One Casualty Of The Recession: Charities

Tim Chen is founder and CEO of NerdWallet.com, a website that helps consumers to compare low apr credit card offers.  Tim also educates consumers about credit cards and personal finance at the Christian Science Monitor, Forbes Moneybuilder Blog, and the Huffington Post.

At the same time that Americans remain as generous as they can be, public charities and private foundations continue to take a beating from the economy’s slide as donations continue their downward spiral.

Non-profit research firm GuideStar reported donations are way down as charitable organizations have been hit hard by the weak economy. The study revealed about 40 percent have seen declines in contributions in the first five months of 2010 at the same time that a majority, 63 percent, saw an increase in demand for their services. According to the study, “even organizations that have stopped the bleeding are concerned.”

Everybody Is Giving Less

More than 60 percent of participants who reported decreased contributions attributed the drop to a decline in both the number of individual donors and the size of their donations, both functions of the downturn.

GuideStar pointed out that the pain was pretty well spread among different types of organizations, although those involved in mental health and crisis intervention were more likely to report a decline in contributions (51 percent).

In addition to the number and size of individual donations, other issues responsible for decreased contributions included smaller corporate gifts; smaller private foundation grants; and discontinued private grants and government grants. As a result, 17 percent of the charities said they had to cut services while 11 percent were forced to lay off employees.

Other Estimates Corroborate The Dropoff

Meanwhile in its annual report, the Giving USA Foundation stated donations fell 3.6 percent in 2009, the largest drop in 26 years. Individual giving dropped by 0.4 percent while grants from foundations were down almost 9 percent. Americans gave $303 billion to various religious, health, cultural and environmental causes in 2009. And according to the Association of Fundraising Professionals 2009 State of Fundraising Survey, nearly half of charities in the United States raised less money in 2009 than in 2008.

What’s more, researchers at Boston College’s Center on Wealth and Philanthropy, which estimates how the most recent changes in financial resources affect the aggregate level of household giving, estimates US household giving for calendar year 2009 totaled between $216-$218 billion dollars, representing a decline of between 4.8 percent and 5.7 percent from the 2008 total of $229 billion.

Preliminary projections for 2010 are all over the place, as the researcher predicts that total household charitable giving could return to the pre-recession (2007) level of approximately $234 billion in the best case scenario, or on the low end, decline an additional 3.9 percent to a total of $212 billion by the end of 2010. Still the researchers pointed out the 2010 estimates would be lower if unemployment remains high throughout 2010 and higher if the recovery is stronger than expected.

A Final Warning To Fundraisers

If you’re going to be doing any fundraising in the downturn, you’re going to have to be smart about it. Peppering potential donors with constant reminders turns out to not be the best approach. When individuals were asked about why they stopped giving, the No. 1 response was being petitioned for money too frequently by a particular charity, and solicited an inappropriate amount.  It makes sense when you think about it – what do you do with all of those “0% APR balance transfer” offers you get in your mail every day?  That’s what I thought.

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Comments

  1. says

    It really is sad to see the charities like the Salvation Army struggle this year. I understand that it only makes sense… I mean, when the economy is struggling, money is scarce, and therefore, there is little to give away.

    My wife and I have decided to give to some great causes, but I wish we could give to more! Hopefully, we can turn this around soon!

  2. says

    It is very sad that charities suffer the most. Demand in their services will continue to grow while donations will decrease. I am afraid it will get only worse with time.

  3. says

    Very interesting article! It makes a lot of sense that giving would be down with the condition of the economy! One thing I am curious about is in your research, did you all find the average % of a person’s income donated to charity? I’d be curious to know what that figure is! Thanks!

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