Fundraising #7

[Guest guest]

The rest of the world cannot afford to repeat U.S. mistakes

 

The 2009 update of Fundraising & Accountability for Animal

Charities is assembled in a markedly different economic climate from

the circumstances prevailing when the 2005 edition was completed,

and from the conditions of any time in the U.S. within the past 70

years.

Animal charities appear to be likely to continue to receive

about 1% of total charitable contributions in 2009 and 2010, both in

the U.S. and worldwide. Across the spectrum of giving, however,

U.S. donors gave 2% less in 2008 than in 2007, and gave 5.5% less to

animal and environmental charities, according to the Giving USA

Foundation, which has surveyed U.S. donor behavior annually since 1956.

" About 1% " in 2007 meant circa 1.2% of a record $314 billion

in total contributions. In 2008 " about 1% " meant circa .9% of $308

billion. The difference is a sum approximately equal to the annual

budget of the Humane Society of the U.S., to the cumulative budgets

of the 400 smallest animal shelters in the U.S., or to the

cumulative budgets of the American SPCA, PETA, and the Best Friends

Animal Society.

These losses have come at the very time that the U.S. humane

community has enjoyed unprecedented opportunity to make gains for

animals through ballot initiatives, and has been challenged by

surging shelter animal intakes resulting from surrenders of

" foreclosure pets, " plus impoundments of more than twice as many

animals as ever before from animal hoarders and negligent breeders.

To the credit of the U.S. humane community, the necessary

investment has been made to secure passage of initiatives such as the

November 2008 prohibition of battery caging, veal crating, and sow

stalls in California, and of greyhound racing in Massachusetts.

Also to the credit of the U.S. humane community, the influx

of animals into shelters has been accommodated--so far--without

killing more animals.

These successes illustrate the value of investing directly in

helping animals, as opposed to investing in attempting to build

institutional stability through creating large endowments.

The sums now called " endowments " were originally called

" reserve funds. " After the Great Depression of the 1930s brought the

collapse of much of the U.S. nonprofit sector, charities were

advised to bank reserves equal to their annual operating budgets, to

help them through hard times in the future. Many succeeded, and

found that the interest from their reserves gave them a head start

each year toward raising their operating budgets. But as bank

interest trailed returns from riskier forms of investment, charities

lobbied to be allowed to manage more active portfolios.

Eventually most states agreed to allow charities to invest in

stocks, mortgages, and other relatively volatile financial

instruments, but only on condition that the sums at risk could not

be allowed to erode the charities' reserves. By law in the majority

of U.S. states, interest and dividends may be drawn off only if the

investment accounts continue to hold whatever value was initially put

into them.

But this negates the original purpose of holding reserves.

Many of the wealthiest animal charities in the U.S. now hold tens of

millions of dollars that they cannot spend, and are instead closing

shelters, laying off staff, and eliminating programs.

ANIMAL PEOPLE and the Wise Giving Alliance have long advised

that charities should not reserve more than twice their annual

operating budget. The present situation exemplifies why. Though the

wealthy charities now in dire straits still have much of their money,

on paper, it is inaccessible to them, and is doing nothing to help

animals.

There was, and is, an intended regulatory brake on the

practice of operating a charity as an investment portfolio: if a

charity keeps too much money invested, and receives more money from

dividends and interest than from public donations, the IRS may

reclassify it as a private foundation. This means that it may no

longer issue tax-exempt receipts to donors. Wealthy charities have

often evaded this problem by dedicating all returns from investment

to further fundraising from the public. The more they have invested,

the more fundraising they can do, so they use only part of the money

raised directly from the public in support of their mission, and

invest the rest.

Now years of receipts that might have funded hugely expanded

programs have evaporated through bad investments. Charities that

invested in program service, including ANIMAL PEOPLE, may have

struggled all along, and be struggling still, but years of using

everything received to help animals have produced the successes that

are enabling the humane community as a whole to continue to grow and

achieve.

The rest of the world cannot afford to repeat U.S. mistakes.

The current economic crisis has clearly shown that the appropriate

approach to building institutional financial stability is the

combination of effective programs and energetic fundraising.

Hoarding resources is ultimately just wasting them, and

betraying the intent of the donors.

 

 

--

Merritt Clifton

Editor, ANIMAL PEOPLE

P.O. Box 960

Clinton, WA 98236

 

Telephone: 360-579-2505

Fax: 360-579-2575

E-mail: anmlpepl

Web: www.animalpeoplenews.org

 

[ANIMAL PEOPLE is the leading independent newspaper providing

original investigative coverage of animal protection worldwide,

founded in 1992. Our readership of 30,000-plus includes the

decision-makers at more than 10,000 animal protection organizations.

We have no alignment or affiliation with any other entity. $24/year;

for free sample, send address.]

 

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