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Demand for grants grows in tough times
By Rick Armon
Beacon Journal staff writer
Published on Saturday, Oct 11, 2008
The Burton D. Morgan Foundation used to have assets hovering around $160 million.
But with financial markets tumbling, the Hudson charitable organization estimated by midweek that it had lost about 20 percent of its wealth this year — money that supports its mission to promote entrepreneurship.
''We are used to the ups and downs of the market, but the last months have been extreme,'' foundation President Deborah Hoover said. ''It definitely makes us nervous.''
The foundation — which gave out $4.4 million last year — is far from alone in its anxiety.
Nationwide, charitable foundations, which are heavily invested in the stock market, are wringing their hands over the economic downturn that has seen the market plunge more than 40 percent since last October.
Private foundations — and the amount they give — are wedded to that falling market. Federal tax laws require them to distribute 5 percent of the value of their investment assets, whether that value is based on the previous year's bottom line or an average of several years.
As the assets go, so does giving.
The severity of the economic turmoil has foundation leaders uneasy about their ability to give, since they rely on healthy assets to hand out greater amounts of money.
''We've never seen this in our lifetime,'' said Monica Wroblewski, spokeswoman with the Council on
Foundations, a nonprofit association in Arlington, Va. ''Who knows what ramifications this will have?''
Based on historical trends after less tough economic times, giving may dip in two years, since many foundations have already committed to projects for next year, she said.
However, some foundations already are cutting back on their grants, according to the Chronicle of Philanthropy, a newspaper that tracks philanthropy and charitable organizations. The William & Flora Hewlett Foundation of Menlo Park, Calif., which has $9.3 billion in assets, is trimming grants by 3 to 5 percent this year, the newspaper said.
Others, including some in the Akron area, predict they will hand out less money next year.
''The difficulty is we'd always like to do more,'' said Chuck Sandstrom, executive director of the Barberton Community Foundation, which had about $105 million in assets a month ago and about $86 million Friday morning. ''But like others, we'll be taking a more defensive position and ride this storm out.
''We're not declining grants. We're tabling them.''
The Barberton foundation will fulfill its commitment to helping Barberton schools build a middle school and buying the former Ohio National Guard armory in the city for future economic development, he said.
Christine Amer Mayer, chief operating officer and legal counsel for the GAR Foundation in Akron, said she expects the organization's grant-making capacity to shrink.
The foundation traditionally has had $170 million to $180 million in assets, but, like the Burton Morgan Foundation, it had lost about 20 percent of its wealth by midweek.
The GAR Foundation will attempt to streamline administrative costs, Mayer said.
''It's reasonable to assume that a lot of organizations are feeling the pinch right now,'' she said. ''It will be a challenge for the entire nonprofit sector.''
No need to panic
But foundation leaders also cautioned against panic. There is no worry that foundations will shut down or that giving will dry up, they said.
The foundations are set up to weather turbulent markets and have diversified their portfolios to guard against crippling losses, they added.
''We'll still have an endowment and be able to make grants and fulfill our mission,'' said Rick Kellar, president of the Margaret Clark Morgan Foundation in Hudson, which had about $90 million in assets before the downturn. ''Less money isn't what we're looking for, but it's the reality.''
The fear is a long-term recession or depression that could severely dampen future giving, said Cynthia Bailie, director of the Foundation Center's Cleveland office.
Need is greater
The ironic twist is that foundations experience a jump in financial requests when the economy stumbles. They also have seen demand climb as governments cut funding for social services and cultural programs.
''Foundations are crucial to the function of a lot of communities,'' Wroblewski said.
Nationwide last year, foundations distributed $42.9 billion, a 10 percent increase over 2006, according to the Foundation Center.
Last year, the Akron Community Foundation received about $675,000 worth of applications for health and human services projects. That jumped to nearly $1 million this year.
''There are so many more groups standing in line,'' President and Chief Executive John Petures Jr. said. ''We're going to have tougher decisions to make.''
The foundation had assets of about $138 million in June.
Looking for a silver lining, Petures and Sandstrom said this is the perfect time for people to set up endowments or establish a charitable gift annuity.
''This is a great time to buy low and ultimately sell high and and expand the philanthropic interests in the community,'' Petures said.
Rick Armon can be reached at 330-996-3569 or rarmon@thebeaconjournal.com.
The Burton D. Morgan Foundation used to have assets hovering around $160 million.
Get the full article here.
Comments
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akron, oh
Posted 05:57 AM, 10/11/2008
The Akron Community Foundation should excercise more discretion when giving out grant money. They should NOT be giviing money to organizations that do not have 501(c)3 status.
Tallmadge, OH
Posted 08:14 AM, 10/11/2008
Please don't come looking for more charitable contributions from me. My own IRA & 401K are down significantly, and I am struggling as well to pay my bills. Those beggars with their hand out can just keep their hand out, or better yet go find a job by filling out a job application with that hand, and work for your own money.
Akron, Oh
Posted 10:11 AM, 10/11/2008
Tim is absolutely correct. The ACF should not use "fiscal agents" as a fishy way to get around the law. The IRS statute, 501(c)(3) was put into place to protect us all from foundations like ACF giving funds to questionable organizations. What ACF has been and continues to do is "officially" give funds to 501(c)(3) approved organizations, called "fiscal agents" knowing full well that the "fiscal agent" will turn around and pass the funds on to less credible organizations that do not have IRS 501(c)(3) approval.
This is wrong and defeats the purpose of the statute's existence in the first place. If an organization does not have the wherewithal to obtain 501(c)(3) status in the first place, then it does not have the right to receive ACF funds directly or indirectly through fiscal agents.
Perhaps the new director will clean this underhanded behavior up. God knows, Jodi Bacon only perpetuated it.
