CHARITY

Charity Bracing for Tough Times Many
Charities feel vulnerable as economy slips.

The faltering economy is starting to affect a growing number of charities and the people they serve. In recent weeks, nonprofit organizations have heard from donors who are putting off big gifts, and some groups that rely mostly on small donations have also seen a falloff.

Many social-service charities — especially those in states like California, Florida, Michigan, and Ohio, which economists believe have already entered a recession — are facing increased demand and such a severe budget crunch they may have to lay off workers. Rising gas and construction prices are adding to the challenge of financing services and expansion plans that numerous charities have under way.

As signs of a long-term downturn continued to mount last week — reports showed that the U.S. economy in the final quarter of 2007 had its sharpest decline in growth since 2003 and that the number of repossessed homes grew by 51 percent last year — charities are beginning to grapple with the steps they may need to take to avert serious financial troubles.

"This is scary to me," says Michael Seltzer, a philanthropy expert, consultant, and author of Securing Your Organization's Future, a book about how nonprofit groups can survive hard times. "It's going to have a dramatic impact on individual giving, foundation giving, corporate giving, government giving. We're coming off a period of incredible accumulation of capital that led to major philanthropic gifts. We hope [a recession] won't deter that."

If past recessions are a guide, many charities can expect donations to tumble. According to figures released last week by Indiana University's Center on Philanthropy, giving dropped an average of 1.3 percent — after adjusting for inflation — during the five national recessions since 1973. (Giving during non-recession years rose 4.3 percent.)

$100 to $300 Gifts
Many fund-raising experts say charities that rely on gifts from people of modest means are most vulnerable to fund-raising troubles now, and eventually those difficulties could spread to groups dependent on affluent people who give millions of dollars.

"The real impact of any recession is going to be on the broad donor base of agencies that rely on $100 to $300 donations from people who are the most affected by the meltdown in the housing market," says Melissa Berman, president of Rockefeller Philanthropy Advisors, a New York group that counsels wealthy donors and foundations on contributions.

Historically, a bad economy affects different types of charities in different ways, according to researchers at Indiana University. Giving to religious groups remains fairly steady in bad times, dropping only marginally. Education, too, is not affected drastically by recessions.

On the other hand, civil-rights groups, community-improvement organizations and other such nonprofit groups took a hit during recessions in the 1970s. Giving to arts groups tends to experience bigger gains during good times and harder crashes during bad times.

Groups that rely on government aid are also likely to feel more of a pinch than other organizations. Already, the housing crisis is squeezing the coffers of many cities and counties and local governments will probably continue to see property-tax revenue decline, as people lose their homes and the value of real estate drops.

Charities that have built their endowments — especially with the help of the strong stock market in recent years — have a cushion that may help them weather the hard times. And they may be able to count on foundations in a way they have not in the past.

And some groups can even find new opportunities for growth as the economy changes.

Five-Year Delay In California, where the economy has been strained, arts groups are already facing signs of trouble.

Lial A. Jones, director of the Crocker Art Museum, in Sacramento, which is entering the final stretch of a campaign to raise $100-million, says she is worried about the drive, even though the museum has already secured $88-million in cash and pledges. The city is extremely hard hit by the mortgage crisis, and the number of foreclosures is among the highest in the country.

One donor has asked for a five-year extension on his promise to contribute $1-million.

The gift is tied to a property sale that the donor now wants to delay, because the property's value has plunged along with the housing market. Other sources of support are on the wane, too: The museum is expecting its grants from the city to drop by as much as 20 percent next year, on top of a 7-percent cut it already suffered this year.

At Southwestern University, in Georgetown, Tex., fund raisers have been waiting for well over a year for a big gift from a donor who had planned to make the contribution with proceeds from the sale of a company. The gift is now in jeopardy because so many corporate buyout deals, including the donor's, have been taken off the table in response to the economic downturn and the tightening lending market.

"It's a significant blow to our long-term planning, but there's nothing we can do about it," says Rick McKelvey, Southwestern's vice president for institutional advancement.

For charities that aid the poor, the strains of the economy have grown more serious. At the Salvation Army's Southern California Division, donations to the charity's year-end Red Kettle drive dropped, signaling difficult times ahead.

While the nonprofit organization is still counting some late-arriving gifts from companies and other donors, the money it raised on the street was down by 6 percent.

Meanwhile, demand for emergency assistance with necessities such as food, shelter, and medicine increased by nearly 25 percent last year, according to Lt. Colonel Paul Bollwahn, the divisional commander.

Several charities with donors in housing and some other industries report that pledges and contributions have been canceled or stalled indefinitely.

Easter Seals has been warned to expect less this year from local fund-raising events and other activities conducted nationwide by brokers and agents who work for Century 21, the real-estate company, says Jeanne Sowa, the charity's senior vice president of corporate relations. Last year, the company's contribution totaled $5.2-million.

Employment Issues
Other groups, like Salvation Army branches in western Michigan and northern Indiana, have asked employees to work nights and weekends, says Matthew Saganski, the Salvation Army's communications manager for that region.

"Our social-worker case loads are going way up," he says. "We're getting a ton of first-time clients."

Donations have also been slower than normal, and the branches are considering bringing in more volunteers for extra help.

Even for charities not in dire straits, hiring has slowed recently.

Rick Bressler, business-development manager at Professionals for Nonprofits, a recruiting firm with offices in New York and Washington, says he's noticed a higher number of applicants than usual for job searches, an indication, he believes, that employees from the corporate world are worried about downsizing."They're getting nervous and looking at nonprofits as an alternative," he says.

Recruiting volunteers is also a concern, particularly for charities that rely on them to provide transportation.

Dan Pruett, president of Meals on Wheels and More, in Austin, Tex., says gas prices for 15 vans his group uses to distribute food went up by $15,000 last year.

The increasing fuel costs have also discouraged some of the charity's 3,500 volunteers who use their own cars to deliver meals, since the nonprofit food program is unable to reimburse them for their expenses.

As charity leaders evaluate their options, management experts who have studied past recessions urge them to weigh their choices carefully before making big course adjustments.

Researchers who looked at charities affected by the last major downturn in the American economy — 2001, when the dot-com bubble popped — found that "temporary" decisions often have permanent effects.

"People thought they were making short-term cuts or changes, but there's a tendency for short-term changes to become institutionalized, to stick," says Denise Gammal, a researcher at United Way of the Bay Area, who was a co-author of a report on charities in the San Francisco Bay Area.

One of the report's most troubling findings: Charities that took on debt in the belief that they'd soon be able to repay it were mistaken. The report found that 29 percent of groups engaged in deficit spending in 2000, before the bubble burst, but 51 percent of groups did so by 2003. And many those groups were still in deficit years later.

CHARITY
Climate Change Prompts Tough Questions for Conservation Charities Conservation organizations that preserve biologically important areas are rethinking their strategy, as climate change alters the physical landscape, reports The New York Times.

Environmental groups now must grapple with questions such as should they try to prevent the shift of ecosystems focus on preserving areas least likely to change? Should they nmve species from one locale to a more suitable one, as climate changes?

In addition to considering the impact of climate change on current conservation projects, conservationists are wondering how already preserved lands will be impacted as temperature and sea level rise.

CHARITY
Elite Private Schools Boast College-Size Endowments
The average endowment per student, adjusted for inflation, has increased by 93.5 percent at the nation’s private schools in the past 10 years, even though enrollments have grown by only 11.6 percent, reports The New York Times.

As a growing number of endowments at the nation’s largest schools have ballooned, trustees have begun to hire full-time money managers. The older, better-known schools generally have the largest endowments. The endowment at Phillips Exeter, the nation’s third-oldest school, exceeded $1-billion last year, fueled by donations from wealthy alumni and its own lucrative investments, up from just over $500-million in 2002.

Fund raisers at both day and boarding schools agree that graduates feel more loyalty toward their secondary schools than to their colleges and are therefore generous donors. “I always tell people I was educated at Exeter and went to Yale,” said James H. Ottaway Jr., a former board member of Dow Jones & Company, whose most recent gift to the school was $10-million for its scholarship fund.

CHARITY Popular Nonprofit Web Site Faces Overwhelming Demand
Kiva, a nonprofit organization that lets users of its Web site make small interest-free loans to entrepreneurs in poor countries is struggling to maintain an adequate supply of loan-seeking entrepreneurs to keep up with the demand from potential donors, reports The New York Times.

Fiona Ramsey, public-relations director at Kiva, which has attracted more than $19.5-million worth of loans from more than 22,000 individuals, said would-be lenders are surprised to be greeted with messages that encourage them to check back soon for giving opportunities.

“We don’t want people coming to the Web site who want to make a loan and there’s no one to loan to,” she said.

Frustrated visitors have sometimes contacted the site demanding an explanation for the lack of needy people to help. The group, which has a 23-person staff, works with microfinance institutions in 39 countries to line up potential borrowers. “We could keep, for lack of a better word, a stockpile of entrepreneurs,” Ms. Ramsey said. “But these are real people. We’re not looking at them as inventory.”

CHARITY
Senators Solicit Information From Wealthy Colleges and Universities
Two key U.S. senators sent a letter to 136 colleges and universities on Thursday requesting detailed information on endowment spending, tuition costs, and financial-aid policies over the last decade, reports The Chronicle of Higher Education.

Sen. Max S. Baucus, Democrat of Montana, and Sen. Charles E. Grassley, Republican of Iowa, announced plans to send the letters just a few hours after the release of an annual report showing that college endowments earned an average return of 17.2 percent in 2007. Colleges with endowments of at least $500-million as of June 30, 2007, are to receive the 50 questions.

The senators say that since university endowments receive large tax benefits, these institutions must prove how they are working to keep the cost of tuition down for students, particularly those from low- and middle-income families.

“Tuition has gone up, college presidents’ salaries have gone up, and endowments continue to go up and up,” Mr. Grassley said in a written statement. “We need to start seeing tuition relief for families go up just as fast.”

Colleges have expressed a mixed reaction to the letter, but many are concerned that 30 days is insufficient time to respond. Robert J. Birgeneau, chancellor of the University of California, told The New York Times that “I believe that Senator Baucus’s and Grassley’s intentions may be admirable, but understanding university finances is an extremely complex matter, especially in public colleges and universities.”

CHARITY
Public Broadcasting Decries Proposed Federal Cuts
For the past seven years, Congress has been able to restore the Bush administration’s proposed cuts in federal money to public broadcasting. But, The New York Times reports, this year may be different.

In its proposed federal budget plan, the Bush administration intends to cut in half the $400-million allocated to public broadcasting for fiscal year 2009 and cut $220-million from the $420-million already planned for 2010. Along with these cuts — the deepest proposed in the past eight years —
President Bush intends to eliminate funds for 2011, along with any additional funds in 2009 for stations to convert to digital transmission, which is federally mandated.

President Bush Includes Charitable-Giving Incentives in Budget Proposal
In his administration’s newly released 2009 budget, President Bush proposed making permanent a number of temporary incentives for charitable giving. He also proposed eliminating the two-tier structure of taxes that private foundations must pay on their investment income, replacing it with a flat rate of 1 percent instead.

The following provisions would become permanent if Congress were to approve President Bush’s budget:

Individuals age 70 1/2 or older could donate up to $100,000 from their Roth Individual Retirement Accounts (IRAs) without paying income tax on the money. A similar provision was in effect in 2007, but it expired at the end of the year and has not been extended.

Grocery stores, restaurants, farmers, and other small businesses could claim an “enhanced tax deduction” for donating excess food to charity. This provision also expired at the end of 2007.

Companies that donate computers, computer hardware, and software to schools and libraries would qualify for a charitable deduction.

Donors could claim a deduction for partial donations of land for conservation purposes.