Sluggish economy obvious in philanthropy slowdown on Long Island

Long Island Business News, Nov 23, 2007 by Ambrose Clancy

Not-for-profits are seeking to make hay while the winter sun shines and the holidays approach, but the regional economy is threatening their best laid plans.

Still, the charitable organizations of Long Island are counting on people to count their blessings and give to the less fortunate. In addition they're also welcoming those who are counting bottom lines, looking to contribute now to reap tax deductions come April, said Fran Karliner, a vice president of the Long Island chapter of the Association of Fundraising Professionals.

The status of the regional economy is a curse, however, as raw economic numbers plus the nervousness that runs though every family budget meeting do not bode well for the not-for-profit sector, said Karliner.

Revenue has been relatively flat compared with last year. But Karliner looks to previous holiday seasons when she said people would respond "to those among us who have it much worse than we do."

She added that not-for-profits must do a better job educating people about the importance of donating. Karliner noted a recent exercise in education at a legislative breakfast where elected officials were briefed on the plight of some veterans returning from Iraq and Afghanistan. They were told veterans had "physical and mental problems and problems with employment."

There are more than 3,000 charitable agencies located here, according to a survey published by Long Island Business News and commissioned by Cerini Associates, the AFP and C&B. One out of every 11 Long Islanders, about 110,000 people, is employed by a not-for- profit, and the survey found that almost every Island resident is affected by their work. The sector is involved in the arts, health care, social services, religion, land preservation, economic development, advocacy and education.

Not-for-profits are also a powerful economic engine directly affecting the employees in the system with somewhere between 60 percent and 70 percent of most budgets devoted to personnel costs. That figure is consistent with industry standards, which maintain it is acceptable to spend 30 percent to 35 percent of a not-for- profit's income on actual funding.

It's a wise move to court local elected officials, since a third of funding for not-for-profits come from government grants, about a quarter from fees for services, and 18 percent from the public ponying up, the survey found.

Agencies are being challenged by the growing needs of Long Islanders who depend on a helping hand. From 2000 to 2004, the increase in jobs in the not-for-profit sector was nine times higher than the for-profit sector, and even "while the not-for-profit sector continues to grow, the increase in demand for services threatens to outstrip the resources of the sector."

Joanna Corbin, director of marketing for Islip Terrace-based Mercy Haven, agreed with Karliner that donations have not increased over 2006 totals. She said that "lower end" contributors - those giving $100 or less - have cut back on their donations and "that's due to the state of the economy."

But even big contributors, such as banks, "haven't been as generous," Corbin said. "Some people have told me directly that due to the economy, the whole mortgage situation, that they can't do what they did."

Other large supporters have cut back on cash gifts and are sending gift certificates for raffles, Corbin said. It's difficult when not-for-profits have to compete with each other, she added.

"There are more fingers in the pot and the pot's not swelling," Corbin said.

Another challenge heading directly toward the not-for-profits is new Internal Revenue Service filings requiring stronger accountability.

This summer, the Internal Revenue Service drafted the first major revision in 30 years to the income tax return used by not-for- profits, said accountant Paul Hammerschmidt, tax director with the Melville firm BDO Seidman. The new version requires greater disclosure about operations, compensation and governance.

"More than 650 public comment letters were provided to the IRS, many from smaller organizations expressing concern about a lack of resources to track and report this information," said Hammerschmidt, who has 20 years experience specializing in tax matters for not-for- profits.

The good news is that IRS representatives have indicated they're willing to make some changes in the draft form based on public comments, according to Hammerschmidt.

Karliner looks at the new form as being a new blizzard of paperwork, but sees an upside.

"The more accountability we have, the greater the trust from the public," she said.