2009 May Be Tough for Nonprofits (Part 1 of 2)

Many charitable organizations have a June 30 fiscal year, so this is a good time to look forward to fiscal 2009. Budgets are being set, and the seeds of success or failure are being laid. What will the new fiscal year hold in store?

My expectation is that fiscal 2009 will be a very tough year for many charities. While some are already feeling the effects of a slowing economy, the full force may not yet have been felt. Consider corporate giving. Corporations generally operate on a calendar year, and calendar 2008 budgets were set in August and September of 2007, which was before the stock market's October peak. Calendar 2009 budgets will be set during a much more cautious environment. Banks, which are often very generous givers, continue to be hit hard by loan defaults. Declining corporate profitability does not bode well for charitable giving next year.

Consider foundation donors, which have faced declining asset values in their investment portfolios. Foundations give a percentage of assets, so their budgets in the next fiscal year are likely to be lower unless the investment markets recover strongly.

Consider individual donors. They are bearing the brunt of the decline in housing values, and they are being pounded by high inflation in such key areas as food, energy and health care. This is bound to impact many household budgets and, thus, charitable giving. I have already witnessed a decline in gifts coming from marketable securities, which reflects declining asset values. Anecdotally, I have heard stories of auction items receiving very low bids at fund raisers.

So, it seems a pretty good bet that 2009 will be a tough one for charitable organizations. Tomorrow, some ideas about how nonprofits might respond to the crunch.

Robert Thalhimer