We've heard lots about how the recession has hurt individuals and business in the recession. But what about the impact on non-profit organizations and charities? Are they suffering as well? Yes, but not all equally. And the times when many charities flourished may not return anytime soon.
The decline in support for charities may mirror the problems of the middle class during the recession. Studies of household income in the U.S. has shown that between 2007 and 2009, household wealth has declined an average of 24.5%
Here's some data on the state of affairs in Western countries:
- In an article by Michelle Nichols for Reuters, she reported on a conference panel of non-profit experts who said that 2009 was extremely difficult for philanthropic budgets.
- In the U.S., donations to charities reached an estimated $307 billion in 2008, according to Giving USA Foundation, with 75% of the money coming from individuals, 5% from corporations and 13% from governments or foundations.
- The Guardian in the U.K. reported that the amount given to charity has fallen 11% during the recession. Medical charities have appeared to weather the recession better than others.
- Paul Waldie writing in the Globe and Mail cited data from the Toronto United Way, which reported a 30% drop in donations.
- In Canada, many non-profits receive funding from Federal and Provincial and municipal governments, and that has declined significantly during the recession.
- The Center of Philanthropy at Indiana University and Giving USA have both concluded that "during economic downturns, giving tends to decline, but "most households continue to give during times of financial insecurity, although somewhat less."
- The Vancouver Foundation survey in Canada reported a drop in funding for most non-profits in 2009 and 2010, and that a significant number were facing a crisis.
The problem is not just that donations reflect difficult economic times. Major donors and governments are beginning to look at charities in a different light. The New York Times cited the fact that Hawaii has proposed a 1% tax on charities; Kansas is considering making nonprofits pay sales taxes, and Pennsylvania is thinking about removing a property tax break for charities. Canadian tax officials are cracking down on charities that use tax shelters, arguing that these shelters are effectively tax dodges.
Attitudes too, of donors are changing. Penelope Burke's Cygnus Donor Survey in 2010 found that many donors are shrinking the number of charities they support while increasing the donations to the ones they do. She also reported that there is donors' growing dissatisfaction with certain fundraising practices or lack of critical information, and prefer to give to charities that provide donors with measurable results on their gifts, and accounting for costs per dollar, and negative view of charities that over -solicit.
In a report for the Cass Business School in London, U.K., authors Jenny Harrow and Cathy Pharoah concluded that charities would have to develop collaborative and non-competing strategies, and innovative ideas to survive.
One charity, The Variety Club of B.C., Canada, may have inadvertently anticipated tough times, and has formulated successful strategies to weather tough times. Variety Club raises funds and distributes grants throughout British Columbia to inspire hope, enrich lives and build a better future for children who have special needs. Variety Club B.C. was able to help over 1300 families and 50 organizations that help children with special needs in the past year.
Variety Club has been able to successfully raise millions of dollars each year based primarily on individual donations, with minimal corporate help and no government assistance. Variety Club holds a blockbuster Telethon each year, which is wonderfully supported by hundreds of volunteers and brings in a large part of its revenue. In all, the Club puts over 200 events during the year.
Barbara Hislop, Executive Director of the Variety Club of B.C. says that donors who have given to several charities before the recession are rationalizing their gifts now, and being selective about where they give. Children and the elderly seem to have a much higher priority, particularly if there is medical need. Hislop has also found that many donors who have given financially in the past who are unable to do so now, provide volunteer service instead. Part of the success of Variety Club, Hislop comments, is due to their Legacy Program, which provides for a long term revenue stability. She also argues that donors want to see an immediate impact on their donations, which Variety Club can provide, and also accountability in terms of administrative costs.
Hislop says the times are different, and some charities may not survive, in part due to an overlap or duplication in services or targets, which means the more strategic and successful ones will survive.
In any case, the recession has hit the non-profit and charity organizations in a similar way to the private sector in that we see more discerning consumers and donors who want to see how their dollars have immediate impact and benefit and accountability.
