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Charities still feel squeeze from recession as shrinking donations fail to meet demand

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A recovering economy isn't providing a lift for the nation's charities and nonprofit groups, as a major report finds that, for many, donations are down while the demand for services keeps rising.

Ever since the economic crash in 2008, not-for-profit organizations report that they have seen a steady increase in demand for their services from people who no longer can afford clothing, food and shelter.

At the same time, donations to those organizations have been dropping, leaving them with fewer resources to carry out their missions, according to a report by the Nonprofit Finance Fund, which released its annual review of the nonprofit sector Monday.

According to a review of some 5,000 nonprofits nationwide, four out of five organizations said they had increased demand for services, for the sixth straight year, and 56 percent said they lacked the resources to meet demand. That was the biggest reported shortfall in the poll's history.

The fund's CEO, Antony Bugg-Levine, thinks more is in play than the economic recession.

"The struggles nonprofits face are not the short-term result of an economic cycle," he said in a statement accompanying the report. "They are the results of fundamental flaws in the way we finance social good."

The District of Columbia chapter of the Salvation Army also has reported problems since before the housing market crash, said Paul Hebblethwaite, director of development.

"One of the challenges is that we have a certain set of resources that we can utilize to stabilize families," including rent and utility bill assistance, he said. "Those resources available, the tools we have available, they've been pretty much stagnant even before 2008."

The economy obviously has had an effect, but Mr. Hebblethwaite said he sees generational factors at play as well. Young adults are living with their parents longer and often don't have jobs they need to support themselves. These young adults do not want to give away their money, and neither do the parents who are still supporting their children.

"Every change in generation, it's a question of will they be as charitable and will they have as many resources to be charitable with?" said Mr. Hebblethwaite, whose organization covers the District of Columbia and parts of Maryland and Virginia.

In addition to stretched resources, the Nonprofit Finance Fund's 2014 State of the Nonprofit Sector Survey found that few nonprofits foresee the situation easing: Only 11 percent said they expected 2014 to be financially easier than last year.

Seeking new donors

Mr. Hebblethwaite just completed a review of the past 12 years of donations to his branch of the Salvation Army. He said that while the group has seen a slight increase in the money it receives, few new donors are getting onboard. The increase is from the same donors giving more.

"I don't know if we're an example of a larger trend, but it does feel like a smaller group of people at least for the Salvation Army," he said.

The group had fewer donors in 2013 than it did in 2001, said Mr. Hebblethwaite, though he thinks there may have been an abnormally high number of donations that year because of the terrorist attacks on Sept. 11. Likewise, donations have dropped during the first few months of this year compared with the same period last year. Mr. Hebblethwaite thinks donations spiked after Superstorm Sandy and have returned to normal levels.

Inside the Beltway, charitable giving often can be affected by the fortunes of federal workers, he said, and people who have to deal with sequestration cuts to their pay or furloughs often have less to give to charity.

The lack of donations is affecting charities nationwide, the survey found. More than half of all nonprofits have enough cash on hand to operate for only three months, and 28 percent ended the 2013 fiscal year with spending deficits.

Kerry Sullivan, president of the Bank of America Charitable Foundation, said in a statement accompanying the report that nonprofits are having to diversify their income and their outreach.

"Today, it's clear that government funding and traditional philanthropy alone can't cover the critical work of nonprofits addressing pressing challenges in our communities," she said, adding that she hoped the survey would "fuel discussion among nonprofits and the private sector" about funding methods.

While more than 70 percent of the nation's nonprofits said they broke even or ran budget surpluses in 2013, just under half identified "long-term financial sustainability" as their greatest challenge. Many rely heavily on government funding, but that has become increasingly uncertain as Washington's budget wars grind on. Many are experimenting with untested funding models, Mr. Bugg-Levine said.

"They're trading a system that they know doesn't work for one that they don't know but hope will work," he told The Chronicle of Philanthropy in an interview. "There's a lot of risk in this change for nonprofits."

But it's not just money that people can donate, Mr. Hebblethwaite said. People can give food and clothes to the Salvation Army and other charities, or volunteer their time. College students who may not have cash can advocate for others to make donations, or take part in events to raise funds for charity.

Mr. Hebblethwaite said people should not forget their less-fortunate neighbors.

"If we don't continue that tradition of charitable giving or making a donation, we're going to see the consequences of that as a society," he said.

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