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Nonprofits and the Economy



Here at GuideStar we try hard to listen and learn from people working in the nonprofit community. Every day GuideStar is in contact with hundreds of people like you at nonprofit organizations through emails and phone calls, answering questions, giving tips, and helping you meet the challenges of your important jobs. Another way we try to stay on top of issues is through our economic surveys which we share with the sector. Now, we are expanding our approach through a unique partnership. This week we launched a new economic survey in partnership with the Association of Fundraising Professionals, Blackbaud, Inc., the Center on Philanthropy at Indiana University, the Foundation Center, and the National Center for Charitable Statistics. By partnering with these institutions, we’re reaching out to new participants, expanding the audiences that will see the results, increasing the survey’s overall impact—and cutting down on the number of surveys you’ll be asked to take this fall.

We invite you to be part of this inaugural survey by answering the questions at the 2010 Nonprofit Fundraising Survey website: The survey will take about five minutes of your time. The questions in this month’s survey are about changes in giving. A summary of responses to date will be visible as soon as you hit “submit,” and you can go back later to check again. Data collected will be reported in the aggregate, with no reference to individual participating organizations. Results will be published jointly by the participating organizations throughout the year, with further analysis to help guide you and your colleagues in this new era for fundraising.

On another note, last week, the Chronicle of Philanthropy reported that charitable giving to the nation’s 400 biggest donor-funded nonprofits fell 11 percent in 2009, the steepest drop since the Chronicle began tracking those numbers 20 years ago.
The United Way and the Salvation Army, which saw decreases of 4.5 percent and 8.4 percent respectively, actually got off relatively easily. Other top 10 organizations like the Y (17.2 percent) and Food for the Poor (27 percent) reported much bigger drops. Experts don’t expect charities, which are as battered by the recession as any other industry, to do much better in 2010 than they did in 2009; most fundraising directors say they’re expecting growth of just 1.4 percent over last year.

These results track with GuideStar’s own most recent economic survey, released in August, which showed that 40 percent of respondents saw a further decline in contributions in the first five months of 2010 compared to the first five months of 2009. At the same time, a majority (63 percent) saw an increase in demand for their services. As I said before, there’s no doubt that the nonprofit sector continues to face an incredibly difficult philanthropic environment

One academic researcher responded in the Chronicle that our interpretation of the survey results was too bleak. Here is our response which was published Sunday in the Chronicle:

In a letter to the editor (“The Nonprofit World’s Finances Are Not as Bleak as a New Study Suggests,” September 23), Lester Salamon commented on GuideStar’s 2010 Economic Survey, taking us to task for what he felt was an overly grim picture of the effects of the economic downturn on the charitable sector.

We at GuideStar stand by our interpretation of the data resulting from our economic survey. While we are pleased for each nonprofit that has moments of good news, the data is clear in its conclusion that many continue to face great challenges, and most have a long way to go to achieve the success they experienced before the recession.

One important aspect of our findings with which Mr. Salamon disagrees is the impact of the decline in charitable giving. Although it may be statistically correct that “such giving accounts overall for only about 12 percent of nonprofit revenues,” when you start to actually look at individual organizations, you see a different picture.

Charitable revenues, when viewed in the aggregate, are dominated by a relatively small number of very large health-care providers, universities, employee-benefit trusts, and the like that derive most of their revenue from program services. For the 4,102 respondents to the GuideStar survey that gave us sufficient information to track back to their Form 990 filings, the median dependence on charitable contributions was 44 percent; for those with annual revenues under $5-million, about a third of respondents depended on charitable giving for 75 percent or more of their revenues.

There is another aspect of the GuideStar survey, however, that is difficult to convey in numbers. There were 7,014 usable responses, and nearly 3,000 of the respondents made comments about how their organizations were doing.

Although 69 percent of survey respondents reported that their 2010 budgets had increased or stayed about the same, this is not necessarily an unalloyed sign of good health. Consider these typical comments from organizations that didn’t cut their budgets in 2010:

“It was better than 2009, but not as good as 2008. We do feel that we’re no longer in free-fall.”

“Cash flow continues to be the problem. We will survive but we may have to cut programs and positions.”

“We have increased revenues by about 50 percent but most is one-time stimulus funding and will not likely continue.”

“Due to decrease in donations, we had to rely on credit to continue operating and now we are in debt.”

“We are struggling financially due to the decrease in contributions.”

“We are operating out of our reserves. We have about six months left and we will fold if no money comes in.”

To be sure, not all the comments are negative, and many of them show resilience as old organizations learn new strategies for raising funds. But the overall tenor of the comments from organizations we are in direct contact with suggests a sector that is nervous and uncertain about what the future holds.

If we report that things are better than they are, the individuals and institutions that are in a position to help may not step up to the plate.

We hope you find these surveys helpful as you make your plans for the remainder of 2010 and 2011. One of the characteristics I like best about my nonprofit colleagues is their optimistic, can-do attitudes. We are resilient and determined. This continuing economic downturn is difficult, but not impossible. What makes us stronger – and more creative and innovative – makes us better. Good cheer to all.

Bob.jpgThe preceding is a guest post by Bob Ottenhoff,  Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.

Topics: Economy GuideStar