Financial turmoil threatens nonprofit coffers

October 20, 2008
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Fundraising consultant Keith Hopkins is optimistic that donors won’t lock up their wallets in the face of the nation’s Black October.

The Grand Rapids Community Foundation’s Marilyn Zack thinks some nonprofits that rely on the annual year-end push for donations could be disappointed this year.

Meanwhile, nonprofits are hoping for the best but preparing for possible belt-tightening. This month’s financial crisis has nonprofits on edge as they enter the busiest season of the year for donations and fundraising.

“That uncertainty that we’re all feeling right now, combined with the reality of a lot of value being lost in the market, to me makes for kind of a perfect storm when it comes to charitable contributions and how that’s going to impact nonprofits at the year-end,” said Marilyn Zack, GRCF’s vice president for development.

“The timing’s bad. This is everybody’s busiest time of year if you’re in the nonprofit sector. They (donors) are having to make these charitable decisions with all this going on. I just don’t know how it’s not going to have an impact.”

Hopkins, a fundraising consultant from Ada, said studies show that in the past 30 years, the only year-to-year decline in giving followed Black Monday in 1987, and that was a dip of just 1 percent.

“People scale back giving a bit. When they relax and time passes, they make up the difference,” said Hopkins, president of the 200-member West Michigan chapter of the Association of Fundraising Professionals.

“I think that most of our membership is falling back to the basics, building a strong case for whatever your organization does and taking that case to people in a face-to-face manner,” he said.

Nonprofits that rest on endowments are watching the stock market with trepidation, while those that rely more on annual donations are worried about donors’ ability to give this year, said Tom Kyros, Varnum, Riddering, Schmidt & Howlett partner and president of the West Michigan Planned Giving Group.

“In all honesty, I would say it’s too early to tell,” Kyros said. “I think it will probably be a year from now when we all say, ‘Oh, now I see what happened last year in terms of all that.’ People are certainly talking about it now, and nonprofits, I think, are worried about it now and probably will start seeing they are behind budget now.”

 He said he hopes that, should nonprofits be forced into a cost-cutting mode, they will keep personnel devoted to planned giving.

“It takes a long time to develop a solid planned giving plan. If you use a downturn in the economy to cut there, you might have just thrown away five or 10 years of work,” Kyros added.

Several nonprofit organizations expressed concern about how the financial crisis will impact them.

Todd Jacobs, Ferris State University director of planned and estate giving, said the older population has the experience of the Great Depression to temper their financial decisions today.

“What we’re seeing is that donors, while they are still making major gifts, that process is taking a longer period of time. Someone who is looking at making a gift of $100,000, it may take them one year to make that determination. Now it’s taking 12 to 15 months waiting till they feel comfortable that they’re still going to be able to make those gifts.”

At Evergreen Commons, a senior citizen community center in Holland, a recent auction raised $116,000, despite the loss of several banks as sponsors, Director of Development and Marketing Abby Reeg said.

“We’ve just had to invite a different variety and new people to the table to help us out, and it still worked out,” Reeg said.

With a $3 million budget, the organization relies on fundraising for about one-third of that amount. Reeg said the organization has been offering a six-month informational series for seniors about financial planning and estate giving. Just last week, the organization unveiled its new Legacy Society wall that honors people who have joined the new group for those who have made an estate gift to Evergreen Commons.

Proaction Behavorial Health encompasses a half-dozen formerly independent nonprofits devoted to mental health and substance use disorder counseling and treatment, including Life Guidance Services and Project Rehab. President Mike Reagan said it’s disappointing that just when the stress of dealing with the economy means more people need the services, he expects belt-tightening ahead.

“It means a slow erosion of what we do, not in quality, but in capacity,” said Reagan, who employs 250 to 275 people in Grand Rapids and Detroit. “What it might do to our funding, we don’t know. We have to be prepared to turn on a dime in terms of reductions.”

Proaction generally has less than $100,000 in donations annually, and most funding comes from government contacts and the Heart of West Michigan United Way.

The United Way is in the first year of a three-year plan to change its giving process, said Michael De Meyer, vice president of resource development. It’s a response to changing giving habits, he said.

While the United Way still will solicit for gifts in workplaces at the end of the year, the new model seeks to engage donors all year round, not only with donations but with volunteer opportunities as well, De Meyer said.

“We would look at it as getting much more sophisticated in being able to organize donors at various areas of interest at different stages of life,” he said.

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