Monday, September 22, 2008
If charities catch a cold when Wall Street sneezes, what should they expect in the coming weeks? Wall Street has a very bad case of pneumonia and is essentially on life support as we speak. According to a WSJ article in today's paper, Charities are in for some seriously tough times:
The failure of Lehman Brothers Holdings Inc. and pain at other big firms threaten to cut into the corporate and individual donations that more than a million nonprofit organizations rely on for basic operations and charitable programs. Officials at charities are trying to devise creative ways to stand out. They are making urgent appeals through direct-mail and email campaigns and taking to the airwaves. Charities also are gearing up to tap their wealthy board members and other well-off supporters for extra cash. If they fail, charities may have to cut staff or seek loans. At Covenant House New York, the nation's largest adolescent-care agency, which serves homeless, runaway and at-risk youths, board members convened Thursday and discussed a possible "doomsday" scenario in case they lose upwards of 40% of their income, said Georgia Boothe, the nonprofit's associate executive director. The charity needs to raise about $3 million through direct mail in December, she said, adding, "We're worried." Direct-mail giving in July was off 15%, she said.
"There will be fewer dollars coming in the doors," he said. "There needs to be thought given to strategic alliances, partnerships, back office consolidation, mergers and acquisitions. In many ways, it's a variation on what's going on Wall Street." The collapse of corporate balance sheets, along with strained household budgets, could start cutting into the more-than-$300 billion national charitable-giving pie. U.S. charitable donations only grew by 1% adjusted for inflation in 2007, according to the Giving USA Foundation. That was before the worst of the housing correction and the current Wall Street crisis.