More than one-third of nonprofits saw donations fall in the first nine months of the year, and one in five expects to make cuts in spending next year because of the poor fund-raising climate, even though many groups report escalating demand for services, a new survey of more than 2,500 charities finds. Seven percent of the organizations said they are in danger of closing down next year because of financial problems.
The study, conducted by the Indiana University Center on Philanthropy and five other organizations, reported some signs that charities are beginning to climb out of the staggering decline in donations they faced during the recession: Thirty-six percent said donations rose in the first three quarters of 2010, compared with 2009, when only 23 percent of nonprofit groups reported an increase. And while 51 percent of groups said donations dropped in the first nine months of 2009, the share of groups with declines dropped to 37 percent this year.
Still, the financial challenges are daunting for many groups. Looking ahead to the final quarter of the year, 43 percent of organizations expected no increase at all over 2009 holiday giving, while 22 percentpercent forecast a decline.
Twenty per cent of charities said they will be forced to cut their budgets next year because they faced a shortfall of donations or other revenue.
What’s more, demand for services from January through September continued to rise compared with the same period in 2009. Nearly 70 percent of charities reported an increase this year. The rise was particularly acute for human-service organizations: Among 965 such charities in the survey, 78 percent said demand from needy individuals and families has grown compared with 2009.
For charities facing budget cuts in 2011, 66 percent said they would trim programs, services, or operating hours; 59 percent said they would cut or freeze staff pay or benefits; and 49 percent said they would resort to hiring freezes or layoffs.
Among groups reporting a decline in giving this year:
- A decline in the number of individuals who made gifts or who reduced the size of their gifts was the most frequently cited challenge for charities, affecting from 63 percent to 75 percent of charities, depending on the size of their budgets.
- A drop in grants from private foundations was the second biggest challenge, in the form of either smaller grants or a grant maker’s decision to give nothing at all.
- Twenty-six percent reported a decline in corporate grants, compared with 20 percent a year ago.
- Nearly a third of the organizations in the survey reported that the amount they raised in government grants and contacts dropped this year, compared with the same nine months in 2009.
The Nonprofit Research Collaborative survey, as it is called, is a joint effort by Indiana University Center on Philanthropy; GuideStar USA, the database of nonprofit organizations; the Association of Fundraising Professionals; the Foundation Center; the Urban Institute’s National Center for Charitable Statistics; and Blackbaud, the software company. The organizations plan to repeat the study three times each year, in early winter, spring, and fall.