Roundtable Discussion: Part I

Charity Leaders Discuss Fundraising in the Down Economy

By rating charities we endeavor to bring greater transparency to the charitable sector and in doing so, we strive to build productive, long-term relationships between donors and the charities they support. To that end, we recently asked representatives of a variety of causes to share their perspectives on two philanthropic issues.

In Part 1 of the conversation, we asked the charities questions about the fundraising landscape. Those questions and answers are below. In Part 2, the nonprofit leaders tackle issues surrounding how the public can identify high performing charities. Part 2 will be available on our site on December 1.

The Contributors

We invited executives from each of the charities on our Advisory Panel as well as one charity from each of our 9 categories (when possible we invited the charity that had earned the most number of consecutive 4-star ratings). The following ten charities agreed to participate in the discussion.

John Butler Director of Marketing, African Wildlife Foundation	Jeremy Kohomban Ph.D., President and CEO, The Children’s Village	Nicholas Torres President, Congreso de Latinos Unidos	Susan Paresky Senior Vice President, Development, Dana-Farber Cancer Institute & The Jimmy Fund	Curtis Hail President, e3 Partners Ministry
Robert Egger Founder and President, DC Central Kitchen	Deanne Pearn Co-Founder & Chief Development Officer, First Place for Youth	Angel Aloma Executive Director, Food For The Poor	Beth Stevens Vice President for Development, Institute for Justice	Jay Jacobs Chief Executive Officer, Summer Search

The Conversation

Charity Navigator: According to Giving USA, the drop in giving from 2007 to 2008 was the biggest in the 54 years it has been tracking the data. Have donations to your charity mirrored what is happening on a national level?

John Butler: AWF finished the 2007 to 2008 giving season as well as can be expected under the economic conditions, experiencing roughly a 15% decrease in individual, unrestricted donations. Fortunately, we remained steady in our corporate, foundation, and government revenues.

Jeremy Kohomban: No, they did not mirror the national drop. In fact, 2007 was stronger than anticipated and the drop in 2008 was only 1.5%. However, we are anticipating a significant drop in 2009, driven by Foundation’s pulling-back on their commitments. 

Nicholas Torres: Our foundation and corporation investments have remained stable. We are primarily funded by government with foundation and corporation support. However, as we are building up a base of individual support, we have noticed that it is much more difficult for people to open up their personal check books and make a donation. They are more willing to leverage their time or corporate support.

Susan Paresky: We were cognizant that the economy and landscape had changed, so we needed to do things differently. We modified our strategy and ended the year with more donors than the previous year, which we considered a success.

We did, however, raise less money than we had planned. We were in the sixth year of our seven-year capital campaign—Mission Possible: The Dana-Farber Campaign to Conquer Cancer—so the goal we had set for the year was actually lower than what we brought in last year. We were very happy with our fundraising this year given the state of the economy and the fact that we were in a declining year of our campaign. In fact, we reached our $1 billion campaign goal one year early. This is the direct result of our base of supporters staying with us and continuing to give generously to a cause close to their hearts.

Curtis Hail: 2008 was our highest revenue year in our 22-year history, at approximately $16 million in revenues. 2009 is up over our 2008 levels. In almost all categories we are at or above prior year levels. The one major segment that has declined is institutional giving as several major foundations have reduced giving due to their smaller corpus. Overall, we feel very blessed, but do not presume on the future.

Robert Egger: We have a very diverse funding stream, and have focused strongly on individual gifts and earned revenue, so we are not as dependent on typical funding sources.

Deanne Pearn: First Place saw our individual contributions decrease by 33% from FY 2007 to FY2008, the first decrease we have experienced since our inception in 1998.

Angel Aloma: Food For The Poor has a very loyal donor base, and we are grateful for that. Food For The Poor saw an increase in donations from 2007 to 2008. The needs of the countries we serve in the Caribbean and Latin America are so great that we prefer to not limit ourselves because of historical data. With a vast array of research and the easier access to data, combined with an innovative approach, all charities should endeavor to achieve beyond the expectations of the times.

Beth Stevens: Donations to the Institute for Justice have not mirrored that trend. Our donors increased by 8 percent their contributions in fiscal year 2008 over fiscal year 2007 (our fiscal year runs July 1 to June 30). FY09 donations increased even further, to 38 percent over FY08’s numbers, thanks in part to a 1:2 challenge grant issued by a longtime Institute for Justice donor.

Jay Jacobs: In a general sense, yes, we saw a decline in total year over year revenues in 2009 verses 2008. Our fundraising events, which generate about 30% of our annual operating revenue, were down about 30% year over year. However, attendance at these events was actually up, so we are building our long-term base. The revenue loss was due to a steep drop in corporate underwriting. All other giving to Summer Search remained essentially flat from 2008-2009. We are also 2/3 of the way through a campaign to raise expansion capital and that has held up very well in spite of the downturn. 

CN: The report also predicted that it will be quite some time before contributions pick up as the historical data shows that it took three years for giving to rebound after a previous recession in 1974. What do you predict for your charity’s fundraising over the next few years?

John Butler: We are hopeful that individual giving will return to normal levels in less than three years. We have had a strong first quarter of FY 2010 in terms of individual giving. Government revenues look very strong. We suspect foundation revenues may be impacted this year given the significant declines in their endowments last year.

Part of the reason AWF is hopeful about our individual giving over the coming years is our renewed energy around individual major donors. Rather than cut staffing or budgets in this area, we have continued to staff and fund major donor activities.

Jeremy Kohomban: We continue to be anxious about Foundation giving and the lack of multi-year commitments that new initiatives require. On individual giving, we remain optimistic. While we recognize that a few of our high net worth donors have been impacted by the recession and by Madoff, our capacity to attract new donors has not diminished and an increased commitment on gifts of smaller denominations should help us rebound. 

Nicholas Torres: We are predicting that our charity fundraising will increase significantly over the next few years. However, this prediction is based upon a strategy of having a much broader support base verses a very narrow but deep support base.

Susan Paresky: We predict that it will take a few years for fundraising to come back to the levels we experienced before the recession. The economy is still sluggish, and although the markets have somewhat rebounded, there is a lot of skepticism from the public and a sense that the nation is not yet back on solid ground. A lot of people lost a lot of money, and earning it back by working and investing will certainly take time.

I believe that if an organization has a good mission and a good story to tell, then it will weather the storm. It takes aggressive planning and a dedicated staff now to position the organization for the future so it’s ready when the economy does rebound.

Curtis Hail: We agree that it will take a couple of years to see people giving again as in the past. In fact, we believe there is a “new reality”, meaning that it won’t ever be as it once was. That due to actual losses and setbacks, or due to paralysis by fear, that the donor public will not be giving as they once did. Smaller gifts, designated purposes, and higher scrutiny will be the new rule.

Robert Egger: MUCH more efforts on social enterprise, earned income and marketing. On marketing--we find that the public often supports efforts they view as innovative with continued (and escalating) support. In other words—the more money we make on our own, the more gifts we get.

Deanne Pearn: We anticipate that things will continue to decrease this year but that we may see a small uptick in the following two years. To fortify our private fundraising efforts over the next year, the organization has actually added fundraising infrastructure this year to focus on individual donor fundraising.

Angel Aloma: We are optimistically hopeful that our fundraising will continue from strength to strength, so we may never need to diminish the aid to those who are in desperate need.

Beth Stevens: We expect to return in the next few years to our normal growth rate of 6-10 percent over FY08’s numbers.

Jay Jacobs: Our goal in FY 2010 is to be essentially flat with 2008 (recovering from a dip in annual giving in 2009) and then to see reasonable growth in 2011 and 2012. Much as the overall climate may be challenging, we feel that there are good opportunities at a local, “donor by donor” level to grow our base of support. The key is our ability to engage in excellent donor stewardship and build strong relationships. If we do that, we can grow even if the macro-trends are less encouraging.

CN:  Has the economy impacted your charity’s philanthropic efforts this past year? Have you had to cut programs and services, staff, pay or benefits? Have you had to put expansion plans on hold? Have you explored the possibility of collaborating or merging with another nonprofit?

In return for providing candid answers, Charity Navigator promised the charities that we’d keep their individual responses anonymous and provide a summary of their experiences. Here’s what they told us:

• In response to the economy, we cut our budget by roughly 10% which included a salary and hiring freeze.
• Not to sound all 'we saw this coming' but we saw this coming and adjusted. As such, we’ve been able to grow our programs and add staff.
• We have not had to decrease programs, staff, or compensation; we decreased slightly our benefits; and we delayed expansion plans slightly. 
• For the years of 2004 – 2008, we provided our staff raises and performance bonuses; in 2009 we were unable to provide either. For years we also offered one free Health Insurance plan to employees, this year, we were forced to charge $50 per month for this plan. We were also forced to cut a number of government supported programs totaling about $2 million.
• We manage to efficiently maintain all our programs and services, and to keep our staff and their benefits.
• Our charity didn’t have to cut services, pay or benefits. However, for the first time in its history, the organization did not offer cost-of-living allowance (COLA) adjustments to existing staff. We hope to introduce COLA adjustments mid-year if we meet certain fundraising benchmarks.
• Given the current economic climate, we are re-examining the time horizon for expansion and perhaps slowing the process down a bit.
• Fortunately, we have been able to supplement annual fundraising revenues with expansion capital raised in our campaign. This actually enabled us to expand our program by 15% in 2009 verses 2008. We have curtailed our growth targets somewhat in future years but still project growth in each of the next three years.
• The economy has made our institution extremely mindful of our budget, and we have worked hard to cut expenses by making thoughtful, modest changes that would not negatively affect our fundraising programs. We looked at economies of scale and reduced our fundraising budget by 10%. We did not cut staff pay or benefits, and we still looked rigorously at replacing staff who left. In some instances, through attrition, we did minimally downsize our staff. And institutionally, no staff received pay raises this year.
• Fundraising in 2008 was definitely more challenging. However, by developing new initiatives and further refining traditional ones we managed to end the year at a higher level of income than in 2007.
• We’ve simply become much more focused on what we really need to achieve our outcomes. We realized that we were spending many of our resources on societal issues that are important but not directly relevant to our organizational outcomes. 
• We are also collaborating with other nonprofits realizing that we can achieve our outcomes by leveraging their resources and expertise. 
• Yes the economy has impacted us negatively, though in gross numbers our revenue is up. Designated giving has remained strong while general fund giving is weaker. We have had to cut back some programs and had workforce reduction recently to better position the organization for an anticipated difficult 2010. These issues have certainly stimulated conversations with other charities about various ways of creating synergies and achieving economies of scale, particularly in the administrative support areas.
• We never have explored the possibility of merging with another nonprofit but routinely collaborate with dozens of organizations to advance our respective missions.