Arkansas nonprofits prepare for possible recession, shift in giving
Inflation has reduced the impact of donated dollars and increased fundraising goals
Girl Scout Troop 3458 visited the Food Bank of Northeast Arkansas in November 2022 and made a donation that will provide 1,000 meals to food insecure individuals. (Courtesy of the Food Bank of Northeast Arkansas)
Philanthropic giving remains fairly steady for many Arkansas nonprofits despite continuing inflation and the possibility of a recession.
While several organizations are on track to meet their fundraising goals, some have experienced slight dips in support. But they’re not yet concerned because December is traditionally a busy time for charitable donations.
“Whether we step into a recession or not, I don’t worry about the generosity of Arkansans or what giving rates will be because historically they’ve been very good to the nonprofits in their communities,” said Jessica Ford, Arkansas Community Foundation’s chief communications officer.
As an example, Ford points to the COVID-19 pandemic when donations came to ACF and Arkansas nonprofits “at an unprecedented rate.” Organizations have since adapted to a new normal, but the nonprofit landscape looks different than it did pre-COVID, she said.
Many organizations are still feeling the effects of the pandemic because the demand was greater than most nonprofits had ever seen, especially those that worked in food insecurity, human services and health care, Ford said.
“It was like crisis mode for those nonprofits,” she said. “We’ve come back from that, but the demand is still high.”
ACF has provided more than $393 million in grants since 1976 and is the state’s largest grantmaker by the number of grants made annually. Through its network of 29 affiliates, ACF connects donors to thousands of nonprofits across Arkansas.
The end of the year is a particularly important time for nonprofits because, on average, about 20% of annual revenue comes in December, according to a 2021 report from Neon One, a nonprofit software company.
“So when something happens during the holidays, whether it’s economic volatility, high interest rates or even some type of natural or manmade disaster, it can disrupt giving and so that inadvertently has a direct effect on nonprofit giving,” Ford said.
End-of-year giving is especially important for smaller nonprofits.
“A little bit goes a long way, and when you don’t get a little bit at this time of year, sometimes it can have a detrimental effect on their programming and their operations,” she said.
Nationally, year-over-year fundraising was up about 6% for the first half of 2022, according to a Fundraising Effectiveness Project report. The increase, largely due to major donors, is still lower than the second quarter inflation rate of approximately 8.5%.
Meanwhile, the number of donors to organizations fell by 7 percent, mostly because of a “collapse” in the number of people making small gifts. The number of individuals making contributions of $100 or less dropped more than 17 percent.
Both food and monetary donations are down at the Food Bank of Northeast Arkansas.
The Jonesboro nonprofit has about 944,000 fewer pounds of food, a 13% decrease from this time last year. The decline is largely due to a decrease in commodities from the U.S. Department of Agriculture, which make up a large portion of the items the food bank distributes, development officer Jennifer Hannah said.
“The USDA bids on commodities from farmers and people like that, and when the market is doing really well for farmers, the USDA gets pretty easily outbid,” she said.
Financial contributions are down about 5%, or $105,000, Hannah said. She attributed some of that to timing because roughly a quarter of the food bank’s donations come at the end of the year.
The organization also just wrapped up its large, annual food drive in November. The food bank did not reach its goal of 350,000 meals, but Hannah said the biggest reason is a change in the meal conversion rate. Typically $1 equals four meals, but this year’s recalculation reduced that number to 3.5 meals.
“Inflation has really impacted us and what we’re able to do with a dollar,” she said. “Obviously people are seeing those higher prices when they go to the grocery store, when they go to get gas and things like that. That impacts us as well.”
The Food Bank of Northeast Arkansas serves roughly 68,000 people annually in 12 counties by arranging pickups and deliveries to 140 partner agencies and programs.
During the pandemic, the food bank saw a surge in monetary and food donations because the mission of feeding people, especially children who relied on school meals, was front of mind for people, Hannah said. That need was also exacerbated by tornadoes in March 2020 and December 2021.
Donations eventually declined and returned to pre-pandemic levels by the end of 2021. That was expected, but Hannah said she’s not yet sure what the current dip in financial contributions means.
“As many of us fear a recession coming, many people are holding on to funds and things a little more tightly because there’s just so much unknown,” she said.
The food bank received a $3 million donation from author and philanthropist MacKenzie Scott in 2021, which Hannah said they used strategically so they could weather peaks and valleys.
Instead of resulting in fewer donations, Hannah said a recession could serve as a call to action that boosts support because much like the pandemic, donors may be more aware of the needs of low-income individuals.
“As far as the future goes, we could either see a drop in donations or we could see an increase in donations, but again, there’s just so much unknown for us as well as for our donors,” she said.
As part of its 2022-2026 strategic plan, the Arts and Science Center for Southeast Arkansas is focused on growing its membership. While the organization has a strong base of recurring donors, it’s been really difficult to gain new members since the start of the pandemic, communications and development coordinator Morgan Henson said.
Memberships accounted for nearly $40,000 in revenue in 2021, according to ASC’s annual report.
Founded in 1968, the Arts and Science Center for Southeast Arkansas offers programming in the visual arts, performing arts and sciences. The Pine Bluff-based nonprofit offers annual memberships that start at $35 for an individual and $50 for a family.
Increasing memberships provides a more secure source of revenue that can help compensate for factors like Pine Bluff’s declining population or the COVID-19 pandemic, Henson said.
“Those are two challenges that are totally out of our control but that we definitely have to be mindful of because as a nonprofit, or really any business or organization, you have to go with punches, you have to just figure things out when they come to you,” she said.
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Overall, end-of-year finances are looking good for ASC, Henson said. The center didn’t focus on a big Giving Tuesday campaign this year because staff was busy preparing for its biennial fundraiser on Dec. 3.
In 2018, the gala raised more than $80,000, according to the organization’s 5-year strategic plan. ASC hosted a virtual, two-night variety show in 2020 and returned to an in-person format in 2022. Funds raised at this year’s gala are expected to surpass 2018’s total thanks to meeting a $45,000 matching gift.
Although the pandemic has been challenging for fundraising, it could ultimately have a positive impact on supporting the arts because audiences have more appreciation for the joy and entertainment they provide, Henson said.
“We’ve seen a big uptick in our theater attendances, and people are just so excited to get out,” she said. “I think people value these experiences more after a period of not being able to partake in them quite as much.”
When the pandemic started, there was a “tremendous shift” at Single Parent Scholarship Fund of Northwest Arkansas where end-of-year gifts account for 35% of donor gifts, CEO Tyler Clark said.
Individual donations increased in 2020 and 2021, which Clark attributed to more frequent communication with donors, as well as people having more money to give and being more engaged because they were stuck at home with less to do.
“So we were raising money from individuals higher than usual, but corporate [giving] dropped out, completely dropped out, because they had their own priorities,” he said.
Additionally, corporations often conduct fundraising through their employees, but that revenue source disappeared when people started working from home, Clark said. Corporate donations accounted for 43% of income, according to the nonprofit’s 2021 annual report.
Single Parent Scholarship Fund of NWA’s history dates back to 1984. The nonprofit merged with the Single Parent Scholarship Fund of Benton County in 2021 and now provides direct financial assistance and supportive services for parents living in Benton, Carroll, Madison and Washington counties who want to pursue higher education.
As of 2021, the organization had awarded $16 million to nearly 21,000 single parents.
The merger resulted in moving the end of the fiscal year to June and Clark said the organization is on track to meet its financial goals, which include raising additional funds to support more scholarship money.
The board of directors voted in May to increase the base scholarships by 25% for all levels to keep up with inflation and increases in tuition and fees. Scholarship amounts now range from $1,250 to $2,500.
Restructuring events like Golftoberfest, a longtime miniature golf fundraiser, has provided more revenue. Prompted by the challenges of the pandemic, the one-day event was expanded to two weeks in two cities, which allows more people to participate.
In addition to events and donors, Single Parent Scholarship Fund of NWA receives support from a private family foundation that provides the majority of overhead costs. The foundation comprised 24% of the nonprofit’s 2021 income.
While a recession could cause a decline in foundation funding, Clark said he doesn’t anticipate Northwest Arkansas foundations will be hit as hard as national ones based on his experience working in development during the 2008 recession.
The potential decline in foundation funding and corporate giving illustrates the importance of following “the perfect nonprofit model,” which is to have a majority of donors be individuals, Clark said.
“Every nonprofit really tries to move in that position just to make them more sturdy because if you rely on just one grant or just one donor, if something goes wrong, you could close your operations or have to take back a service or let go of staff,” he said.
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