Nonprofit orgs. feel impact of slowing economy

Nonprofit orgs. feel impact of slowing economy

Cara Newman

High-technology corporations aren’t the only businesses feeling the effects of the economic downturn. Nonprofit organizations are playing the catch-up game with corporate and individual donations, earned income and government assistance.

“When there is a substantial drop in the market, people tend to look at where they can cut back expenses,” said Gary McDonald, president and CEO of Care and Share Food Bank, which distributes food to nonprofit social agencies across Southern Colorado. He expected his operating budget last month to be $56,223 but in the end he had only $10,491 with which to operate.

McDonald attributes this to high-technology company layoffs as well as the fluctuations of the stock market. Care and Share, like many nonprofit organizations, receives some of its operating capital in the form of donations from foundations. Foundations receive their funds from people with investments. If the returns on their investments drop, so too do their donations to foundations.

“I believe there is always a shock effect,” McDonald said. It is not only corporations and foundations that contribute to the survival of nonprofits, said Cathy Robbins, executive director of the Chamber Nonprofit Partnership. On average, nearly 50 percent of a nonprofit organization’s income is derived from earned income. This includes ticket sales, scholarships and fees for service. About 32 percent of a nonprofit organization’s income comes from government funds. Of the remaining 18 percent, 6 percent (or 1.08 percent of total donations) is from corporations, 8 percent (or 1.44 percent of total donations) comes from foundations and 86 percent (or 15.48 percent of total income) is from individual contributors.

Although nearly one third of most nonprofits’ revenues come from the government, some don’t rely on government assistance as much.

Susan Greene, executive director of the Colorado Springs Symphony, said that more than half of the symphony’s income is from earned income while the remainder is from foundation and corporate donations. She said perhaps 5 percent of funds come from the government.

“In some ways, we feel a greater impact than the health-related not-for-profits,” said Greene. “Unfortunately, the arts are viewed as a fluff kind of thing rather than an essential element. We are the first to be hit in an economic downturn.”

This is because many foundations depend on the health of the stock market. If the stock market drops, so does the foundations’ income and the money they can contribute to nonprofit corporations. Operating on a $3 million annual budget, Greene hasn’t seen much of a drop in donations so far but attributes this to her staff pumping up the level of work they do to solicit donations. She admits that people are donating less, which means Symphony staff have to send out more letters, make more phone calls and host more fund-raising events.

Greene’s goal is to reach the $1.2 million mark by the end of July. To date, the symphony has raised about $850,000. Corporations that have donated in the past are being forced either to reduce contributions or eliminate the Symphony from the donation list.

“You work twice as hard to try to maintain the same levels,” said McDonald. “You look at alternative sources of fund raising such as partnering with organizations, looking at opportunities you may have overlooked in the past such as events or organizations you haven’t contacted, (and) holding more events. It now becomes a numbers game.”

One nonprofit organization that is primarily self-sufficient is Goodwill Industries. The company, with a local and national presence, receives donations in primarily two forms: material goods to sell in its retail stores and contracts of service.

The Colorado Springs’ Goodwill’s budgeted income averages $19 million each year, said Bob Baker, president and CEO of the local organization. About $12 million comes from contracts the company has with local military installations. The U. S. Air Force Academy contracts with Goodwill for janitorial and commercial laundry services, and for workers in the dining hall.

Goodwill stores generate about $6.5 million annually for the organization. Although state funding plays a minor role in accounts receivable, Baker said the per-person state funding increase dipped last year with only a 2 percent increase.

“In the overall scheme of things, they’re (government funding) not a huge contributor to the sector,” said Robbins, who works with 267 of the area’s nearly 500 nonprofit organizations. The impact, she said, will come from diminished governmental assistance and philanthropic organizations due to devaluation of stocks.

“Different kinds of nonprofits will be impacted differently,” she continued “depending on where their revenues come from. The nonprofits will have to create some efficiencies. We will have to look at how we focus, how we partner, (and) how we can be most effective.”

Some of the smaller nonprofit organizations will need to merge or partner with another nonprofit organization, or close their doors, Robbins said. The larger ones will need to focus and develop a strategic plan that will make them “lean and mean.”

Copyright 2001 Dolan Media Newswires

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