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For Many Charities, an Empty Cup

On the day terror struck America, staffers of the Austin Children's Museum were as stunned as the rest of the nation. As reality sunk in, they asked themselves what, as a service organization, they should be doing. Before the day was out, the museum had sent an e-mail to 2,000 constituents that listed guidelines for helping children to cope with what they were seeing on television.

Then the staff looked at the museum's current programs to see what it could offer in this new climate. Their annual international children's festival, which was already under way and featured exhibits of 30 cultures, was an opportunity to teach children about tolerance. Their main exhibit, an interactive one called "Busytown," which had been planned for two years and opened in September, was meant to focus on community building and featured figures representing firefighter and police officer. That exhibit, which invited children to role play as rescue workers, meshed with one of the widely advocated recommendations for helping children to cope: Let them express their thoughts and feelings about what's happening in the world.

Later in September, however, the museum got the same kind of news that many nonprofits are facing today: Three grants that had been earmarked for the museum were, at the last minute, going to disaster-relief organizations instead.

WANING RESOURCES. Many charities are facing a drop in income this year -- 20% to 25% on average, experts estimate, although many will lose more. It's not just that people and corporations are giving their money to disaster relief instead -- a slumping stock market also is shrinking both endowment income and gifts from companies and individuals. Also, cuts in local, state, and federal budgets for social services will hit some nonprofits hard as dwindling supplies of dollars are redirected for defense spending and tax cuts.

Those likely to fare best will be the ones with strong and ongoing connections to donors. In other words, those able to provide solid examples of their community contributions -- and willing to ask for money on the strength of that value.

"We had a reason to be communicating with our members based on what we had to offer after what was in the headlines," says Ken Stein, director of marketing and development for the museum. Their program schedule -- the events that helped children cope -- became extremely relevant. "Now we are able to say: We were a valuable institution before September 11, and we are a valuable institution now, when we need your support more than ever."

The nonprofits in the most jeopardy are arts and cultural institutions, smaller organizations, those relying on only one or two large sources of funding and, especially, any group that hasn't worked diligently over the last several years to nurture its donor base and demonstrate its value. Now, with funding sources drying up, these groups need to move quickly to adapt if they want to survive, say both professional fund-raising consultants and those who lead nonprofits. Their advice:

Give before you get. Don't send out a letter asking for money because you're facing a budget shortfall -- ask for money because you're providing a great service to the community. Bring together groups of people who have supported your organization and reiterate your mission. "Remind people why you exist and what you do," says Linda Welter, who is a board member of both Women in Development of Greater Boston and the social-service organization Helping Our Women in Provincetown, Mass.

The nonprofits that do best financially are those that continue to return value to their donors -- and do so at all times, not simply when rattling the cup, says Don Peppers, co-founder of the Peppers & Rogers Group, a customer-relations consultant. Adds Peppers: "People need a reason to be associated with your charity in addition to the psychic reward," he said.

Nurture relationships. The closer a nonprofit is to its donors, the easier it is to count on them during a crisis. Stein is calling on the biggest donors to the Austin Children's Museum, who also happen to be business and community leaders, to serve as advisers. "They have a track record of steering their organizations through tough times, and they have a track record of supporting the museum," says Stein, who expects not only to improve the museum's balance sheet, but to strengthen its relationships with those donors.

Emphasize community. All that money going to disaster relief is a sign that people want to help. Now that nearly $1.5 billion has been contributed to such groups, it's OK to ask people to consider donating closer to home. "Think globally, but give locally" is becoming a mantra among nonprofits. "Helping Our Women is a small social-service agency that should not be doing well in this climate, but it is because the call went out for us to consider our own community and how devastating it is for people who have nothing," Welter says.

The appeal to patriotism can also be given a local focus. Peppers cites the advice of President Bush and other leaders who are telling the public to go out and shop, eat in restaurants, and otherwise get back to normal. "Charities can use that message," he says. "You want to do your part? Support the arts like you did last year because life goes on -- and here's your chance to prove it." As part of their pitch to "act locally," small charities might want to show how little of their money goes to bureaucratic and administrative expenses, leaving more to go directly to the community.

Gain financial savvy. It's a good time to rethink budget and fund-raising strategies. The Council of Community Services of New York State, which has some 800 members, is working with a CPA firm to hold cash-management seminars before the end of the year. The move comes as many of its members face "some very negative budget projections," says Executive Director Douglas Sauer.

As with individuals and for-profit businesses, those boasting a cash cushion will fare best. Similarly, financially diversified nonprofits will be better off. If a charity gets most of its budget from one gala event or a couple of big donors, it's simply too vulnerable. For some, getting financially smart may mean forming an alliance. In today's climate, arts and cultural organizations, especially, need to pool their resources, says Sauer. He sees collaboration as their best bet for conveying the message that they are crucial to economic development, especially in tourist spots, as well as to enlightenment.

Ask for the money. Many organizations postponed fund-raising appeals and events scheduled for September or October -- and there is some evidence they were right to do so, says Edith Falk of Campbell & Co., fund-raising consultants in Chicago. Those who went ahead with their plans saw donations drop off by as much as 40% because, as Falk puts it, "people were distracted." Now, she suggests that nonprofits not delay any longer or they will miss the holiday season, when generosity tends to be at its peak. The Austin Children's Museum is moving up its annual appeal to donors, usually held in December, to early November. "While people have a heightened awareness of our programs, we want to remind them we are nonprofit," Stein said.

A gala fund-raising event, even one that has become a tradition, probably won't get good results this year. "People don't really want to attend -- there's a lack of substance," says Welter. "Emphasize substance. Unless they are finding something in their mission that can be translated into a betterment of people and their communities in a really substantive way, nonprofits are missing the boat."

In today's climate, those who miss that boat could find it hard to stay afloat. By Theresa Forsman in New York

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