Staying in the Game

Year-end appeals produce modest gains for many charities

As the nation’s nonprofit organizations close their books for the calendar year, many are discovering that their fund-raising tallies for 2001 are better than they had expected. Strong returns in the final two months helped many charities avoid the worst-case scenarios many fund raisers had predicted in the wake of the September 11 terrorist attacks and the country’s official slide into an economic recession.

Interviews with more than 60 charity officials and consultants found that while growth over 2000 totals tended to be modest, few organizations reported significant declines in donations. Nonprofit groups attribute their relative good fortune to hard work, quick adjustments in fund-raising appeals, and increased news-media attention to the needs of charities.

Yet while the effort paid off for many organizations, fund raisers remain concerned about the months ahead, particularly as they wait to see how grant proposals to corporations, foundations, and government agencies will fare. Many fear that even if the economy improves, they may suffer declines in giving from such institutional donors because those organizations set their 2002 budgets based on economic projections made last year. Social-services groups, in particular, worry that they could face the combined pressures of increases in demand for their services coupled with cutbacks in government and other support.

Charities are now reviewing what tactics worked best at the close of 2001, to help them plan for what many predict will be a difficult year ahead.

“We were light on our feet, we were changing constantly,” says Marilyn F. Grist, senior vice president for the international-aid organization CARE. The group raised $27.8-million during the last three months of the year, up from $22.7-million during the same months in 2000.

The outlook was much worse in September, when donations were 70 percent below that month’s goal. After that, “every day we were doing analysis of the previous day’s returns and every week we were readjusting strategy,” says Ms. Grist. CARE continues to monitor economic trends carefully, she says, and the organization plans to increase its appeals to individuals this year.

September and October were exceptionally difficult months for nonprofit organizations of all kinds and sizes across the country. During those months after the terrorist attacks when the stock market dipped to its lowest levels since 1999, nonprofit groups sometimes made gut decisions, hoping for the best.

Many altered plans. Shortly after the terrorist attacks, Brenda Babitz, president of the Monroe Community College Foundation, in Rochester, N.Y., sent a letter to people who had previously given $100 or more that emphasized the role community colleges play in training members of the police, fire, and other rescue forces. “To me,” she says, “there’s nothing more important than educating the workers of the community.”

Ms. Babitz’s tenacity resulted in a response rate of 21 percent for the mailing, compared with 10 percent for a mailing sent around the same time the year before. The donors who replied gave $47,716 and helped the college raise $263,220 overall last year, up from $193,544 in 2000.

Organizations that did well say they took a more aggressive approach than they had in years past. Fund raisers at Freedom From Hunger, an international-development organization in Davis, Calif., credit an urgent year-end appeal with helping to turn around a lull in gifts after the September terrorist attacks. The result: 2001 was the organization’s most successful fund-raising year in its 56-year history, raising $1.8-million, compared with $1.5-million in 2000.

Claire Thomas, vice president for development and public affairs, says the fund-raising letter told donors that if the charity didn’t raise at least $668,200 by the end of January, Freedom From Hunger would have to start making cuts in its programs. “For us, a semi-desperate appeal is an unusual thing,” she says. “We don’t have very emotional appeals, and so when it comes from us, I think people notice.”

Caution Caused Problems

Some nonprofit groups that took a more cautious approach to seeking donations paid a price. Despite running a popular Degas exhibit from June through early September that helped bring in many new donors, the Minneapolis Institute of Arts only raised the same amount during the last six months of 2001 — $2.5-million — as it had raised during the corresponding period in 2000 when it had no comparable special exhibit.

The museum’s director of development, Kristine C. Melloh, says the gains from donors who became museum members with gifts of $35 to $125 were offset by a decrease in patron-circle donors, people who give unrestricted gifts of $1,500 or more. The reason, she said, is that board members and other volunteers were reluctant to call people right after the terrorist attacks. As a result, the share of donations from big donors dropped. While 63 percent of total donations came from patron-circle gifts in the second half of 2000, only 53 percent came from that group in the same period last year.

“Typically, when we reach the anniversary of a gift, we call the donor,” says Ms. Melloh. But last year the museum “was more lenient, because of sensitivity,” she says. The museum hopes to make up for the drop-off in big gifts by, over the next six months, relying less on solicitations by volunteers, hunting for more corporate sponsorships, and offering more incentives, such as VIP tickets to exhibits, to encourage individual donors.

Other arts organizations also reported that they were having financial difficulties. A new survey of 134 museums by the Association of Art Museum Directors found that 65 said their overall revenue had declined in the months following September 11 compared with the earlier part of the year.

Some charities said that they had more trouble raising money from small donors, but that when they asked their loyal, wealthier donors to pitch in with bigger gifts, they made up lost ground.

The Bank Street College of Education, in New York, raised $10-million in 2001, as much as it did in 2000. In both years, $2-million of the total came from individual gifts. The difference in 2001, says Teresa S. Karamanos, the dean of external affairs, was that “it was a much smaller group of people” who gave in 2000.

Swarthmore College, near Philadelphia, found that the percentage of alumni who made gifts to the annual fund went up from 29.5 percent in 2000 to 31 percent last year. But because the average gift was $30 smaller than in 2000 — 20 percent of donors gave less than they did in 2000 — big donors were called upon to make up for the shortfall to still meet the goal. Pat Laws, director of annual giving, says that the college’s ability to attract large individual gifts provides “protection during a bad economy.”

In addition to giving larger sums of money, some big donors heeded the call to show extra leadership. For example, trustees at the John G. Shedd Aquarium, in Chicago, took a hands-on role in the fund-raising process like never before.

Trustees combed through the list of donors who were set to receive the aquarium’s year-end appeal for large donations, signing and adding personal notes to letters going to their friends and colleagues. They also identified more than 300 additional people who would be good prospects for the appeal, which eventually went out to 1,050 people and raised $282,000, a 29-percent increase over the year-end appeal sent to large donors in 2000.

Before getting the results for the major-gift mailing, the aquarium had decreased its fund-raising goal for 2001 by $400,000. But when gifts for the year were added up, the aquarium found it had just squeaked by its original fund-raising goal of $5.1-million.

Even without handwritten notes, returns on direct mail tended to exceed expectations for many groups.

Freedom From Hunger’s Ms. Thomas says the biggest surprise in 2001 was her group’s success in soliciting new donors. Officials at the group reasoned that the weakening economy and anthrax scares would make people unlikely to respond to requests for support from charities they didn’t already know. The organization therefore sent out acquisition appeals to only 70,000 people in the fall, rather than the 175,000 who were in its original plan. But despite fewer letters, the appeal raised 120 percent of what the organization projected the original mailing would bring in.

“We got nervous,” says Ms. Thomas. “Acquisition is so expensive that we figured, well, if we’re not going to raise very much money, we better not spend very much money. So we blew it. But if you put me back in the same position with the same information, I probably would make the same choice.”

Given the appeal’s success, the organization has decided to do a mailing of about 100,000 letters this spring to potential new donors.

Freedom From Hunger’s success may be attributed in part to its mission. Current events, including the military operation in Afghanistan, have highlighted “the consequences of long-term poverty and hunger in countries and how important international development is,” says Ms. Thomas.

Other international organizations, such as the American Friends Service Committee, CARE, Church World Service, and Oxfam America, report that their fund raising held steady compared with 2000 or in some cases increased. The American Friends Service Committee, in Philadelphia, for example, raised $29.8-million in 2001, compared with $27.8-million in 2000.

Looking ahead, groups that rely on institutional sources of funds say they worry most about competing for a dwindling supply of grants, corporate sponsorships, and government support. The weak economy and stock-market declines have shrunk foundation and corporate assets, while the economy’s troubles have cut into government budgets.

Organizations such as the Huntington Theatre, in Boston, faced drops in corporate funds in 2001, down $90,000, and fund raisers are worried the trend will only worsen this year. To try to offset cuts in corporate giving, the theater plans to encourage individual donors to give more by offering a monthly giving program and by doing more to encourage bequests and other planned gifts.

Friends of the Earth, an environmental group in Washington that raised 10 percent less in the last quarter of 2001 than it did in 2000, has had recent bad news from two foundations.

The Florence and John Schumann Foundation, in Montclair, N.J., which had invited the charity to apply for a grant, wrote to say that it would not be considering new grant proposals because stock-market losses had caused the value of its endowments to fall. The Summit Fund of Washington, a foundation that gives money to the group, wrote to say it would only be giving out one-year grants in 2002, instead of its usual multiple-year awards, for similar reasons.

Chris Pabon, Friends of the Earth’s director of foundation relations, says fund raisers need to start adjusting to a new way of thinking. “It’s a totally different mentality,” he says. “Before, it’s been years of plenty. Now, I think we’re all realizing that it’s just going to be more difficult and that we should expect some more rejections.”

Many foundations have seen the value of their assets plummet. The David and Lucile Packard Foundation, for example, reduced its grants budget for 2002 by 45 percent compared with last year, to $250-million. The decline was due to a sharp drop in assets, from almost $10-billion at the end of 2000 to $6.4-billion late last year.

Social-Services Groups

Human-service groups are particularly concerned about 2002, in part because many rely on government support, and state and local government budgets are expected to be tight.

Irv Katz, president of the National Assembly of Health and Human Service Organizations, in Washington, says that in 2002 human-service charities will receive a combination punch from government-spending cuts and concurrent drops in fund raising. Problems for those groups will be exacerbated if the demand for these services continues to increase.

There is evidence already that many local United Way organizations are having trouble meeting their fund-raising goals. Total gifts to the United Way in Chicago will be less than $95-million during the campaign that is now concluding, falling short of its $100-million goal. The United Way of Massachusetts Bay, in Boston, raised a record $54-million in its most recent campaign, but came in under its $56-million goal.

Despite extending its 2001 campaign by six and a half weeks, the United Way of Central Indiana, in Indianapolis, came in $900,000 below its goal of $38.3-million dollars. Company mergers, relocations, layoffs, and the weak economy were the primary reasons the organization didn’t meet its goal, says Ellen K. Annala, the group’s president.

At the same time that the Indianapolis United Way has less money to distribute to local social-service charities, the demand for those groups’ services is rising. Calls to Helpline, a hot line run by the Information & Referral Network that puts callers in touch with Indianapolis-area social-service groups, were up 43 percent in the last three months of 2001 compared with calls during the same period in 2000. Callers asked most often for help with basic necessities, such as food, housing and rent, utilities, and employment, says Ms. Annala.

“Need has increased, resources haven’t,” she says. “So just as we have had to prioritize more with our own unrestricted dollars, member agencies are going to have to prioritize in who gets served, and that is distressing to them, to the community, and to us.”

Marni Larose, Meg Sommerfeld, and Nicole Wallace contributed to this article.