Wednesday, December 10, 2008

2008 Holiday Donation Season

With a significant downturn in the American economy, many people are wondering what their financial future will hold. The stock market has taken record breaking falls, the likes of which have not been seen since the 1930’s. Business failure, independent wealth, retirement funds, and housing foreclosure are main topics of discussion beingheard around the country. The ensuing economic recession has many people safeguarding their wealth and cautiously spending, especially with the upcoming holiday season fast approaching. Does this mean non-profit organization donations, which usually spike at this time of year, are going to decrease?

Unfortunately, non-profit organizations are familiar with financial suffering due to a weak economy. The recession that started in 2000 and peaked with the 9-11 attacks caused financial strain to the charitable sector that took years to overcome. Ironically, now that many non-profits are again starting to turn profits and recover from deficits they will again undergo financial loss. After the 9-11 attacks of September of 2001, the number of mid-sized non-profit organizations that operated in a deficit rose 20%, totaling over 40%. These organizations did not see relief until 2005. Many of these non-profits saw an increase in expenses and a decrease in donations, suggesting that while revenue was not coming in the need of services these non-profits provided increased. These numbers only increased if the organizations were government funded. Though the current economic situation looks bleak, many not-for-profits learned valuable lessons during the last recession on how to operate with lower expenses and cut costs. President and CEO of Nonprofit Finance Fund, Clara Miller gives advice,
“Nonprofits that choose to learn from the challenges that the sector experienced during the last recession will be well positioned to deal with a new one. What nonprofits do now will have consequences that resonate far beyond the bottom lines of the organizations. The expected economic downturn will pose serious challenges for clients that rely on the services of nonprofits, particularly those in low-income communities. With fewer dollars flowing into the sector, nonprofits face the possibility of being forced to cut services at a time of increased need. Philanthropists, government, and nonprofit organizations will need to work together much more closely to ensure ongoing services for at-risk populations."

With experts calling the immediate financial outlook for non-profits the “perfect storm” situation, here are some statistics and survey results:
• 51% of adults plan on donating this holiday season.
• Only 33% of donators polled say they will donate less for the 2008 holiday season, then they donated for the 2007 holiday season.
• Non-profits that provide faith-based, social, and health/disease services are most likely to receive donations of all levels.
• 27% of donators say that the organizations website is the best resource and most helpful in their decision about donating.
• $3 billion is the estimated donation amount for the 2008 holiday season.

Here is a breakdown of WHO is donating this holiday season:
• 54% of women and 48% of mean plan to donate.
• 64% of people with household income of more than $100K plan to donate online.
• 46% of 18-24 year olds and 50% of 25-34 year olds plan to donate online.
• 53% of 55-64 year olds plan to donate online.
• 46% of the group who said their financial situation became substantially worse during the past 12 months still plan to donate online this holiday season

Here is a breakdown of planned donation amounts:
• >$100 – 42%
• $100 to $1000 – 20%
• <$1000 – 4%
• Undecided – 35%

Though this holiday seasons outcome looks promising experts say the next couple of years might be skeptical. John Havens, an authority on wealth patterns, predicts that the current economic crisis might affect charitable giving for more then a year. This prediction comes from the real value of wealth. From past recessions, net household wealth did not directly impact giving, though does play a significant part in donation levels. Household income does directly affect donations; therefore, with income holding steady donation amounts for individual households should remain even with the household donation history. A decrease in average income levels would most likely prove disastrous for non-profits. Large-scale donations, often planned a year in advance, should not see a decline until 2009. Consequently, non-profits are preparing to react accordingly to donation amounts received. With services needed more then ever and donations expected to decline, efficiency is necessary for the future of non-profit organizations.

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