Every year for the last decade, the Child and Family Network Centers, a small, Virginia-based non-profit, submitted a fundraising request to the Freddie Mac Foundation.
And every year, the charitable arm of the mortgage-finance giant contributed thousands of dollars that helped the non-profit provide education and support to hundreds of needy children.
But this year’s $350,000 request went to the foundation in early September — days before the federal government took over Freddie Mac and mortgage sibling Fannie Mae amid rising losses. Now, both firms’ charitable grants, questioned by some as politically motivated, are on hold pending a Federal Housing Finance Agency review.
“We are in deep trouble if we don’t hear something soon,” says Barbara Fox Mason, the non-profit’s executive director. “That’s the money we count on to carry us through to the holidays,” when other contributions arrive.
FHFA Director James Lockhart wrote on Oct. 2 “it is envisioned” that Fannie and Freddie “will continue to make charitable contributions.” Corinne Russell, an FHFA spokeswoman, said Friday no final funding decisions have been made.
“If it doesn’t come through at all, we’ll have to cut families,” says Mason.
The economic crisis threatening the nation with the worst recession in decades has set off tremors among non-profits and charities large and small that rely on donations from Wall Street, industry and average Americans.
The potential impact is just now taking shape, because 2009 grants from many philanthropic foundations are still being set and the end-of-year holiday giving season is opening. Although it’s difficult to draw broad conclusions from reports by individual charities, many non-profits say they are feeling an economic pinch.
“This is the worst fundraising environment I’ve ever worked in,” says Jeffrey Towers, chief development officer for the American Red Cross, which won promises of $100 million from Congress this month after 2008’s hurricanes, tornadoes and floods depleted the group’s disaster-relief reserves.
The Red Cross is suffering as much as a 30% drop in responses and contributions from new donors, and corporate donations are “coming in at lower amounts” at the halfway point of a campaign to raise $100 million by Dec. 31, Towers says.
Across the nation, philanthropic organizations report similar omens, some tied directly to this fall’s credit crisis and plunge of financial markets.
Lehman Bros.’ September filing for bankruptcy court protection could take a financial toll on non-profits as disparate as Doctors Without Borders, an international group that supplies emergency medical aid, and the Grand Street Settlement, an organization that provides education and social services on Manhattan’s Lower East Side.
Since 2005, Lehman’s charitable foundation gave more than $1.5 million to fund Doctors Without Borders’ relief efforts for the Asian tsunami and other disasters. The foundation also gave thousands of dollars to Grand Street’s College and Career Discovery Center, which carries the Lehman name.
Jennifer Tierney, development director for Doctors Without Borders, awaits word on whether Lehman’s bankruptcy filing will affect a pending application for additional funding. “We really don’t know what the implications will be,” she says.
The Lehman Foundation notified Grand Street last year that it would “rotate out” as main sponsor of the college program, says Allen Payne, the non-profit’s director of development. “We had a plan to go back to them” for one more year of funding, says Payne, “but now that’s not going to happen.”
A freeze on spending
Even without any official funding cut, last month’s federal takeover of Fannie Mae dealt a financial blow to N Street Village, a Washington, D.C., non-profit that provides services to homeless and low-income women. The government action induced some potential donors to believe — incorrectly — that the Nov. 22 walk-athon fundraiser sponsored by Fannie Mae had been canceled.
“We budgeted $325,000 for the walk-athon this year, and we’re not even halfway there yet,” says Mary Funke, N Street’s executive director. “Corporations that normally sponsored us for this kind of event stopped. And many individuals have either not registered, or they registered for a lower amount.”
She also worries that Freddie Mac sponsorship for an annual fundraising gala won’t materialize. In all, that could face N Street with what Funke calls a “worst-case scenario (fundraising) deficit of about $500,000.” With an eye on the slumping economy, the non-profit froze all hiring and halted spending on all but core program services as of Oct. 1.
The next, unwanted, cut, says Funke, could be month-long salary furloughs, “starting with me.”
Trouble in Michigan
The foundering fortunes of the nation’s automakers have similarly triggered spinoff financial concerns at a range of charities. Last year, the Big 3 — GM, Ford and Chrysler — accounted for roughly 40% of overall giving through workplace fundraising pledges to the United Way for Southeastern Michigan, says Doug Plant, the non-profit’s vice president of fund development. This year, as the pledge season gets into full swing, the goal’s been cut to 35%.
“The Big 3 have been the biggest contributors, both corporate and individual employees. Both of these sides have really been impacted by the economy,” Plant says.
United Way’s local 211 assistance line has logged about 25,000 phone calls for housing aid this year, five times the 2007 volume, says Bill Sullivan, director of the southeastern Michigan program.
Numbers tell a similar story at the United Way of Central Ohio. There, demand for groceries at local food banks is up 14% this year, says Kermit Whitfield, a spokesman for the non-profit. Calls to a 211 line that links the needy with food banks and other services are up 21% just since July, he says.
However, the overall outlook for charitable giving isn’t necessarily as gloomy as recent economic gyrations might suggest, says Steven Lawrence, senior research director for the Foundation Center, a key information source about U.S. philanthropy.
Total giving by foundations declined from $30.5 billion in 2001 to $30.3 billion in 2003, during the last national economic slump, Lawrence wrote in an analysis this month. Even so, he wrote, many foundations dug deeper to cover previously approved funding commitments, and some “even increased their payout rate … to the communities and organizations they had long supported.”
Foundation giving to non-profits actually increased slightly during four of five U.S. recessionary periods dating to 1980, Lawrence says. Overall charitable giving dipped little more than an inflation-adjusted 1% in most of the eight recessionary years since 1971, according to research conducted by the Center on Philanthropy at Indiana University for the Giving USA Foundation.
“If there is a very substantial erosion in giving, it would be the first time in our post-World War II history,” says Reynold Levy, president of Lincoln Center for the Performing Arts in New York.
But that doesn’t mean a given charity won’t suffer. Nearly two-thirds of 100 grant-giving officers surveyed this month by the Wall Street-based Committee Encouraging Corporate Philanthropy said they did not feel their 2009 contribution budgets were necessarily secure.
And the percentage of fundraisers who reported a negative economic impact rose in a national survey the Indiana University center released in July. “Clearly, all of the signals have worsened since then,” says Patrick Rooney, the center’s interim executive director.
Officials at a range of well-known and highly regarded philanthropies agree:
• Catholic Charities USA reports that January-to October contributions fell to $7.6 million, down 4% or $300,000 from the same period last year.
• The Meals on Wheels Association of America says roughly two-thirds of its members surveyed recently reported drops in both corporate and individual donations. Programs in Texas, Minnesota and California were forced to close this year.
• The Salvation Army reports its western territory suffered a 9% drop in overall fundraising since August alone. Data for the organization’s other territories weren’t available.
• Goodwill Industries International says public support from cash donations, bequests and special events fell 2.3% for the first eight months of 2008 in comparison with the same period last year.
“Many charities are between a rock and a hard place, being asked to do more with less,” says Ken Berger, president and CEO of Charity Navigator, a large independent U.S. charity evaluator.
If there’s any so-called bright side, he says, it’s that the economic crisis could force redundant, inefficient or otherwise weak charities to merge with stronger organizations or simply shut down, reducing the competition for contribution dollars.
“The non-profit world tends to operate slowly,” Berger says. “When we’re already over the cliff, then we notice.”
Source: www.usatoday.com
