Reprinted with permission from the Chronicle of Philanthropy

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No matter how much success the 400 top fund-raising organizations in the United States achieved last year, the future looks gloomy.

Particularly since the September 11 attacks, charities have seen a drop in donations, initially because mail appeals were canceled and donors steered contributions to relief efforts. Within the last few weeks, mail potentially contaminated by anthrax has worried people about opening letters, threatening to pose yet another hurdle to the crucial end-of-year fund-raising push.

"Everything happening right before the best giving season cut into our ability to approach people," says Alyssa Herman, director of development for Doctors Without Borders USA (Médicins Sans Frontières USA), in New York. The international relief group lost $2-million in expected revenue after halting an appeal scheduled to be sent immediately after the attacks.

As a result of anticipated fund-raising shortfalls, many charities are proceeding cautiously with new programs, hiring additional staff members, or spending on travel. The fund-raising climate does not seem likely to improve soon: a recent poll by Independent Sector, a coalition of major nonprofit organizations and grant makers, found that half of the 1,009 people it surveyed said the sinking economy would negatively affect their giving decisions.

Government officials have started to take notice of the plight of charities.

President Bush recently recorded a public-service announcement for United Ways, describing their support of child-mentoring and drug-treatment programs, as well as shelters for people who are homeless or abused. "All of us have a responsibility to promote these efforts--now more than ever," the president says in the announcement. "I encourage all Americans to support their local United Ways, to help build--and rebuild--communities we can be proud of."

Two U.S. senators also have proposed tax-relief legislation intended to spur giving to all types of charities.

Sharing Strategies

As charities head into the final stretch of this year, fund raisers are hastily comparing strategies for how best to proceed given the uncertain economic outlook.

 

At the Salvation Army in Des Moines, some of the group's donations are being channeled toward relief efforts instead of local needs, such as providing food and financial help to those who need it to pay rent and utility bills. Two out of five donations made in response to an August appeal by the local charity have been directed to the relief efforts, says Carl Bump, director of development and communications.

As a result of this earmarking, and because fund raising was already down 10 percent before the attacks, the food bank the charity helps finance can only distribute three days worth of food, instead of five. "It's great that we helped out with September 11, but there are still needs in the Des Moines area," says Mr. Bump, who hopes donors "still budgeted for the local end."

The attacks also affected fund raising at Habitat for Humanity International, which canceled a September mail appeal, losing $900,000 in projected revenue. The setback prompted the group to ask several donors to accelerate long-term gift payments.

For example, a donor who pledged $500,000 over five years made an extra payment this fall, says Paul C. Miles, acting senior vice president of development.

The house-building charity, headquartered in Americus, Ga., is scrambling to make up lost ground. In October the group sent an appeal to 1 million people who had donated to the group in the past -- two and a half times the number originally scheduled to receive it, says Mr. Miles. The charity also revamped its Web site, making donation information more prominently featured on its home page.

Even if those strategies succeed in quickly obtaining donations, Habitat for Humanity is still scaling back its annual goals. The charity had planned to build an additional 1,400 homes this year; now only 950 additional homes will be built, says Mr. Miles. He adds that the group also expects losses in corporate giving: "They just don't have the philanthropy budget that they did a few years ago."

Revenue Lost

Other nondisaster relief charities, including Girl Scouts of the USA, in New York, are feeling the pinch from corporations that suffered stock losses, decided to give instead to disaster-relief efforts, or both.

"It's a double whammy," says Diane Pike, director of development. "Especially in New York, we are more acutely aware of it." A company recently decreased its support for Girl Scouts of the USA's 90th anniversary celebration next March, from $250,000 to $100,000. The group was hoping to raise between $2-million and $3-million at the event. "We are probably not going to realize that revenue," says Ms. Pike.

 

Worries about the uncertain fund-raising climate this year run so strong that two New York organizations -- the American Civil Liberties Union Foundation and the Museum of Modern Art -- declined an invitation to be highlighted in profiles in The Chronicle's Philanthropy 400 coverage. The groups said they felt it would be inappropriate for them to talk about successes in 2000 given recent events.

'Tied to Market Cycles'

Many charities blame the economy, rather than the September terrorist attacks, for sluggish fund raising. Contributions from individuals to the Jewish Communal Fund, in New York, decreased by 13 percent during its 2001 fiscal year, which ended June 30, compared with the year before, says Susan Dickman, executive vice president of the charity. The fund manages more than 1,600 donor-advised funds, which allow donors to obtain a tax deduction on gifts to a community foundation or similar charity, then recommend how to distribute the money. "We are tied to market cycles very strongly and the year 2000 was a good one," she says. "2001 will not be as strong."

Richard Geswell, executive vice president for revenue and marketing for the Leukemia & Lymphoma Society, in White Plains, N.Y., says that even before September 11, "we were already bracing for a much more conservative year." Officials are now feeling even more uneasy about their Teams in Training fund-raising program, which trains people to run marathons and, in exchange, asks them to raise pledges from friends and family. The marathon program, which operates in about 40 locations, generates about 40 percent of the society's $129.8-million in annual contributions.

"For the most part, we suspect people will want to travel less distance to get to a marathon venue," Mr. Geswell says. About 40 of the 400 people who signed up through the society to run in the Dublin marathon in October asked to switch to an American location. However, Mr. Geswell is encouraged that participation in athletic events remained strong in the weeks following the attacks -- at a 100-kilometer bike ride in Portsmouth, N.H., in September, 100 of the 105 individuals who had signed up were present, well within the normal drop-off range for such an event.

 

While September turned out to be a good month for the charity, with fund-raising revenues up 15 percent from the amount raised during the same month last year, Mr. Geswell is planning conservatively for 2002. He says a major test for the charity will be what kind of response it gets during its new recruiting cycle, in which direct mail is being used to solicit marathon participants for next winter and spring.

Paring Goals

Other groups are also nervous about how the slow economy will affect future fund raising. Since June, the Trust for Public Land, in San Francisco, has experienced a 20-percent decline in direct-mail gifts, says Ann Root, associate director of development for the national office. While mail appeals raise only about $1.2-million annually, a small portion of the group's budget, the environmental charity is also concerned about declines in gifts from foundations, whose endowments and grant budgets may be down along with the stock market over all. "I would imagine that ultimately that is going to have an impact" on the group's fund raising, says Ms. Root.

Disabled American Veterans, in Cold Spring, Ky., has seen fund raising sink about 10 percent compared with the fall of last year, says Max Hart, the group's director of fund raising. The charity, which raised $101-million last year, decided in September to pare its fund-raising goal this year from $97-million to $90-million. "All nonprofits are down, and have been down since last fall," says Mr. Hart. "Last year we had big capital gains, this year we will have big capital losses."

'Don't Fill It'

While many charities on the Philanthropy 400 have avoided slashing jobs or programs, officials are being cautious about hiring personnel, traveling, and other spending. This fall, officials at the Mennonite Central Committee, in Akron, Pa., are telling staff members not to spend any budget surpluses, says Dave Worth, a fund raiser for the group. The current policy, he says, is "if there is a new position, don't fill it, just stick with what you've got."

At Direct Relief International, Thomas E. Tighe, the executive director, has cut costs by performing tasks himself, such as writing copy for the group's new Web site, instead of hiring extra personnel. Even though fund raising lags $200,000 behind expectations so far this year, the group, in Santa Barbara, Calif., has not trimmed any programs or staff members. However, the charity shelved other projects, such as resurfacing the group's warehouse parking lot. "We've had to defer everything that is deferrable," says Mr. Tighe.

In an appeal mailed to 300,000 people who made previous donations to the Planned Parenthood Federation of America, Gloria Feldt, the president, noted that the New York-based organization's "fund raising had come to a virtual halt" immediately after the September 11 attacks. She projected that, as a result, the charity would end the year $1.9-million short in an "already tight budget." The letter asked recipients if they could make an extra gift of $15 or more to help close the budget shortfall.

In September, the group raised a third less money, or $700,000 less than it raised during the same time last year, says James Minow, Planned Parenthood's vice president for development. However, the organization was reassured by the fact that original projections had suggested that the shortfall might be even greater. Officials expect a similar drop in October results, but Mr. Minow hopes figures for November and December will improve as more time passes after the attacks.

"Right now we are feeling that our donor loyalty is exceptionally strong and most of our donors will continue to be with us at this very difficult time," he says.

Strategy Meetings

While charity officials can't jump-start the economy, fund raisers are seeking strategies to make the most of the current climate. Charity officials have been meeting around the country to discuss new challenges that have arisen since the September 11 attacks.

At a Washington symposium last month, direct-mail fund-raising consultants told the audience that now is the time to focus on longtime supporters, not to approach new donors. "The organizations that have built a strong link with donors -- it will pay off," said Frank O'Brien, president of O'Brien McConnell & Pearson, a fund-raising consulting company in Washington.

While he and other consultants advised most groups not to use the attacks, or issues related to the attacks, in fund-raising appeals, he said that charities should not send appeals that "make apologies for an organization's existence."

The United Way of Central Maryland, in Baltimore, is focusing on major donors to reach its goal of $45-million by December 15. To compensate for local corporate layoffs, which have reduced the number of employees able to donate to the United Way's on-the-job campaign, the charity has pursued donors who can afford to give $10,000 or more. Board members are being asked to approach people in their social or professional circles for help. Since January, the United Way has received seven gifts of $100,000 or more, including one that arrived in late October.

Congress Proposes Help

In addition to retooling their strategies, charities are receiving some outside help to bolster fund raising, including from members of Congress who are proposing tax-relief measures aimed at increasing individual and foundation giving.

Sens. Rick Santorum, a Pennsylvania Republican, and Evan Bayh, an Indiana Democrat, are pushing for passage of several charitable tax breaks, saying that many local charities are running short of funds because so much money has been diverted to aid attack victims. The legislation "creates an incentive for people to give to their local charities also," Senator Santorum said.

Some foundations are also stepping in with assistance. Janet Atkins, president of Philanthropic Advisors, in Boston, which advises 35 family foundations on philanthropy, says that while she is ordinarily not "Pollyanna-ish" in her outlook, she strongly expects her clients to increase their contributions to charity in the wake of the attacks and the economic downturn. So far, most of the foundations she advises have pledged to give out about 6.5 percent of their assets, on average, a figure that exceeds the minimum 5 percent of assets that is generally required to be paid out to charities each year by the Internal Revenue Service. The 35 foundations collectively award about $100 million in grants each year.

Ms. Atkins says many foundations she works with made grants to relief organizations in addition to maintaining existing grants to other groups. "Either it is for patriotism or it is a signal to the nonprofits that have received their gifts before that staying the course is very, very important," she said. And in some cases, she said, they are making additional contributions to the organizations they have supported in the past "because they are concerned about the kind of retrenching they have read about." However, the foundations may not make grants to new causes or groups as they maintain levels of support for existing groups, says Ms. Atkins.

Years Ahead

While some groups are beginning to brace for a rocky 2002, others say it could be months before some nonprofit groups feel the effects of a slump in the economy.

At the Orange County Community Foundation, in Irvine, Calif., contributions rose by nearly 200 percent this fiscal year, which ended June 30. Donors so far are not canceling support for any programs, says Shelley Hoss, the foundation's president. "Nobody we have been working with has said on September 12, 'I don't want to continue with this,'" says Ms. Hoss.

The effects of the economy on giving, she says, "will be something we will look at over a period of years, not months or weeks."