The effect of hard times on nonprofits is clearly a hot topic.  There was an article by Kevin McCoy and Oren Dorell in today’s USA Today, titled “It’s a hard time to be a charity.”  The article starts by discussing the impact of the Freddie Mac financial woes on its charitable arm and thus the nonprofits and programs that received funding from them. 

The article goes on to state, “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.”

The article ends with “”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.”

It is an interesting article, you should read it.  Click here.

I have been thinking a lot lately about the impact of tough economic times on smaller businesses and their philanthropy - the subject of Carol Tice’s article in October’s Entrepreneur Magazine for which she interviewed me.  However, this morning in the USA Today was an article by Emily Bazar and Dennis Cauchon, Financial mayhem hurts non-profits, foundations.  Watching the news about the market situation last week, until I read this article, I now realize that it had not yet fully clicked through for me the impact this volatility was having not only on businesses but also on community foundations and nonprofits that invest in the stock market.  The article talks about the greatest impact being on those community organizations that rely on endowments and donations as they are expected to decline - resulting in lower payouts from foundations in upcoming years because of what is happening now. 

The article talks about the role of diversification of financial portfolios as a way to minimize losses…however the  closing quote from John Griswold, executive director of the Commonfund Institute, stated that “Diversification has been the name of the game in endowments, and that’s good,” he says.  “The problem is, in a crisis like this, everything can go down and diversification doesn’t help.”

To read the full article, click here.