Charities Looking To Raise Spirits
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Nonprofits cut expenses to ride out recession
March 9, 2009 - Story featured in NJBiz: View Article
By Beth Fitzgerald |
New Jersey After 3 provides after-school programs for 14,000 children across the state, but that number may soon be headed for a sharp decline. As the fiscal crisis led the state to eliminate the group’s $250,000 annual grant, a private foundation, whose endowment was pummeled in the stock market crash, also cut the organization’s funding by 25 percent.
Mark Valli, president of the New Brunswick-based nonprofit, is leaving a staff position vacant, has cut back on staff development and now faces the wrenching reality that services to children could be reduced over the next year.
An After 3 partner organization that delivers the after-school programs “is closing its doors because they’re not able to raise the dollars to support their administrative costs,” Valli said. “Another of our partners is working out a merger with another nonprofit.”
Before his next fiscal year begins July 1, “I may have to make more tough decisions — either shrink our staff or serve fewer kids, or some combination of all of that,” he said.
The tough tradeoffs facing After 3 are rippling through the state’s nonprofit community. Charities are cutting overhead expenses as the economic crisis pushes donors to cut back on giving, but they’re also going back to their most loyal donors and appealing for extra help to weather the storm.
“Nonprofits have to run like a business, and right now they are doing what a business does in difficult times — going over every line-item expense on the budget, and deferring any expenses that can be deferred,” said Mitchell Lewis, a partner in the not-for-profit services practice of the Edison-based accounting firm Weiser.
But also, like any business, nonprofits are trying to accelerate revenue. “Some organizations are going back to their donors for more support, or to accelerate the support,” he said.
This is a tough time to appeal for extra and early donations, “but it never hurts to ask,” Lewis said. The problem is that everyone’s in the same lifeboat: The stock market plunge that pummeled charities’ endowments has done the same thing to donors’ portfolios.
Nonprofits, meanwhile, are targeting expenses by freezing hiring and salaries, asking employees to contribute more to their health benefits, and suspending their matching contributions to employee retirement plans, Lewis said.
Charities are under siege from all directions: government grants disappear as the recession squeezes tax collections, while foundations and individuals give less as their wealth evaporates on Wall Street — and all the while, the recession is swelling the ranks of needy citizens turning to charities for help.
“Some will have to close,” said Linda Czipo, executive director of the Center for Non-Profits in New Brunswick. “More people are coming for help than they have seen before, and their ability to provide services is stretched beyond the limit.”
Czipo said some charities are outsourcing human resources management to professional employer organizations to save money, and appealing to volunteers to carry a heavier load. “People are holding their breath and deciding which programs they absolutely must do, and which ones they can put off or curtail.”
Many charities held big annual fundraisers last year — on the heels of the autumn stock market crash — and “a fair number of them said they didn’t raise as much as they typically do,” Czipo said. “Donors are actually less wealthy now, people are worried about whether they’ll lose their jobs and they don’t feel they have discretionary income. Some people who might have been donors have now turned into clients.”
Elijah’s Promise, a soup kitchen and food bank in New Brunswick, is serving more than 200 people a day — about double from a year ago — while cash donations declined more than 10 percent last year, said Lisanne Finston, executive director. She’s talking with other nonprofits to find creative ways to partner, share services and lower expenses.
And she said the state’s emergency food system is looking at how to make sure those who are eligible to receive food stamps have access to supermarkets with lower prices, even grow their own food. “This crisis is an opportunity to look at how we can do a better job of helping people,” Finston said.
Gene Derkack, American Cancer Society regional vice president for Union, Essex and Hudson counties, said he’s “cautiously optimistic” despite the recession, avoiding layoffs but “cutting administrative costs across the board.” ACS funds cancer research and provides services to cancer patients and their families; Derkack said the organization is determined to broaden its base of donors to keep fundraising levels stable.
“Everyone just has to work harder, because cancer doesn’t stop,” he said. Nationwide, ACS raised about $100 million last year, a 10 percent increase, and this year, “we need to double the number of people who contribute — which means the staff has to work harder to reach out to the community.”
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