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The Economic Outlook for Nonprofits in 2009 and 2010

By Kristin Gabriel

Republish: EasyPublish™ Published: 21Nov2009 Word count: 513 Viewed: 325 time(s) Get Free Content For Your Site

A recent 2009 survey from the Foundation Center determined nonprofit giving will likely decline by more than 10 percent since 2008. The survey, the result of interviewing and obtaining the responses of 600 foundations, also said that continued reductions are expected throughout 2010.

This year has suffered declines in overall consumer demand and our country's highest unemployment figures in a quarter century. It is therefore no surprise that the outlook for the nonprofit community has been impacted by the recession. The good news is the field of philanthropy will become more strategic as a result of the economic crisis.

U.S. foundation giving suffered an estimated 22 percent drop in foundation assets in 2008. Earlier in the year the Foundation Center estimated that 2009 giving by the nation's more than 75,000 grant making foundations would "decrease by around eight to 13 percent. At this time, it seems as if it is likely the decline will be even more.

Overall, the economic crisis has forced nonprofits to adjust their operating costs. More than two-thirds of respondents to the September 2009 said they have in some way reduced operating expenses since the beginning of the economic crisis, even those that still have endowments.

Some nonprofits are trying to preserve the value of their endowments so that they will not permanently diminish grant making capacity. Others have determined they will be smaller institutions going forward and are making necessary staffing and expense adjustments.

What is entailed in the cut backs? Many foundations have reduced operating expenses since the onset of the economic crisis. They have reduced staff travel and salaries. Two-thirds of the respondents that cut expenses reported reducing staff travel budgets or limiting staff to attend conferences. One-third indicated that they had also reduced staff training and professional development opportunities.

More respondents expect that their giving will be lower in 2010 (26 percent) than higher (17 percent). Larger foundations, those giving over $10 million, are more likely than smaller foundations to reduce their giving further next year. While asset averaging generally limits the impact of modest economic fluctuations on annual giving, the extreme 2008 asset losses will not be balanced out by 2007 asset growth and the 2009 turnaround.

The impact of the economic crisis on foundations has been twofold. 1) There is a clear expectation among grant makers that the field of philanthropy will become more strategic as a result of having weathered the economic crisis. 2) The long-term impact of the crisis on their own foundations are forcing engaging in robust strategic planning and more focused use of the foundation's capabilities and being more focused and disciplined in executing strategies. Other types of long-term changes cited by survey respondents ranged from governance to investments to grantee relations.

Experts believe that the nonprofit sector will emerge stronger but agree that ultimately there will be fewer organizations.

The 2010 Foundation Giving Forecast Survey will be conducted in January 2010, with results released in the March 2010 edition of Foundation Growth and Giving Estimates.

The annual Foundation Giving Forecast Survey and made it available to approximately 5,000 large and mid-size U.S. community, independent, and corporate foundations.

Source: Foundation Center, 2009 http://www.foundationcenter.org/gainknowledge/research/pdf/researchadvisory_economy_200911.pdf

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