Source: The Wall Street Journal
Author: Mike Spector

Officials at charities are trying to devise creative ways to stand out. They are making urgent appeals through direct-mail and email campaigns and taking to the airwaves. Charities also are gearing up to tap their wealthy board members and other well-off supporters for extra cash. If they fail, charities may have to cut staff or seek loans.

At Covenant House New York, the nation’s largest adolescent-care agency, which serves homeless, runaway and at-risk youths, board members convened Thursday and discussed a possible “doomsday” scenario in case they lose upwards of 40% of their income, said Georgia Boothe, the nonprofit’s associate executive director. The charity needs to raise about $3 million through direct mail in December, she said, adding, “We’re worried.” Direct-mail giving in July was off 15%, she said.

New York-based City Harvest, which feeds the hungry and has counted Lehman among its top five corporate donors, had set a goal of raising $5.7 million between November and January and $3 million in December alone. Much of that was expected to come from Wall Street bonuses.

“Things have changed drastically in the last week or two,” said executive director Jilly Stephens, who said the need for her group’s services is rising. “We’re heading into a period of the unknown.”

Still, she said she was encouraged that about 525 people turned out for the group’s first silent auction of photographs on Thursday night. The event raised about $217,000.

Gordon J. Campbell, president and chief executive of the United Way of New York City, said he began working on Thursday with other United Way officials in the New York area to arrange a town hall meeting on the future of nonprofits.

“There will be fewer dollars coming in the doors,” he said. “There needs to be thought given to strategic alliances, partnerships, back office consolidation, mergers and acquisitions. In many ways, it’s a variation on what’s going on Wall Street.”

The collapse of corporate balance sheets, along with strained household budgets, could start cutting into the more-than-$300 billion national charitable-giving pie. U.S. charitable donations only grew by 1% adjusted for inflation in 2007, according to the Giving USA Foundation. That was before the worst of the housing correction and the current Wall Street crisis.

In a recent Chronicle of Philanthropy survey of 77 businesses, 50 said they expected giving to remain flat in 2008. U.S. companies donated an average of 0.8% of their pretax profits in 2007, down from 1.4% in 2004, according to Mark Shamley, president of the Association of Corporate Contribution Professionals in Mount Pleasant, S.C. “Companies are looking to cut expenditures across” the board “and corporate giving is going to be part of that,” he said.

Worse for charities, the height of the financial crisis is hitting just before the end of the year, when nonprofits typically bring in the largest amount of revenue as Americans open their wallets around the holidays.

“It’s a real challenge,” said Melissa Berman, president and chief executive of Rockefeller Philanthropy Advisors. “For many charities, half of their income or more can come in during the final two months of the year.”

Working in Support of Education, a New York-based charity that provides financial literacy certification tests and materials to high schools nationwide, gets the bulk of its donations from financial institutions, said its president, Phyllis Frankfort. Getting funding for next year “is going to be a difficult challenge,” she said.

The American Red Cross, one of the nation’s largest and most recognizable charities with annual revenue of about $3 billion, took the extraordinary step on Sept. 10 of asking Congress for a $150 million loan to pay for responses to Hurricanes Gustav and Ike. In addition to the loan request, the Red Cross has flashed appeals for donations during National Football League games.

A Red Cross spokesman said lawmakers haven’t decided whether to make the loan. As of Sept. 10, the Red Cross had only raised $5 million for Gustav, according to the loan-request letter sent by CEO Gail McGovern to congressional leaders. Red Cross hurricane efforts in total could cost as much as $130 million this year, a spokesman said.

“The response thus far by the American Red Cross to back-to-back hurricanes Gustav and Ike is the largest relief effort we have mounted since Hurricane Katrina,” Ms. McGovern wrote in her letter to lawmakers. She also said Gustav donations had dropped from $1.4 million in one day to just $70,000 a day.

In a recent interview, Jeffrey Towers, the Red Cross’s newly hired fund-raising chief said the charity is up against “the most troubled economy I’ve faced in my 25-year fund-raising career.”

—Francine Schwadel contributed to this article.

Write to Mike Spector at and Shelly Banjo at

Corrections and Amplifications:

The American Red Cross recently asked Congress for a $150 million appropriation. This article incorrectly said the Red Cross requested a loan.

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