02:45 pm
The Coming Collapse of the NGO Sector
I don’t think anyone has talked about this, but the current economic mess is going to have a huge impact on non-profit organizations — particularly groups that rely on institutional or private philanthropy to fund their operations.
Institutional donors — including large foundations like Ford, Hewlett, and Kellogg — and small family foundations all are going to be hit hard by any decline in either the stock market or the dollar. Individual donors are also going to have less money to give to their favorite groups.
But it’s more than that. I think we’re heading toward a major shakeout in the NGO sector. Here are the factors that are combining to create, if you’ll pardon the cliché, a perfect storm for non-profits:
1. The decline in the economy. Even if it were to end tomorrow, donors already are cutting back on their giving.
2. The current political campaign. Money that otherwise would have gone to NGOs instead has gone to fund the McCain, Obama, and Clinton campaigns.
3. Direct mail, once the lifeblood of non-profit fundraising, has declined significantly over the past half-decade. It no longer offers a cost-effective way to raise funds or grow membership.
4. Baby boomers, the primary source of donations for many groups, are starting to retire and thus have less disposable income to devote to giving. The generations that have succeeded the boomers in the workplace are both less inclined to give and, when they do, more likely to give to multiple (as opposed to one particular) organizations.
5. Funds from annuities, trusts, and estates are no longer as sure a source of funding as they used to be. Donors are outliving their life expectancy, and the rapid rise in the cost of health care has significantly eroded nest eggs that otherwise would have gone to a charitable organization upon the death of the donor.
Any one of these factors would pose problems for the non-profit sector. The combination of all five means that many NGOs will not survive the next few years. Expect a significant shakeout, with smaller non-profits without a strong membership base to be the first affected.
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