Modest recovery forecast for giving

By Todd Cohen

RESEARCH TRIANGLE PARK, N.C. – Charitable giving will grow slightly this year but charities still will need to work to raise more money.

That was the prediction of Michael Walden, an economist at N.C. State University who spoke to an audience of 175 people on Jan. 30 at the fourth-annual Philanthropy Forecast sponsored by the Triangle chapter of the Association of Fundraising Professionals.

Giving follows the economy, and the economy is starting to pick up after a deep plunge during the recession, Walden said.

Still, he said, the recovery still trails the rebounds from other recent recessions because the dive was deeper, he said.

And in North Carolina, which continues to depend heavily on manufacturing jobs, the recovery trails that of the U.S. overall.

“Giving will improve,” Walden said, “but nudges will be needed.”

After falling in 2008 and the first half of 2009, including two quarters during which it fell roughly 6 percent each quarter, gross domestic product now is projected to grow at a “very modest” rate of 2 percent to 3 percent, Walden said.

In a robust economy, by comparison, the economy would be growing at a rate of 4 percent to 5 percent.

“We’re growing, but growing very slowly,” he said.

The reason is that while the massive job losses that occurred during the recession have stopped, employment has been posting only small gains.

The U.S. lost 8 million jobs during the recession but has regained only 2.5 million jobs, Walden said.

“A record number of people were unemployed for more than a year,” he said.

Job loss hurts the economy, he said, because consumer spending accounts for 70 percent of gross domestic product.

After a sharp drop during the recession, while they are spending more now, he said, consumers still are spending below their level before the recession.

And they are spending 12 percent below the level they would have been been had consumer spending continued to grow at pre-recession levels, Walden said.

The recovery in household wealth also has lagged behind the rebound from previous recessions, he said.

In fact, he said, the plunge in the economy arguably can best be characterized as a “loss-of-wealth recession.”

The decline in wealth has been a crucial factor both in the severity of the recession, and in the economy’s slow recovery, Walden said.

Wealth consists of financial wealth as well as wealth from real estate, primarily home ownership, he said.

While financial wealth always declines during a recession, he said, this recession was fundamentally different from previous recessions because of the collapse of the real-estate market following a 10-year boom.

That boom create a lot of jobs and a lot of wealth, and many people “accessed that wealth” through home-equity loans and other means, and then spent that money, helping to drive the economy, Walden said,

“Then it came to an end,” he said, with “appreciation rates” for housing prices falling into “negative territory,” where they remain.

The result was a plunge in household wealth.

“Forty percent of household wealth comes from real estate, and real estate has crashed,” Walden said. “The housing market has to get better before household wealth from real estate will recover.”

He voiced “cautious optimism” that the housing market was “moving toward equilibrium, where demand and supply match up again.”

Charitable fundraisers should be looking for any signs of recovery in the real-estate market as indicators that the economy is recovering, he said.

Walden said the recession hit North Carolina hard, and that the state’s job market has been slow to recover, with the employment base growing 0.7 percent in the state overall, compared to 1.9 percent in the U.S.

He also said the federal debt had reached its biggest share of gross domestic product since World War II, and warned the U.S. faces long-term fiscal challenges because of the projected costs to government of an aging population.

Walden predicted 2012 would be a “growth year,” and would be “a little better” than 2011.

“I don’t see a return of the recession,” he said.

The housing market and household finance will be absolutely key to the recovery, he said, adding that the economy still will not be “normal.”

Funders should exit their comfort zones

By Todd Cohen

Despite their seemingly endless evangelizing about the need for change, foundations sure seem slow to embrace it.

But if they expect to have even a prayer of making change happen on the causes and issues they care about, grantmakers first need to change the way they themselves do business.

Many foundations are disconnected from the nonprofits they fund and the communities those organizations serve.

Tone deaf to what nonprofits say about the operating and financial problems they face, and the kind of support they need, many foundations prefer to push their own pet ideas or those of consultants and other hangers-on who seduce them with management jargon and philanthropic-correctness.

Foundations drone on about the need for collaboration, evaluation and diversity, but they shun true partnerships, reject criticism, and dismiss ideas that differ from or challenge their own.

To help nonprofits and the people and places they serve cope with unprecedented challenges in the face of social and global crises and change, foundations need to use a lot more common sense about how they work.

The need for foundations to embrace change is the focus of the year-end statement for 2011 by Kathleen Enright, founding president and CEO of Grantmakers for Effective Organizations.

After 10 years of working to help funders work smarter, GEO still sees big gaps between the needs of nonprofits and the way funders operate.

While a new study from GEO will show “pockets of progress,” particularly among its members, Enright says, “broad-scale change remains elusive.”

On the whole, she says, the study finds that “general operating support remained static, evaluation remains predominantly an exercise in accountability rather than learning, and most grantmakers do not seek input on strategy or specific proposals from grantees or recipient communities.”

And instead of getting the operating and program support they need, she says, many nonprofits have been “hollowed out by accepting funds that are too rigidly restricted or do not cover the full costs of programs, operations or overhead.”

So GEO has been working to help make philanthropy “smarter so that nonprofits can grow stronger and deliver better results in communities,” she says.

Change, however, is “coming slower than we’d like,” she says.

A 2008 survey by GEO found a “persistent gap between nonprofit needs and grantmaker practices, with foundations making slow progress on adopting the practices that they and their grantees say are essential to supporting nonprofit health and vitality,” Enright says.

While the lack of progress across the field is disappointing, she says, funders have a critical opportunity “to focus on areas where they do have the power to make changes to better serve grantees and recipient communities and to invest grant dollars more effectively.”

Enright’s recommendations for funders include changing the way they give grants and changing how they relate to others.

On their grantmaking, she says, funders should provide flexible funding, increase multi-year support and streamline their requirements

And in their relationships, she says, funders should “foster deeper connections” and “tap the wisdom of grantees” and representatives from communities they support; learn together with grantees and community members; and collaborate to have greater impact.

“The only way for philanthropy’s response to match the complexity of the issues we hope to address is if we consciously shift the focus away from our individual interests and resources and instead look at how best to solve problems in combination with others,” Enright says.

“By supporting networks, focusing on collective action, being willing to follow as well as lead, and bridging diverse perspectives on the ground,” she says, “grantmakers will start to play a more vital role in creating positive change.”

Nonprofits fear more government cuts

Nonprofits that count on government funding expect deeper cuts, especially for programs serving the most vulnerable populations such as elderly and homeless people, and they expect those cuts will cause big problems for their organizations, a new study says.

The study by Bridgespan Group dismissed the likely effectiveness of some strategies promoted by nonprofit-sector leaders to address the problem of government cuts, but it identified two sector-level solutions to the fiscal shakeout that might work despite barriers they face.

“For those nonprofits that depend on government funding – especially those organizations that deliver human services – there is a cliff at the end of the tunnel,” says the study, The View from the Cliff.

Much of government revenue “is poised to fall off amidst the public sector’s ongoing fiscal shakeout,” says the study, which is based on a survey in late 2011 of 68 nonprofits that receive most of their funding from federal, state and local government, and on in-depth interviews with about 20 of them, and conversations with several state and local officials.

According to the Urban Institute, government contracts and grants for human-services nonprofits in 2009 were worth over $100 billion and accounted for 65 percent of their total revenue, Bridgespan says.

But the funding and “safety net” of essential services that government supports is “under threat,” the study says, with $2 trillion in federal spending cuts in the works over the next 10 years, roughly half of them in domestic spending, as a result of the Budget Control Act of 2011.

Those cuts “will have a big impact on state and local government budgets that have already been heavily strained by the recession – and the nonprofits that all three levels of government fund to deliver human services,” the study says.

Most nonprofits involved in the study “have managed to survive the tough economic times with their government funding intact, floating in large part on a bubble created by federal stimulus funds,” it says, referring to over $700 billion put into the economy since 2009 as a result of the American Recovery and Reinvestment Act.

“But the bubble is set to burst, and the cliff is just ahead,” the study says. “Nonprofits are deeply concerned about the coming government funding squeeze and appear to have only limited options available as they look ahead to tougher times.”

Despite big reductions in state and local funding in particular, the study says, some of the impact “has been blunted by the ongoing execution of grants and contracts awarded before the downturn, and by the continued outsourcing of state and local functions” to nonprofits.

Thirty-eight percent of survey respondents reported a decrease in government funding since the recession began, 27 percent reported funding had stayed the same, and 35 percent said they funding had increased.

But 91 percent agreed federal cuts would “cause significant problems for our organization as we seek to fund our mission,” and only 55 percent said their organization “has an adequate understanding” of the cuts’ impact.

The recession has resulted in “belt-tightening” for government-funded nonprofits, the study says, including staff cuts, freezes on hiring and salaries, and administrative efficiencies.

But a “belt-easing” is not likely to follow for many government-funded nonprofits, the study says, and in many cases “cinching the belt even tighter will still fall short of the restructuring that will ultimately be required.”

Still, many nonprofits are responding the downturn in ways that could lead to a “fundamental reset in their work,” the study says.

Most of those surveyed are clarifying their strategy, diversifying funding streams, measuring outcomes, improving productivity, and “engaging government funders as customers,” it says.

Less than a third have a contingency plan for various government funding scenarios, but another third plan to develop one.

The study said many “solutions” touted by nonprofit leaders and advocates “don’t appear up to the task – and will be harder to realize in the ongoing fiscal crunch.”

Advocacy to preserve and enhance funding, for example, will be a “zero-sum game, helping one set of nonprofits or program category at the expense of another,” while calls for improved government contracting fly in the face of the likelihood that, with the coming shortfalls, “government is going to be even more inclined to use its dominant market power to squeeze its nonprofit contractors rather than to improve the contracting relationship.”

And despite predictions of a “shake-out,” with weaker nonprofits merging with larger ones or even shutting down, only 10 percent of survey respondents indicated they found mergers or acquisitions to be effective ways to cope with government funding cuts.

Bridgespan also says it has seen few examples of collaboration that “was taking costs out of the system.”

The study says solutions that hold “practical promise,” while still facing barriers, include using improved human services to reduce health-care costs, and focusing resources on programs and providers that “demonstrate superior results.”

Instead of making across-the-board cuts in programs and in the funding of nonprofits that deliver those programs, Bridgespan says, government should set priorities on funding programs and providers “in the best position to provide better results for the funding invested – and make the hard choices of defunding those with less impact in order to free up the resources to do so.”

And, recognizing that its costs on health continue to rise, government should examine “how certain kinds of human-services funding, tied to tested strategies in public health, could help control health-care costs by serving society’s most vulnerable in more carefully targeted and effective ways,” Bridgespan says.

“If things are going to change,” says Daniel Stid, a Bridgespan partner and co-author, “there needs to be a countervailing constituency that demands public money be spend on programs that deliver better results for lower costs, delivered by nonprofits with a demonstrated ability to improve the lives of the people they serve, and funded at levels that enable them to increase their impact over time.”

Philanthropist Mary Semans dies at 91

By Todd Cohen

DURHAM, N.C. – Mary Duke Biddle Trent Semans, a philanthropist who supported a broad range of causes with compassion, kindness and devotion, and who bridged the era from just after World War I with the Internet age, died Jan. 25 at age 91.

Born and raised in New York City, Mrs. Semans lived in North Carolina after graduating from Duke University, where she enrolled at age 15.

She served for over 50 years on the board of The Duke Endowment, a Charlotte-based foundation that was created by her great uncle and is the largest foundation in the Southeast, and was its first female chairman from 1982 to 2001.

She also served on the board of the Durham-based Mary Duke Biddle Foundation, a smaller foundation created by her mother to support arts, educational and charitable causes in North Carolina and New York City.

“For our organization, she has been the spirit of the presence of Mr. Duke and the sensitivities of the Duke family and their interest in making the Carolinas better,” says Gene Cochrane, president of The Duke Endowment.

Doug Zinn, executive director of the Mary Duke Biddle Foundation, says Mrs. Semans was “genuine in her interest and commitment and devotion to people, to justice and to making life better for everybody.”

Mrs. Semans was the great-granddaughter of Washington Duke, who with his sons, Benjamin Newton Duke and James B. Duke, helped build American Tobacco Company and Duke Power Company, now Duke Energy, into industry leaders and forces for economic growth.

The Dukes were the chief benefactors of Trinity College in Durham, which later became Duke University.

And James B. Duke, Mrs. Semans’ great uncle, created The Duke Endowment in 1924.

Mrs. Semans, who served on many boards and helped raise money for many organizations, devoted her life to supporting education, children’s issues, health care and the arts.

She and her second husband, James H. Semans, who died in 2005 at age 94, were strong supporters of Duke University and of causes ranging from education and medicine to economic justice, housing for the poor, people with disabilities, and vocational education.

The couple also was instrumental in the establishment of the Winston-Salem-based University of North Carolina School of the Arts, the first state-supported arts conservatory in the U.S.

Mrs. Semans served as a trustee for the school for over 20 years, and continued to serve as an honorary board member.

When it came under attack from state lawmakers shortly after it opened in 1965, Jim and Mary Semans “were responsible, if anyone was, for saving the school when it was most vulnerable,” says David Winslow, who is president of The Winslow Group, a Winston-Salem fundraising consulting firm, and secretary of the Semans Art Fund, a small foundation that supports students and faculty at the School of the Arts.

In 1971, the couple received the North Carolina Award, the state’s highest civilian honor, and in 1997 they received the North Carolina Philanthropy Award, presented by the Philanthropy Journal to recognize sustained and significant support for the state’s nonprofit sector.

Cochrane says that in her decision-making process at The Duke Endowment, Mrs. Semans “was trustee first, and family member second, and I always had great respect for her doing it in that way.”

Despite the strict limitations that James B. Duke set on the funding focus of the Endowment, which supports education, health care, children and religion, it adapted itself to changing times, and Mrs. Semans supported that change with “supportive caution,” Cochrane says.

“She would generally support the discussion and was always open to that change, but she would make sure we would imagine the question in light of the roots of the organization,” he says. “She was open to change, she encouraged change, but she wanted it done carefully and thoughtfully.”

She also “seemed to be perfectly comfortable in every decade,” he says. “She had a wonderful curiosity about what’s next.”
As the Endowment was redesigning its website in 2010 and its email newsletter in 2011, for example, “she wanted it done, but she always wanted to understand what we were planning to do,” Cochrane says. “It got her curiosity and she was very supportive of it.”

Zinn of the Mary Duke Biddle Foundation says Mrs. Semans was the “embodiment of goodness” and had “true genuine charm.”
She “meant everything she said to people,” he says. “And she was a great enabler and believed in bringing disparate groups together and finding solutions.”
Her life was “built on the upbeat,” he says.

“She always saw the positive, or found the positive, in any situation,” Zinn says. “And then she wrapped herself around that and that’s how it grew.”

Winslow says Mrs. Semans was the “most extraordinary person I’ve known in my lifetime in philanthropy.”

At the same time she was making an impact on a personal level, he says, she also “was able to profoundly go way beyond the person and affect institutions and movements and things much bigger.”

Jim and Mary Semans, for example, spearheaded the creation of an emerging-artists program that was launched at the Durham Arts Council, then was expanded statewide and eventually was replicated throughout the U.S., Winslow says.

The idea was to invest “seed” money in young, budding artists, “giving them a boost at that special time in their lives, often spelling the difference between doing nothing and doing something great,” he says, “and that was the kind of philanthropist she was.”

Training on tap for nonprofit boards

By Todd Cohen

GREENSBORO, N.C. — Nonprofit boards are the focus of leadership-development programs offered by the Guilford Nonprofit Consortium and United Way of Greater High Point.

Effective boards are critical for nonprofits as they work to improve their programming, staff management and fundraising, says Donna Newton, director of the Guilford Nonprofit Consortium.

Bobby Smith, president of United Way of Greater High Point, says the strain the troubled economy has put on nonprofits makes it even more important that their boards include members who understand their roles and responsibilities.

The Guilford Nonprofit Consortium, a collaborative of over 250 nonprofits, has picked board development as its priority for continuing education in 2012.

Its efforts this year will include a workshop on Feb. 9 for nonprofit staff and board members, and a board-development academy

The three-hour workshop will be open to existing and new Consortium members, including nonprofit staff and board members, as well as consultants who work with nonprofits.

The workshop program, developed by nonprofits consultants who are Consortium members, will look at board-recruitment strategies; building and sustaining board commitment; strengthening board committees; managing difficult board members; establishing realistic expectations for the board; and the board’s role in fundraising.

The cost for the workshop, to be held from 8 a.m. to 11 a.m. in the Haywood Duke Room at Holy Trinity Episcopal Church in Greensboro, is $10 for Consortium members.

The board-development academy, to meet one evening a week for three hours from Jan. 17 through March 16, includes 30 participants to be selected based on applications they submit.

Classes will focus on board roles and responsibility; board meetings; board fiduciary responsibilities and legal duties; strategic planning; financial literacy; fundraising; marketing and advocacy; and a mock board meeting.

Tuition is $100 for staff, board members and other volunteers at Consortium member organizations, and $200 for other individuals.

The board-development program at United Way of Greater High Point, which has produced 183 graduates in its first six years, is developing its next class for this spring.

The program, which offers two classes a year of seven sessions each in the spring and fall, will be funded for the coming year with a $5,000 grant from the Cemala Foundation in Greensboro.

Designed to identify, recruit and train diverse candidates from High Point, Archdale, Trinity and Jamestown, the program focuses on topics that include strategic planning; marketing; finance; fundraising; fiduciary responsibilities; and how to run meetings.

Each class concludes with a graduation ceremony, to which local nonprofits are invited, that serves as a “draft” for new board members, Smith says, with graduates talking about what they learned and the kind of board work they want to do.

Fundraising rebounds to pre-recession level

Overall giving grew 3.4 percent in the first 11 months of 2011, marking the first time it had exceeded the level of giving in 2007, before the recession, Blackbaud says.

The company, which provides technology and services for nonprofits, also reported that overall charitable giving grew 1.4 percent for the three months ended November 2011, compared to the same period a year earlier, while online giving grew 12 percent.

Based on $2.5 billion in 12 months’ revenue from 1,281 nonprofits, Blackbaud says overall revenue for the three-month period fell 2.5 percent compared to the same period a year earlier for nonprofits with less than $1 million in prior-year revenue, grew 8.2 percent for nonprofits with prior-year revenue of $1 million to $10 million, and fell 0.4 percent for nonprofits with prior-year revenue of over $10 million.

And based on $383 million in 12 months’ online revenue from 1,769 nonprofits, Blackbaud says online revenue for the three-month period grew 15.4 percent for small nonprofits, 12.1 percent for medium-sized nonprofits, and 10.8 percent for large nonprofits.

The company also reported that overall charitable revenue for the “public, society-benefit” sector, including United Ways, Jewish federations and free-standing donor-advised funds, grew 5.4 percent for the three months ended November 2011, compared to the same period a year earlier, while online revenue grew 11.9 percent.

The trend in overall charitable revenue trend was based on $180 million in 12-month revenue from 95 nonprofits, while the trend in online revenue was based on $14 million in 12-month revenue from 105 nonprofits.