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Credit Crunch Leaves Charities in Cash Crisis

The God's Love We Deliver sought to generated much needed money for the beleaguered charity.

The God's Love We Deliver sought to generated much needed money for the beleaguered charity.

Gregory M. White

November 24, 2008

The leaves crunched beneath the runners’ feet as the first chilly winds of winter blew past the starting line. They had come from across New York City to queue for the 15th annual God’s Love We Deliver charity run on that November Sunday morning. They were not a moment too soon for those most in need.

As Wall Street’s wintertime chestnuts continue to roast under the flames of an ever-declining economy, New York City’s local charities are being burdened with a financial failure that will make their ability to fulfill their goals that much more difficult. The Dow Jones Industrial Average’s fall from heights of over 14,000 just over a year ago to lows around 7,500 points this month has symbolized an economic collapse compared to the Great Depression. But the struggle for charities to meet the needs of many Americans left impoverished by the crisis may soon become more an emblem of the times.

God’s Love We Deliver seeks to provide meals for people homebound by illness. Her 17 years as a volunteer have left Roz Gilbert adamant about the importance of this organization. But this year she has seen a cash drought.

“I couldn’t believe how many checks I didn’t get this year,” she said.

Gilbert said that God’s Love We Deliver provides more than 1,600 meals per day and that she was concerned the loss of funds could impact the organization’s ability to meet the needs of the community.

The race, with its goal of raising money for the year’s expenditures, has not been immune. “Even my group, I’m not going to get to $10,000 this year,” she said about her own running team.

The falls of Bear Stearns in March and Lehman Brothers in September have made the finances of New York’s charities particularly precarious. Both organizations donated heavily to charities, often doubling workers’ gifts as well as providing generous corporate grants.

God’s Love We Deliver received $1,865,799 in charity donations from corporations and foundations last year. This amounted to 19.7 percent of donations and nearly the same amount of yearly costs, much of which may be at risk from the financial crisis

There were no financial services corporations on the list of 2008 sponsors for God’s Love’s charity run, except for Bloomberg, the information services firm. Other sponsors included retail brands Nike and MAC Cosmetics.

Institutions like Meals on Wheels are also suffering through the crisis. Beth Shapiro, director of marketing and communications, described the decrease in funding as sizable. It includes a $500,000 loss in donations from the fall of Bear Stearns alone.

“Who anticipated the fall of Bear Stearns? For us to make up $500,000 it’s not going to happen this year,” she said.

Meals on Wheels lost both the Lehman Brothers and AIG corporate matching programs in just one week, Shapiro said, part of a $225,000 loss just from firms in the financial sector. With an annual budget of $20 million, this amounts to a sizable loss. The Bear Stearns loss alone equals 90,000 fewer meals for clients, Shapiro said. She hopes that holiday fundraising can overcome this deficit.

“If we don’t meet our demands now we will be in jeopardy, meals will be in jeopardy,” she said.

While Meals on Wheels is restructuring to streamline and make services more efficient, Shapiro is still fearful.

“We don’t want to not deliver meals to people who can’t get out,” she said.

The global economic collapse has brought down some of Wall Street’s largest banks, and the deep devaluations of stocks, bonds and other investments affects charities as well. Lehman Brothers alone donated $30.8 million to charities in fiscal year 2007, a number that will not be made up this year. But even for the survivors, their ability to donate has been decreased by plummeting stock values and advancing debt on the weakness of their balance sheets.

Some have even cancelled Christmas parties, including UBS, the Swiss investment bank caught in a tax-evasion scandal. Last year UBS donated $38.1 million to charity to groups such as the Children’s Aid Society of New York. UBS representatives were unable to comment on how a decline in profits would impact charitable giving or the employee-matching program.

Citigroup donated $145 million to charities last year globally. Citi refused to comment on donation plans for the year, though the recent government bailout for the group may suggest difficulties in meeting all charitable commitments.

Firms like Freddie Mae and Fannie Mac, whose donations to charities were sizable, were unable to say what changes they are making as a result of being under conservatorship.  Spokesmen for both said all programs were under review.

Charities that cater to less than immediate needs are also being affected by the crisis. The Henry Street Settlement, which supports cultural works and community development on the Lower East Side, has also seen the impact of the financial collapse. Susan LaRosa, director of marketing and communications, said that the now-bankrupt Lehman Brothers was the underwriter for the group’s annual gala art show, its largest fundraiser of the year. According to Lehman Brothers records, this underwriting amounted to $175,000 in 2007.

“We are not going to makes as much money from this show,” she said. “We’re not going to make that $1.4 million.”

LaRosa was also concerned about individual donations.

“These individual funders don’t have as much to give,” because they have lost their jobs or their wealth, she said.

While a loss in funding was evident, LaRosa didn’t anticipate any funding cutbacks.

“We are going to become a much more efficient machine,” she said.

The Food Bank of New York is also under threat from the encroaching financial crush. Brian Pham, while working a table at a university event intending to encourage students to volunteer, seemed less than hopeful about his charity’s current economic position.

“We’ve seen drops in some of our corporate donations,” he said. “It’s a hard time.”

The Food Bank receives the majority of its donations in  food donated by individuals and firms. Patrick Mooney, director of philanthropy, said the decrease in food donations has been alarming, with a loss of 10 million pounds this year.

“With financial firms we’ve definitely seen a decrease,” including a loss of a $10,000 donation for Lehman Brothers alone, he said. HSBC and Washington Mutual, which had its profitable divisions absorbed by JPMorgan Chase in September, have also made cutbacks in contributions.

Mooney said financial firms aren’t the only ony lost source. He said  Kraft and Nabisco, which previously donated large amounts of food, are now selling it in foreign markets because of  the global food shortage.

Mooney described a dire situation. He said that demand has increased from 1 million people in 2004 to 1.3 million in 2007. This rise in demand has already resulted in food shortages, where shelves are now bare in Food Bank warehouses. He said cutbacks are planned in the delivery program and less food is being provided. Even so, he said, “We’re solvent.”

Charities that otherwise may seem independent of the current financial crisis are being affected indirectly. Father Neil Connolly of St. Mary’s Church on the Lower East Side has seen demand for his church’s charity work start to rise as the economic crisis begins to affect more low-income workers.

Father Connolly said the city’s efforts to cut spending froma lack of taxable income would impact his church,  harming “the homeless and hungry.”

“Will we have a shelter, will we have a pantry? A lot of that depends on the city,” he said.

St. Mary’s has several programs that require funding from both the City of New York and the Catholic Archdiocese. This includes the shelter and pantry, but also counseling and support services. Those programs are largely funded by the Archdiocese, but also rely on community and private donations from firms. Father Connolly was concerned about the long-term health of those donations.

“We haven’t seen a big decline yet, but I think we’ll see one,” he said.

Father Connolly described the impact of the crisis on New York’s poorest as being exacerbated by the housing bubble.

“I think the real estate industry has become untethered,” he said, describing rising housing costs in the Lower East Side and other low-income communities.

St. Mary’s still plans to go through with its annual Thanksgiving turkey giveaway and its Christmas Day festivities that include a meal for the homeless and lonely. But Father Connolly has little faith in what’s to come next.“After this, who knows,” he said.


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