The Financial Outlook for Christian Nonprofits




The Financial Outlook for Christian Nonprofits

Leaders share their perspectives.

Ken Walker

Don Worrell entered 2009 with two budgets on his desk: one that outlined where his ministry wants to go; the other, a contingency plan in the event donations don't support projected expenditures.

"We don't have a crystal ball to look into," says Worrell, CEO of the Nashville Rescue Mission, whose cash budget last year totaled approximately $6 million. "As we get into the year, if we see that things aren't stabilized, we have put in some things that we can cut. We want to continue serving the homeless in Middle Tennessee."

Whether a city-rescue mission or a global outreach like Habitat for Humanity, Christian nonprofits started 2009 with a wary eye on the economy.

But, according to a recent study from the Giving USA Foundation, giving remains relatively healthy during lean times. Researched and written by the Center on Philanthropy at Indiana University, the study found that over the past four decades, total giving in the United States has risen every year except during one.

That exception was 1987, when a tax-law change the previous year prompted some donors to accelerate donations to maximize deductions, says George Ruotolo Jr., 2008 chair of the Giving Institute (parent of the foundation).

Since 1967, there have been six recessions—three lasting for less than eight months and three for 11 months or longer. Nonprofits faring the best were in human and social services, followed closely by those in religion.

"One of the things we have to do with economics and philanthropy going forward is learn from the past," Ruotolo told Outcomes. "The average pullback in giving over all those recessions was 1 percent, in inflation-adjusted dollars. It's not good news, but it's not like we lost 10 percent of our value."

Pat McLaughlin, founder and president of the Timothy Group, which has helped more than 1,500 Christian organizations with fundraising, says ministries must realize that donors may feel the need to focus giving more tightly.

However, that doesn't mean funds will stop flowing. As McLaughlin puts it, the philanthropic community gives from the head, while stewards give from the heart.

"Unless there is an all-out 1929 disaster, people are going to continue to give," says McLaughlin. "Recently in Williamsburg, Virginia, I found a $10 million lead gift for a campaign. One of my guys asked for a $2 million gift in Atlanta and [the giver] said, 'We'll do $1 million in 2008, and we'll consider an additional $1 million in 2009.'?"

McLaughlin added that ministries that depend on direct mail rather than relationships could be hurt. "Those that are relationship driven are going to have less of a downturn."

Uncertain times

Rick John, chief financial officer of microloan specialist Opportunity International (OI), says his organization has examined scenarios in case of a shortfall, starting with less money to distribute to its partners in 28 developing nations. The agency currently has 1.2 million loan clients and 17 banks for the poor in 16 countries.

A cutback in revenues would keep them from serving as many people, especially in Africa where needs are greatest, John says. However, despite last autumn's stock market freefall, the financial officer says OI has not seen a noticeable impact. "We have been on an aggressive growth and expansion curve for the past six years," John says. "We have averaged 30 percent annual growth in U.S. fundraising and just about that same amount in the growth of our services around the world."

The Salvation Army is also charting uncertain waters. Last fall's stock market downturn had an impact. Donations received by phone, mail, and the Internet declined 9 percent over a 10-week period starting August 1, 2008. "We haven't made any administrative changes," says Melissa Temme, director of public relations. "We hope for the best and plan for the worst. Everyone is affected and people are concerned."

Although Focus on the Family's revenues increased 3.3 percent for the fiscal year that ended September 30, 2008, the ministry was still 2.7 percent under budget, leaving it about $4 million short of projections. A summer shortfall forced Focus to trim expenses, but it saw a surge in giving the last two months of fiscal year 2008, thanks to radio and mail appeals, says chief financial officer Wade Crow.

A Colorado Springs roundtable of financial officers last fall revealed that while donations were steady, other income sources were negatively affected. Crow says that report mirrors Focus's experience, with its product and resource sales declining. "We are looking at more conservative budgets," says Crow. "We're looking at certain programs and projects that may be less core to the ministry."

Habitat for Humanity is more than halfway into its fiscal year, which started last July 1. Since it wasn't forecasting a major year for U.S. income, says senior vice president of development Mark Crozet, the homebuilding initiative hopes to increase fundraising in other nations.

There have been some optimistic signs that Habitat will hold its own.

"I think a huge part of it is that people who support us come from a mission-based perspective," Crozet says. "The week after the 30 percent market crash [the week of October 13], we generated $1 million in fundraising. We are blessed by the passion of the people who care for us."

Adjusting to the times

Given the predictions for increased unemployment and fading economic growth at the onset of 2009, nonprofits recognize they are likely to face belt tightening in the months ahead.

However, that prospect doesn't deter them. The need for the Salvation Army's services is greater than ever, Temme says. She points to requests for assistance last year increasing up to 30 percent, with applicants seeking help with rent or mortgage assistance, utility bills, transportation, or emergency shelter. For example, since August 2007, there has been a waiting list at a family shelter in an upper-middle-class area of Olathe, Kansas. Prior to that, it was typically half full.

For insight on ministering in difficult economic times, the Salvation Army dug through its archives to examine operations during the Great Depression. During the 1930s, it inaugurated several new services, with officers taking on the brunt of new responsibilities. "There were a number of pay cuts or people who didn't get paid," Temme says. "The officers were the head of the church. If the church provided a soup kitchen, they were in as dire a need as people they were serving. Their meals came from the soup kitchen."

At this point, faith-based nonprofits have not experienced that kind of pinch. In fact, Habitat for Humanity has set as its 2009 goal to build or rehabilitate more than 50,000 homes, up from 49,000 last year. Yet it is forming more partnerships and looking at more holistic development, says Crozet.

Hurricane Katrina was an eye opener for Habitat. Victims weren't just homeless; they also needed health care, education, water, and other necessities. "We are partnering with people like World Vision, World Relief, the Salvation Army, and Mercy Corps, who do the kinds of things we don't do," Crozet says. "And we look at other problems. We worked in one country in Africa where women could not legally own homes, so we worked on legislation to change that."

After the 9/11 terrorist attacks put a dent in income, the Nashville Rescue Mission started setting aside funds in the event of another shortfall. So far the organization has not had to tap what has become a $1.5 million rainy-day fund. However, meal and lodging needs increased 5.4 percent and 5.6 percent, respectively, during the first eight months of 2008, and the CEO says the funds might be needed if those trends continue.

"Today a lot of people who come to us are better educated," Worrell says. "A lot have college degrees and they come without an addiction. Mothers and children are a big thing right now; we're getting moms with 15- and 16-year-olds, people you would think would be the most stable."

Increased needs like these can cause concern for nonprofit leaders, but funds are still available, says the Timothy Group's McLaughlin. "We're recommending campaigns because we are still discovering key donors who want to give," says McLaughlin. "We're going to have to love people and not commit donor fatigue—not ask them too many times. We talk about organizations dating their donors. Those that that have dated their donors are going to be fine as we go through 2009."

Ken Walker is a freelance writer from Huntington, West Virginia.

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