By JAMI MAKAN
1. "We're getting desperate."
Times are tough for fund-raisers and the nonprofits they serve. For decades American individuals and institutions have increased their annual donating by an average of about 3 percent. But in 2009 they gave $304 billion, 3.2 percent less than in 2008, the worst drop since the 1980s, according to the GivingUSA Foundation. The result: An estimated one-fifth of the country's 1.2 million nonprofits have smaller budgets in 2011, with 7 percent at risk of shutting down.
This means fund-raisers most of whom are on the staff of nonprofits are desperately shifting tactics, focusing on squeezing more out of existing donors, reaching out internationally and experimenting with social media. The hard work is starting to pay off: "There has been some turnaround," says Una Osili, research director at Indiana University's Center on Philanthropy.
2. "We're not above telemarketing."
It's common for big charities to hire outside firms to seek donations by phone; these solicitors tend to keep a big chunk of what they raise. In Massachusetts, for example, solicitors took 57 cents of every dollar donated in 2009, according to a report by the state attorney general. To appear more efficient on paper, some nonprofits tell solicitors to recite a few educational talking points during calls, thus allowing them to report telemarketing expenses as "program costs."
Telemarketing is also about raising awareness, nonprofits say. When a firm calls 1,000 households, just 1 or 2 percent donate, says Michael Nilsen, of the Association of Fundraising Professionals, which represents some solicitors. Telemarketing is part of a long-term strategy, he says; people reached by phone often choose to give later.
3. "It's scary what we know about you."
Nonprofits have always done prospect research to find donors. This once meant driving by homes to see if they're in a nice neighborhood or asking donors for the names of well-off friends. But according to research firm Campbell Rinker, 42 percent of nonprofits today tap huge databases to make predictions about who's worth targeting and for what amount. The databases are usually compiled by third-party firms that build profiles of millions of individuals based on public data like real estate records and boat ownership.
While the info is legally obtained, critics say modern-day prospect research raises privacy issues. "I find it quite disturbing," says Wendy Kaminer, a former American Civil Liberties Union board member who criticized the group in 2004 after it hired a data-collection firm. While major donors may be familiar with these practices, she says, "I don't think $20- and $30-a-year donors expect to be the subject of this kind of fairly covert investigation." (A spokesperson says the ACLU "goes to great lengths" to protect donors' privacy.)
4. "Tapping technology has its limits."
More than two-thirds of nonprofits use social networking, according to Blackbaud, a maker of fund-raising software, and while there are real benefits it's cheaper than snail mail, for one there are downsides, too. According to Beth Kanter, coauthor of The Networked Nonprofit, social media can distract a failing nonprofit, and connections formed online aren't always strong. Another trend: charities partnering with wireless carriers to solicit donations via text message. But it's expensive to set up and generally limited to amounts of $5 or $10. Meanwhile, iPhone apps don't allow one-click donations; instead, users must open a browser and enter info. Kanter says this makes it harder to give, and an online petition against Apple's policy has more than 36,000 signatures. A spokesperson for Apple says the tech giant is proud to have apps that "accept charitable donations via a link to their websites."
5. "We like the tax code just the way it is."
The charitable-contribution tax deduction has been around since 1917, but its future is unclear. President Obama's bipartisan deficit commission has proposed limiting, or even eliminating, it. While the commission's report may or may not be adopted, "in any real tax-reform debate, [the charitable deduction] will be on the table," says Mark Robyn, staff economist at the Tax Foundation. In 2009 almost 40 million returns made use of it, to the tune of more than $170 billion, according to IRS data, and many fund-raisers think nixing it could reduce giving. "We'll be worried about a lot of the major gifts," says Nilsen. Indeed, a 2010 Indiana University survey found 67 percent of wealthy households "would somewhat or dramatically decrease" charitable giving without any tax break.
6. "Some of our tactics are controversial."
Recently, authorities have cracked down on some fund-raising methods they say endanger public health and safety. Last year volunteers for Camp Quality Kansas, which runs a summer camp for children with cancer, raised money from motorists stopped at Wichita intersections. It was much more efficient than phone calls, says Director Susie Mooney; the group raised about $10,000. In March the city council voted to place new restrictions on street fund-raising. "We were afraid that someone was going to have an accident or lose their life," says Wichita Mayor Carl Brewer. Mooney says her volunteers follow all the city's rules; each person gets a handout with instructions for safe conduct.
Also under fire: bake sales. In 2009, the New York City Education Department drastically curtailed them, allowing only "approved" food items (40 percent of the city's students are overweight or obese, a spokesperson says). The move prompted parent Elizabeth Puccini to draft a petition and organize a rally. She argues the rule eliminates a good fund-raising tool and doesn't make sense, since unhealthy snacks "are available every single day in vending machines."
7. "We don't like being told what to do with your money."
Fund-raisers say donors are getting more hands-on about their contributions. In 2010, 60 percent of nonprofits reported receiving gifts that could be spent only in certain ways, compared with just 36 percent in 2007, according to Blackbaud. One reason: skepticism after the fund-raising controversies surrounding the Haiti earthquake and other disasters. "They understandably want to ensure that their money makes a difference," says Sean Stannard-Stockton, CEO of Tactical Philanthropy, which advises major donors. For larger donations, GivingUSA Chair Edith Falk says, nonprofits generally will draw up written agreements with donors.
Nonprofits aren't happy about the trend. Suzanne Elliott, COO of Dress for Success, says the portion of her budget made up of restricted giving has increased from 8 percent in 2008 to 25 percent today, making it harder for the organization, which gives career aid to disadvantaged women, to spend on IT and staffing. As a result, "everyone here is stretched thin," she says.
8. "We may sit on your donation."
Most charities have only enough in the bank to operate for a few months. But some have amassed so much money that they could stop fund-raising for years. For example, Guide Dogs for the Blind has $275 million, enough for nine years. Critics say it's better to use the surplus than invest it, exposing it to market risk. "A charity that has three or more years' worth of their budget in reserve has a poor basis to ask for additional money," says Daniel Borochoff, head of charity watchdog American Institute of Philanthropy. (Morgan Watkins, acting president and CEO of Guide Dogs, says the savings help it weather economic downturns and serve more people.)
Yet charities' cash holdings pale compared with those of elite universities; Harvard's endowment was recently valued at $27.6 billion. A source of pride for universities, endowments drew criticism for some big losses during the financial crisis. According to a study coauthored by Commonfund, endowments lost an average of 19 percent in the fiscal year ended June 30, 2009. Anne Neal, president of nonprofit American Council of Trustees and Alumni, says trustees need to be more engaged in investment decisions and recommends alumni make targeted gifts instead. "When they ask for endowment money, just say no," she says. (A spokesperson for Harvard says that over time the endowment has had "excellent investment returns.")
9. "Yes, there is such a thing as too much fund-raising."
Last year's congressional elections were the costliest ever. Candidates raised a record $1.8 billion, a 28 percent rise from 2006, according to the Center for Responsive Politics. Many worry the trend harms the political process: A study by nonprofit researcher MAPLight.org, found 79 percent of donations to a member of the House between 2005 and 2007 came from outside the representative's district. "Ordinary voters can't hold their own lawmakers accountable," says Nick Nyhart, president of nonpartisan Public Campaign. His group advocates giving congressional candidates who raise enough from their own district access to a national fund. But Republican campaign consultant Steven Castleton says public financing already exists for presidential elections but has grown less popular among candidates and taxpayers over the years.
10. "Say hello to new fees."
During the recession, many zoos, museums and aquariums faced big declines in funding, as fewer people became members and donor institutions gave out fewer grants. "Everybody was strapped during the downturn," says American Association of Museums President Ford W. Bell. New or higher fees helped make up the difference for many facilities; roughly 14 percent of attractions increased or added admission fees in 2009. Meanwhile, others actually drew more visitors and didn't need to raise fees. Says Peggy Lents, spokesperson for the Missouri Botanical Garden in St. Louis, "In a recession, gardens tend to be a wonderful place to get away from it all."