Nonprofits Hindered by Financial Crisis

October 14, 2008 04:45 PM
by Jen O'Neill
In the wake of Wall Street’s meltdown, nonprofits across the country are suffering financially as demand for their services grows.

Falling From Grace

Fall is the fund-raising season for most nonprofit organizations, but for many of them, their efforts seem fruitless, thanks to the current economic climate. The New York Times reports that the first wave of the financial crisis has resulted in sizeable cuts in financial contributions from large corporations and state funding. Ultimately, the contributions and volunteers that nonprofits rely on are quickly diminishing, leaving behind the people who need it most.

As critical New York City programs—such as attendance improvement and dropout prevention—are forced to close because of inadequate funding, nonprofit organizations are going to have to find new ways of raising capital.

“If you ask me about what the future is going to look like in the next couple years, it’s going to hurt like hell,” declares JoAnne Page, the president and chief executive of the Fortune Society, a nonprofit organization that serves court-adjudicated youth.

Thousands of nonprofits are suffering from cuts in foundation giving, contributions and gifts from corporate and private donors. While many nonprofit executive directors and fund-raisers remain optimistic, others are sitting on pins and needles as they anticipate the negative effects the economy will bring. Citymeals-on-Wheels has already been forced to make program cuts, delivering one meal a day to elderly people rather than two. 

Many nonprofits and charities hope for the best but are planning for the worst, and all nonprofits are expected to take a hit in some form. The Boston Globe compared the financial crisis to an earthquake, with its epicenter striking the largest corporations on Wall Street, and the aftershocks reaching small businesses and nonprofits.

Five of the top 10 largest corporate givers are financial institutions, including Bank of America and Wachovia. Even before the financial downturn, many companies expected their donations to decrease or remain the same. The Chronicle of Philanthropy confirmed that Staples, CVS and Raytheon would contribute as much as they did last year. In the meantime, “Donors are going to be cautious in tough economic times to make new commitments,” claims Michael Sullivan, senior vice president of philanthropy at Joslin Diabetes Center. “You have to be prepared for alternative scenarios.”

Reaction: Forecasting philanthropy

The Association for Healthcare Philanthropy (AHP) remarked that nonprofits have to be creative about their fund-raising efforts, and more transparent and accountable in order to attract donations. On a positive note, a recent study conducted by AHP provides a glimmer of hope. According to Dr. John Volpe, professor at the University of Maryland University College, “the data strongly indicate that when the economy recovers from its current downturn the growth in the generosity of the American people should rise sharply.”

Related Topic: Irish giving

The United States is known to be the most generous country when it comes to philanthropic endeavors, but Ireland is also pulling its own weight to keep charitable activities alive. According to The Irish Times, philanthropy in Ireland is “only in its infancy” but “will continue to invest in activities and initiatives which will give rise to a fairer, culturally rich and advanced society.”

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