Giving in a Recession

According to a recent report on the 2010 State of the Nonprofit Sector only 18 percent of the more than 1,300 nonprofit leaders surveyed expect their organizations to end 2010 in the black. While in 2009, 35 percent of organizations ended the year with an operating surplus. 61 percent of those organizations surveyed have less than three months of cash available, and 12 percent have no cash. (Source: The Foundation Center.)

80 percent of nonprofits expect to see an increase in demand for their services in 2010, while only 49 percent expect to be able to fully meet that demand. Organizations are taking a number of steps to maintain, and expand — service delivery during this period of economic uncertainty. 52 percent stated they have collaborated with other organizations to provide programs, 43 percent have added to or expanded their program offerings, 18 percent have expanded the geographic area served by their programs, and 60 percent have become more engaged with their board.

The impact of the economic crisis on foundations includes the following: 1) There is a clear expectation among grant makers that the field of philanthropy will become more strategic as a result of having weathered the economic crisis. There are long-term consequences of the crisis on their own foundations are forcing engaging in "more robust strategic planning," "more focused use of the foundation's capabilities," and being "more focused and disciplined in executing our strategy."

What all this means is that the field of philanthropy will become more strategic as a result of the world's economic crisis. With declines in overall consumer demand and our country's highest unemployment figures in a quarter century, so it is no surprise that the future outlook for the nonprofit community has been impacted by the recession.

Many experts believe that the nonprofit sector will emerge stronger, but all agree that ultimately there will be fewer organizations due to consolidation. U.S. Charity giving suffered an estimated 22 percent drop in foundation assets in 2008. It was predicted that 2009 giving by the nation's more than 75,000 grant making foundations would "decrease by around eight to 13 percent." The economic crisis has forced nonprofits to adjust their operating costs. More than two-thirds of respondents to the September 2009 survey said they have in some way reduced operating expenses since the beginning of the economic crisis, even those that still have endowments. It seems that some nonprofits are trying to preserve the value of their endowments, so that they will not permanently diminish grant making capacity, while others have determined they will be smaller institutions going forward and are making necessary staffing and expense adjustments.

Many have cut back by reducing operating expenses since the onset of the economic crisis, and by reducing staff travel and salaries. Two-thirds of the respondents that cut expenses reported reducing staff travel budgets and/or limiting staff to attend conferences. A little over one-third indicated that they had also reduced staff training and professional development opportunities.

More of the respondents expect that their giving will be lower in 2010 (26 percent) than higher (17 percent). Larger foundations, those giving over $10 million, are more likely than smaller foundations to reduce their giving further next year. Asset averaging limits the impact of economic fluctuations on annual giving, yet the extreme 2008 asset losses will not be balanced out by 2007 asset growth and the 2009 turnaround in the market.