealed that if first quarter trends continue, 2009 could be worse than 2008.
Jon Biedermann, Vice President at SofterWare and developer of DonorPerfect, noted “Giving USA’s annual estimates are based on econometric studies from an array of sources and data, whereas our analysis is based on aggregated actual donations recorded by a wide variety of clients. This method allows us to analyze the data monthly, which provides additional insights into fluctuations. Although our donation results are higher than Giving USA, they’re consistent with a multi-year analysis that shows DonorPerfect clients improve their fundraising results above the national average of all nonprofits. Besides these differences, it still tracks well as a snapshot of giving results and provides insight into 2009 trends."
Trends for 2009
An analysis for the first quarter 2009 shows an 8.4% decline vs. the 2008 first quarter. This shows improvement from the steep drop in November and December 2008. However, Mr. Biedermann further noted that “… unless this improving trend continues, there is a good chance that overall giving in the USA in 2009 may be down more than the 2% reported by Giving USA in 2008, perhaps even as low as -10%! The obvious fear from these indicators is that cash-strapped nonprofits will need to reduce services at the very time when they will be needed most.”
http://www.donorperfect.com//press-release/donation-report-2009.asp
Revenue, Donors Continue Free Fall By Mark Hrywna June 25, 2009 NonProfit Times
It’s no surprise that revenue continues to fall but the number of new donors also continues its drop, declining almost 13 percent in the first quarter of 2009, as compared to 2008.
Key metrics in the Target Analytics Index of National Fundraising Performance declined as a whole for the first quarter of 2009 as compared to the same time last year. The index -- released today (6/25) by Target Analytics, a Blackbaud company -- analyzes direct marketing giving for 79 national organizations.

Most organizations suffered declines in key measures for 2008 as a result of the struggling economy, but the new trends are now more widespread across the index.

Index donor declines are due primarily to declines in new donor numbers, which have fallen faster than overall donor numbers since the 2005 hurricanes, and have fallen three times faster since the recession began in 2007 than they had in either of the previous two years.

http://www.nptimes.com/instantfund/09Jun/IF-090625-1.html

Fundraising Dips In First Quarter Of 2009 Sunday, June 28, 2009 at 07:44PM by Allyson Kapin

The struggling economy hit nonprofits hard in the first quarter of 2009. According to the latest Target Analytics Index of National Fundraising Performance, the number of new donors dropped by almost 13%, as compared to 2008. The study analyzed 79 nonprofit organizations and their fundraising campaigns via direct mail, online fundraising, telemarketing and canvassing.

The study also showed that for the first time since Target Analytics released its initial study in 2002, overall revenue per donor declined by 2.1%. Prior to this study, the Index of the National Fundraising Performance had only been showing a gradual decline in donor numbers since the U.S. Gulf Coast hurricanes of 2005. However, things rapidly changed from Q4 in 2008 to Q1 in 2009. The decline in donors accelerated even faster due to the recession and a 13% decrease in new donors.

http://www.frogloop.com/dips

Nonprofits Employ Tougher Measures as Downturn Deepens: Bridgespan Survey Shows 41 Percent Turning to Layoffs, 33 Percent Reserve Draw-Downs, but Also Hope June 29, 2009, 12:01 a.m. EST

BOSTON, Jun 29, 2009 (BUSINESS WIRE) -- The negative effects of the economy on nonprofit organizations has accelerated over the last six months, according to responses from nearly 100 nonprofit leaders participating in a Bridgespan study initiated in November 2008 and updated in May 2009. The percentage of nonprofits that have resorted to layoffs, broad-based programmatic reductions, and reserve draw-downs has increased measurably. Nevertheless nonprofit leaders appear to be optimistic about the future. Almost half of the respondents reported that they believed their organization would be on stronger financial footing in a year's time.

Since that initial survey, the country has a new President, and a new budget and stimulus package. Nonetheless, as the economic crisis has deepened, the situation for nonprofits has continued to deteriorate. According to Bridgespan partner William Foster, "This survey highlights just how tough times really are. Ninety-two percent of nonprofits responding to the May 2009 survey indicated they were experiencing the effects of the downturn, up from 75 percent in November. Forty-nine percent reported that their financial situation had worsened, and the percentage of nonprofits reporting funding cuts has increased from 52 percent to 69 percent. Further, the percentage reporting cuts of more than 20 percent has increased from 13 percent to 24 percent."

http://www.marketwatch.com/story/nonprofits-employ-tougher-measures-as-downturn-deepens-bridgespan-survey-shows-41-percent-turning-to-layoffs-33-percent-reserve-draw-downs-but-also-hope

Managing in Tough Times: May 2009 Nonprofit Leaders Survey Update Published Date: 2009-06-29 Author(s): William Foster Gail Perreault Sarah Sable

Responses of nearly 100 nonprofit leaders participating in a Bridgespan longitudinal study show nonprofits are turning to much tougher measures than foreseen six months ago to cope with the economic downturn. The percentage of nonprofits that have resorted to layoffs has increased, as has the percentage that has made broad-based programmatic reductions. More organizations have drawn down their reserves. Nonprofit leaders appear to be optimistic about the future, though: Almost half of the respondents reported that they believe their organization will be on stronger financial footing in a year’s time. And two thirds have employed contingency planning, a key step for weathering the storm, as outlined in our original November 2008 report “Managing in Tough Times: 7 Steps.”

These current findings follow from results of that November study, in which the Bridgespan Group surveyed nonprofit leaders across the U.S. to find out how the economic downturn was affecting their organizations. We reached out to approximately 800 nonprofit chief executive officers, presidents, and executive directors; more than 100 responded. At the time, many nonprofit organizations were struggling to meet increased demand for their services in the face of deep budget cuts. However, more than a third of the nonprofits that had already experienced funding cuts were not reducing costs to manage through the downturn. Instead, they were trying to compensate by increasing fundraising capacity.

Much has changed in the U.S. since that initial research: There is a new President, a new budget, and a stimulus package of unprecedented magnitude. At the same time, the country continues to face a prolonged downturn and profound state budget crises. We completed our follow-up survey in May 2009 to gauge the effects of these developments on nonprofit organizations. We sent this survey to the same group of leaders who received the previous survey, asking all of the same questions, along with some new ones. The May 2009 survey findings, along with Bridgespan commentary, are presented in detail in this report. The findings indicate that nonprofits are taking many of the seven steps outlined in our original report as they strive to deliver in the short term while planning for the future.

(snip)

This survey highlights just how tough times really are, and the severity with which the economic crisis is affecting nonprofits. But there are purposeful steps that organizations can take to weather economic adversity while continuing to meet the needs of their communities. And tough times can be the catalyst for improving internal operations and making it easier for people to work smarter—not just longer and harder. Bridgespan has collected insights and advice from our clients, from other nonprofit leaders and experts, and from our own leadership in our Managing in Tough Times Resource Center. We hope it will help you manage through these tough times.

http://www.linkedin.com/news?viewArticle=&articleID=47137970&gid=81092&articleURL=http%3A%2F%2Fwww%2Ebridgespan%2Eorg%2FLearningCenter%2FResourceDetail%2Easpx%3Fid%3D4296&urlhash=--G_&trk=news_discuss

Recession Hits Nonprofits Hard By Jim Hickey July 3, 2009 Vineyard Gazette Online

The recession has hit Island nonprofits hard, a recent survey by the Martha’s Vineyard Donors Collaborative has found.

Released this week and based on a survey done in May of a wide range of Vineyard charities, the six-page report by the collaborative found that 56 per cent of Vineyard nonprofits had experienced a decrease in contributions over the winter, and 20 per cent saw a dramatic decrease.

“The Vineyard has struggled like the rest of the nation as the recession takes its toll,” the report says.

The donors collaborative is an advocacy group devoted to strengthening the nonprofit community on the Vineyard.

The survey released this week warns things will likely get worse before they get better.

http://www.mvgazette.com/article.php?21806

Donor Numbers and Revenue per Donor Shrink in First Quarter ’09, July 7, 2009, Association of Fundraising Professionals

Not only is the United States seeing a drop in donor numbers since their peak in 2005, the economy has left those donors giving less.

According to the Index of National Fundraising Performance published by Target Analytics, first quarter 2009 saw the first overall decline in revenue per donor since the study began in 2002. Revenue per donor declines were experienced by two-thirds of the organizations in the index.

As each donor gives less, the problem is compounded by falling donor numbers in the U.S. that have taken place for more than three years (since the Gulf Coast hurricanes of 2005). The study indicates that in the last quarter of 2008 and the first quarter of 2009, this gradual fall in donor numbers has increased in magnitude, suggesting that the recession is accelerating the rate of decrease in donor numbers.

"These numbers continue to underscore the extraordinary situation and challenges the charitable sector faces now," said Paulette V. Maehara, CFRE, CAE, president and CEO of AFP. "However, it's important to remember that overall, the economy currently seems to be steadying itself, albeit very slowly. While we still have a long ways to go, we are hopeful that this report represents the absolute worst of the recession's impact."

http://www.afpnet.org/ka/ka-3.cfm?content_item_id=24956&folder_id=2545

Bridgespan Study Examines Rural Funding Challenges - Study examines rural funding challenges: IDs themes for strengthening the nonprofit Sector’s capacity to tackle social issues. 20 Jul 2009 Authors: Barry Newstead & Pat Wu

The issue of nonprofit funding is topical given the economic climate, but for rural nonprofits it is a chronic reality of life. In a recent study on the rural funding gap, the Bridgespan Group found that rural nonprofits lag behind their urban counterparts in terms of their share of federal government, private foundation, and corporate donations and as such they are less well positioned to help disadvantaged residents in their communities. Funded by a grant from the Atlantic Philanthropies, the study looked at the funding structure of rural nonprofits in two sample states – California and New Mexico to understand the gap. The report identified lessons learned from successful rural youth serving organizations including National Indian Youth Leadership Program (NIYLP) in New Mexico, Boys and Girls Club of Fresno, and the Human Response Network in Northern California’s Trinity County.

(Snip)

“The rural funding gap is real and presents challenges for both rural nonprofits and private foundations that care about tackling poverty. There are no silver bullets but the themes are a good reminder for leaders of the hard work required to expand the resources available for youth and families in need in rural communities,” said Bridgespan’s Newstead.

http://atlanticphilanthropies.org/news/news/bridgespan_study_examines_rural_funding_challenges
Nonprofit medical systems see their financial health worsening -The health care sector also added fewer jobs and had more mass layoffs in 2008 than during the previous year. By Victoria Stagg Elliott, AMNews staff. Posted July 27, 2009.

The recession is continuing to pound hospital and health care finances, according to a pair of reports issued in July.

"This is not a good year for health care, just as it's not a good year for the economy," said Jon Burroughs, MD, a senior consultant with the Greeley Co. in Marblehead, Mass.

http://www.ama-assn.org/amednews/2009/07/27/bisb0727.htm

Charitable Giving Climate Continues to Decline, Nonprofits Say - 86 Percent Report Economy is Having Negative Effect on Fundraising, Center on Philanthropy at Indiana University Study Finds Released: August 3, 2009

The fundraising climate for U.S. charities continued to decline in the first half of 2009, according to the latest Philanthropic Giving Index (PGI) released today by the Center on Philanthropy at Indiana University.

The PGI, similar to a Consumer Confidence Index for charitable giving, includes three indexes on a scale from 0 to 100, based on a semiannual national survey of nonprofit fundraising professionals. Higher scores indicate more positive or optimistic attitudes about the climate for fundraising.

The fundraisers’ assessment of the current giving environment fell to its lowest level since the Center began the study in 1998. In the latest survey, the Present Situation Index (PSI) is at 58.0, an 8.7 percent decrease from six months ago and a 28.9 percent decrease from one year ago. The PSI has averaged 82.1 over the history of the study.

Fundraisers’ expectations for the coming six months are slightly more optimistic, but remain below the historical average for the study. The Expectations Index (EI) is at 72.8, a 10.2 percent increase from six months ago and a 13.2 percent decrease from a year ago. The overall PGI, which is an average of the current and future indexes, is at 65.4, up 0.9 percent from December 2008 and down 21 percent from this time last year.

http://www.philanthropy.iupui.edu/News/2009/08/pr-CharitableGivingClimateContinuesDecline.aspx

Impact of the 2007-09 Economic Recession on Nonprofit Organizations by Lester M. Salamon, Stephanie L. Geller, and Kasey L. Spence, Listening Post Project of Johns Hopkins University (2009)

The current recession has already resulted in serious economic costs for our nation. Although the media has focused on the downturn’s severe effects on businesses, there has been little attention on how it has impacted our country’s critical nonprofit sector. Are nonprofits facing a decline in revenues? Have nonprofits been forced to reduce their programs and services? How are nonprofits responding to these pressures and what consequences, if any, have they had to endure?

To help fill this major gap in knowledge, the Johns Hopkins Nonprofit Listening Post Project surveyed its nationwide sample of nonprofit organizations in five key fields (children and family services, elderly housing and services, education, community and economic development, and the arts) in April of 2009. Key findings from the 363 organizations responding to this Sounding include the following:

1) Significant economic stress
  • 83 percent of responding organizations reported some level of fiscal stress during the target period of September 2008 to March 2009.
  • Close to 40 percent of the organizations considered the stress to be “severe” or “very severe”.
  • Theaters and orchestras were particularly hard hit, with 73 percent of the former and half of the latter reporting “severe” or “very severe” stress.
  • But a third or more of child-serving and elderly-serving organizations also reported “severe” or “very severe” fiscal stress.
  • Contributing to this stress was a perfect storm of impacts:
  • Declining revenues (51 percent of organizations);
  • Increased costs, particularly for health benefits, underlining the importance of health benefit reform for the nation’s nonprofit human service and arts organizations;
  • Declining endowments hitting 80 percent of organizations with endowments;
  • Decreased cash flow as a result of restricted credit and government payment delays.
  • Substantial majorities of the respondents expect continuing revenue declines over the coming months, particularly from private giving and government support.
2) Impressive resilience

In the face of this fiscal stress, nonprofit organizations are displaying enormous resilience:
  • The share of organizations reporting “severe” or “very severe” fiscal stress is actually lower now than during the recession that followed 9/11 (37% vs. 51% of organizations).
  • Except for the arts organizations, sizable majorities of organizations at present are reporting that their fiscal stress is “minimal” or “moderate”.
  • This is consistent with experience in prior recessions, during which nonprofits boosted employment while for-profit employment has declined. This suggests that nonprofits are a counter-cyclical force in the economy.
  • Reflecting this, more than two-thirds of the respondents indicated that they have been “successful” or “very successful” in coping with the current fiscal crisis.
  • As a consequence, nearly three-fourths of the organizations reported being able to maintain or actually increase the number of people they serve, and this was especially true of service to vulnerable populations.
3) A range of coping strategies
To achieve this result in the face of such serious economic conditions, nonprofits have displayed unusual resolve and launched a host of inventive coping strategies:
  • Well over half of all organizations have launched new or expanded fund-raising efforts, targeting individuals, state and local government, the federal government, and foundations.
  • Substantial proportions of organizations are also tightening their belts further, cutting administrative costs, creating collaborative relationships with other nonprofits, instituting salary freezes, postponing new hires, and relying more heavily on volunteers.
  • Finally, substantial numbers of organizations are stepping up their marketing and their advocacy.
http://www.ccss.jhu.edu/pdfs/LP_Communiques/LP_Communique_14.pdf

Survey shows Utah nonprofits struggling - Donations decline while demand for services rises Aug 18, 2009
SALT LAKE CITY - A survey of 127 Utah nonprofit organizations shows the economic downturn has forced agencies to cut staff and services or revamp programs in order to survive.

The June survey, which was released Friday, was the second conducted by Community Foundation of Utah this year. In both instances, charities said their donations had declined while the demand for services increased. Rural agencies struggled the most.

Agencies say that to weather the times, they have increased collaborations with other entities and created new efficiencies and programming to meet demands. At least four agencies said they merged with others to save money .

http://www.msnbc.msn.com/id/32463413/ns/us_news-giving/

A Current Overview of Philanthropy and the Economy – Contributed by: CCS Fund Raising, New York

http://www.givinginstitute.org/resourcelibrary/pdfs/US_Phil_and_Economy_for_Web.pdf

(NEW and current) The Chronicle of Philanthropy is Studying Staffing Trends at Charities: Help Us Draw a Reliable Picture of What's Happening Now
Nonprofit organizations nationwide have been laying off staff members and taking other steps as the economy continues to take a toll on the budgets of charities of all kinds. But how can organizations make sure they are taking the smartest steps now — and avoiding approaches that could cause their most-talented workers to leave as the recession ends and the job market expands?

Those are among the questions The Chronicle is exploring in a new survey of nonprofit organizations we urge you to fill out. Organizations that participate in the survey will get a free copy of the results, which will also be discussed at a Chronicle Webinar in October.

http://philanthropy.com/news/?id=9269&pth&utm_source=pt&utm_medium=newsletter&utm_content=lefttop

My Conclusions:

  • Based on the studies linked above, it seems no one really knows what the dollar effect is on the nonprofit sector from this recession.
  • It seems no one knows the impact of the recession and loss of nonprofits on a client population.
  • Most nonprofits worth their salt had income and expenditures in proposed budgets for 2009. In many the income and expenses were probably about a 4%-5% increase. That too is a loss. Increases in utilities, fringe benefits, salary increases and many other budget items were also lost, the invisible lose to nonprofit groups
  • While there appears no universal successful plan for fundraising and proposal writing, some local groups have been able to maintain donors even if not at the same level of giving in the past – but for most, no such plan was in place.
  • Nonprofit leaders are not alone with the plight facing them. This could be the best of times for coalescing and creating a new regional and national force of small and mid-size nonprofits for advocacy, political clout and a voice in social policy.
  • We have no idea whether the economy will begin to straighten out in 2010. We can make an educated guess It will take awhile for philanthropy to rise. In the meantime there will be fewer nonprofits actually in business. Merger does not seem to be the method of choice for survival and the delivery of services to clients.
  • Experienced leadership at the top and in middle management will leave from the stress, the lack of hope for economic change, the inability to have the board get serious about the issues and frustration/guilt about not doing the mission. Board members will begin to disappear because they have no idea what can and should be done – this is not what they signed up for.
  • This is not a great time to start a new nonprofit tax exempt organization unless you have strong local support
  • This is not a great time to think about a career change to do fundraising and grant writing.
  • It can get worse and probably will.
  • And many nonprofits will survive and live to continue to perform their missions and they may be different than they were in 2008.
What do you think?

7 comments:

Wallis said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


Margaret

http://grantfoundation.net

Debra Berg said...

Don, I'm also reading a lot of what you've reported here but I'm finding contradictions to some of the doom and gloom. Take for example in Nonprofit World March/April a report cited from DonorsPerfect.com that "Donations to small and medium sized nonprofits are up over 5 per cent" based on online fundraising applications. The conclusions by Jon Biedermann, VP of DonorPerfect.com Division - Softerware, is that "there's ample evidence for the country's generosity remain(ing) even during financially stressful periods such as these and consistent with historical results ... since 1969, U.S. giving measured in current dollars, has risen every year except 1987 (due to a change in the tax law prompting people to give early)."

I've seen other articles with slightly less percentages cited for increases. How does one explain this? Perhaps the definition of "nonprofit" is to broad (may include hospitals, schools, non-human service initiatives, etc.) I know some have seen drops in funding, but is it industry-wide and is it just related to the economy? I'm not saying the drops haven't occured for some, I'm just wondering about the use of the media to generalize and capitalize on panic verses using real analysis so we can truly address the problem.
Debra Berg
NICENetwork.org

Don Griesmann said...

Hi, Debra. It is always good to have your comments and perspective on issues.

Several responses:

1. The DonorPerfetct article you cite is from March/April. I cite a later DonorPerfect article from June.

2. The base study for all data and responses is that from GivingUSA setting the drop of giving at 2%. It received national publicity. None of the other studies I have listed received that kind of coverage. Other studies used different methodology. Even the Chronicle of Philanthropy is checking out the effect based on staffing, cited in this article. I am still convinced that GivingUSA does not give the full impact on NPOs that set budgets late last year for 2009. If they set a slight increase in costs and income. They are not receiving that income and are facing the increases in cost. That is part of the invisible impact of the recession on NPOs of all sizes.

3. I have cited 15 studies in the article. Each has its own perspective. All demonstrate with data from a local or a national view that nonprofits of all sizes are in many ways in dire straites. The "gloom and doom" is not from news articles - alone. The 15 studies put numbers on the anecdotes. One person's gloom and doom may be another persons sense of reality with a sense of gloom and doom. The studies speak for themselves. I am responsible for the conclusions I draw from the studies and the articles.

4. I do think that differences in results from studies do not depend on size of NPOs. Rather the differences depend on the assumptions, the methodology, the date of the study and the date of the publication. Clearly the effect of the recession does not hit NPOs equally. We do need studies showing how NPOs have survived and thrived while others - most - descended into a hole or oblivion - without the Madoff effect.

5. We will not effectively plan for the future of the third sector, if it is to change, if we do not look at the causes and results of the current situation. There are opportunities now for change. I fear we will be letting others - Congress, foundations, infrastructure nonprofits such as Independent Sector, BoardSource, Charity Navigator and others dictate that future. See my comments in

The Nonprofit Quarterly’s "Study on Nonprofit and Philanthropic Infrastructure" Misses The Mark

And the beat goes on. These articles are recent:

With Donations and Grants Down, Social Service Agencies Feel the Pinch, By DIANE CARDWELL Published: August 21, 2009 New York Times

http://www.nytimes.com/2009/08/22/nyregion/22nonprofit.html?_r=1&ref=todayspaper

Cutbacks pinch homeless programs By Wendy Koch, August 24, 2009, USA TODAY

http://www.usatoday.com/news/nation/2009-08-24-homeless_N.htm

Thank you for taking the time to respond. I hope that you will again.

My very best, Don

patricia said...

I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


Patricia

http://dataentryjob-s.com

Doris said...

Don, Thank you so much for compiling this information. I scanned the entire blog this morning and put it on our Grants dpt. agenda to look at in depth tomorrow. It may help us to make a more realistic plan to forward our E.D. I am in the middle of my 2009 detailed report and fear that my projection of a 25% drop in grants for 2009 may have been too small. I will know more by the end of the week. Although any report is just a snapshot and doesn't tell the full story over time, I know that we worked harder, enjoyed more hours donated by interns and a great volunteer, and experienced even more cooperation from program and finance staff. Yet, we came up short. That is NOT encouraging. I can't help but feel discouraged that we have let our frail and neediest clients down despite the "breakneck" pace last year. Worse, we have more need than ever as other agenies downsize. Best regards, Doris

Don Griesmann said...

Hi, Doris. I am pleased the article helped in some way. Your report of the state of affairs is at every corner. At this point I believe strongly that new funds and funding are critical for the future and a plan has to be developed around resources needed with the board. But I also beleive that the board and management have to look at the program as to what are the priorities of the service you can provide with quality, not simply numbers of people served. No one can match the past right now. If a funder or grant you have has numbers of unduplicated customers as a contract compliance issue, a conversation has to be held with them about the numbers and the quality without loss of funding. That funder will be carrying a larger load of the organization than planned and its continued support is vital. Current supporters may also have to hear that. Doing more with less can be doing more for fewer customers. What is the mission and what is the impact being made? But those are only the start of the priority issues. You guys are in my thoughts. Thank everyone for me about what they are doing for your community and our world. My best, Don

Anonymous said...

It is kind of sad how most non-profits don't last very long.
-Jon @ nonprofit software

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