Philanthropy: Foundation Grants and Charitable Giving

Felicia Whatley

MSPA Program PAF G 652

Philanthropy: Foundation Grants and Charitable Giving

Ron Ancrum

Non-profits Suffer

            Non-profit organizations will likely take a cut in donations because the economy is struggling. With Wall Street plummeting and investors cutting back their spending, people are less likely to give. This is impacting the non-profit organizations that are reliant on big charitable gifts from individual donors. Inflation and rising costs have caused donors to give a lot less. “A $200 million drop in revenues over the first two weeks of September, along with up to $600 million in potential unbudgeted demands, has both lawmakers and constitutional officers calling for reduced spending,” (O’Sullivan, Jim and State House News Service. “Non-profits Warn Budget Cuts Would Exacerbate Downturn in Philanthropy.” The Chronicles of Philanthropy, (2008)).  Investors do not have extra money this year and won’t be able to give out as much to non-profit organizations. When the market is hurting, so are people’s wallets. This has a direct affect on the non-profit sectors.

            It is so bad that Lazarus House in Lawrence can’t afford to feed the doubling amount of hungry homeless people coming in. Their needed $150,000 has been cut to $100,000 while the number of soup kitchen users rose 30 percent. They just don’t have enough money to buy enough food for these poor people. It’s devastating and sad how budget cuts are leaving the homeless hungry.

            Massachusetts’ biggest employer is the non-profit sector, accounting for 14 percent of all jobs in Massachusetts. If the funding for their jobs is cut, some are not going to be able to keep their jobs, and the organizations will be crippled in doing what they set out to do in helping the citizens. With so many Americans losing their jobs right because of the struggling economy, there is a greater need for the services non-profits provide.

            “Charities could face significant cuts in the money they received from the government, not only because the federal government is spending money to rescue failed financial institutions, but also because the financial collapse will cause tax revenues to drop in many states,”  (Hall, Holly. “How Bad Is It?” The Chronicles of Philanthropy. V20:124 (2008)). Non-profits will continue to struggle as the market collapses. They will need to find new, innovative ways to ask for funding. Today’s television Business Week’s segment on non-profits suggested they try to fund raise online.

If non-profits were used to relying on government funding or having big name donors flock to them, they may need to be more realistic about the situation and reach out. Just reading about a soup kitchen having difficulty feeding the hungry homeless people makes you want to reach into your pockets and help. Non-profit organizations may need to advertise more and host more donation drives.  They may also need to downsize their staff and expenditures, just to stay afloat.

Business Week’s Philanthropy article from June, 18, 2008 suggests proactive media outreach may invite the IRS to make audits, but public relations are important for private organizations. “[PR] shines the spotlight on grantee successes, inspires action among constituencies, creates an environment for collaboration among multiple stakeholders, advances key issues…highlights the foundation’s role as a good community citizen that is leading by example,” (Polt, Rich. “Private Foundations Should Consider PR.” Business Week. 41273, (2007)).

The foundations aren’t bringing in as much money this year. Over a third of U.S. charities say they collected fewer dollars this year than last year. This double the amount of declines verses last year.  Many charities rely on end of the year gifts. Thirty-five percent said in a GuideStar, a Virginia non-profit survey that funds have declined since 2003. A GuideStar spokesman said, “Reports that the economy is having an adverse effect on charities are not premature. It was a commonsense feeling that things were bad, and now we are seeing the numbers,” (Blum, Debra E. “Fund-Raising Angst Backed Up by 2008 Declines in Gifts, Survey finds” The Chronicle of Philanthropy. (2008).). The non-profits in New England have seen a 30 to 31 percent decline in contributions. The groups most affected were the disease-related groups, mental health organizations, and religious groups with a 41 percent decrease.

The most common reason for fun raising decreases was that they had fewer gifts from fewer donors than last year. Smaller corporate gift reductions are also a factor. The economy has had an impact on giving.

Public and private organizations are feeling the strain. When A.I. G, the Lehman Brothers and Bear Sterns collapsed it directly affected the Starr Foundation, who held 15.5 million shares of A.I.G. Its assets dropped over a billion dollars since the end of 2006.

Some private foundations of Bear Sterns executives have been hurt by the economy because they held stock. Some of Lehman’s top executives had foundations that in New York were major philanthropy organizations. Richard S. Fuld Jr., Lehman’s chairman and chief executive set up a foundation called the Kathy and Richard S. Fuld Jr. Family Foundation. The family gave $5 million in 2006. “Foundations are required by law to give away at least 5 percent of their assets a year. But when their assets shrink, their donations tend to shrink as well. Gathering enough money to return to their previous level is often hard,” (Blum, Debra E. “Fund-Raising Angst Backed Up by 2008 Declines in Gifts, Survey finds” The Chronicle of Philanthropy. (2008).).

Non-profit organizations are trying to minimize the impact of smaller wallets. A New York charity the International Rescue Committee helps resettle refugees. There was an obvious decline in donations since last year. They used to receive $500,000 a year from Wall Street companies but the sour market has changed that. The charity has cut back on mailings to recruit new donors. Instead, they are doing a “Give Thanks” campaign to bring in more individual gifts and bring in more modest online and direct mail donations. The new corporate dinners will help attract the much needed publicity.

They are looking for a media outlet to get their message out and get more donations.

            The public sector and philanthropy struggle to bring good quality healthcare to Americans. Health philanthropy lacks enough information, expertise, and funding to support effective public programs. A recent New York Times article depicted how individuals are cutting the corners and costs at getting healthcare. Many of the elective lucrative surgeries like those for weight management are not being done because people do not have the funds or public assistance to pay for it. The hospitals are struggling and desperately need more charitable funding.

Despite the budget cuts, non-profit organizations are still doing wonderful things. AmeriCares Foundation out of Stamford, Connecticut raised $24 million in cash plus millions of dollars worth of donated medical supplies last year. The company is looking to match each donor’s gift dollar to a dollar for charity.  This is appealing to donors and so far they have raised half of their $1 million dollar goal.

Charities are asking for things other than just cash. They are taking bequests, gifts, real estate, life insurance, and other alternatives than just cash or stocks. The stock market plummeting has caused the giving to go down at many community foundations. Gifts from donors have dropped by 30 percent this year at the Boston Foundation and 36 percent at the Fidelity Charitable Gift Fund. Even the really large organizations are feeling the economic strain. These companies will have to rethink how they approach the market. The economy is expected to get worse before it gets better, making tough times for non-profits even worse. “If on, the other hand, the market fails to rebound from its current level or sinks further, the asset losses may be so pronounced and widespread that an overall decrease in funding becomes inevitable,” (Lawrence, Steven “Past Economic Downturns and Outlook for Foundation Giving” PhilanTopic (2008).

Randolph Peers, the executive director at Opportunities for a Better Tomorrow helps disadvantaged youth and staff learn skills to get jobs. His organization would get $75,000 a year from the Starr Foundation for the past five years. They won’t get that money this year. Peers said the crumble on Wall Street “will affect us all…We have to tighten out budgets. We won’t see such generous philanthropy coming our way, and people in my field are going to have a harder time finding jobs for disadvantaged adults when the job market is tightening, (Blum, Debra E. “Fund-Raising Angst Backed Up by 2008 Declines in Gifts, Survey finds” The Chronicle of Philanthropy.(2008). ).

Public and private non-profit organizations are feeling the economic pitch clamping down on much needed funding. It is so bad that 30 percent of non-profits are seeing a decrease in donations. Soup kitchens and hospitals are having a difficult time keeping up with the uninsured, unemployed citizens in America. They must change how they approach the public and market better to attract new donations. Their public relations skills are imperative to their survival. Things are likely to get worse, before they get better for philanthropy.

REFERENCES

O’Sullivan, Jim and State House News Service. “Non-profits Warn Budget Cuts Would Exacerbate Downturn in Philanthropy.” The Chronicles of Philanthropy. (2008).

Hall, Holly. “How Bad Is It?” The Chronicles of Philanthropy. V20:124 (2008).

Polt, Rich. “Private Foundations Should Consider PR.” Business Week. 41273,

               (2007)

Blum, Debra E. “Fund-Raising Angst Backed Up by 2008 Declines in Gifts,

Survey finds” The Chronicle of Philanthropy. (2008).

Lawrence, Steven. “Past Economic Downturns and Outlook for Foundation Giving” PhilanTopic (2008)