Safety-Net Groups Hurt by Donation Drop. (L.A.'S Working Poor -- Surviving the Recession).

DONATIONS to local charities generally fell sharply at the end of last year as a result of dollars being diverted to Sept. 11 disaster relief funds and the ongoing economic recession.

While a few nonprofit organizations matched or even exceeded fundraising expectations for the fourth quarter of 2001, most nonprofits' worst fears were realized as individual and corporate donations were slashed by as much as $300 million in the L.A. area, according to a number of estimates.

Hardest hit were what the California Endowment Foundation, which awards grants to community-based groups, terms "safety-net organizations." These include food banks, homeless shelters and mental health service providers, a group more dependent on corporate grants and government funding.

The same factors that reduce funding for these "safety-net" nonprofits often contribute to increased demand for their services. A recent California Endowment survey found that nearly two-thirds of the safety-net nonprofits had reported increased demand for their services.

"Ironically, the same time you have an economic downturn, you have more need," said Mark Groner, vice president of development for Wise Senior Services in Santa Monica. "It's just a vicious cycle."

A survey of more than 400 statewide nonprofit executive directors conducted for the California Endowment revealed an average decrease in donations of $62,000 per agency over the two months following the attacks. There are roughly 4,600 nonprofit organizations serving Los Angeles County.

Robert Ross, president of the California Endowment, noted that even a slight reduction in funds can put a strain on operations for a charitable organization.

"A five percent hit... doesn't sound devastating, but most of them do not have anything that resembles a healthy cash reserve," Ross said.

The decline in giving was felt by organizations large and small.

Joe Haggerty, president of the United Way of Greater Los Angeles, said giving in December was flat compared to the year earlier, but "for most charities, that meant they ended up down a little bit because of poor results in September and October."

Exceptions were those with an established and more affluent individual donor base. Santa Monica-based Liberty Hill Foundation and Make-A-Wish Foundation of Greater Los Angeles each saw increases in donation levels for its final quarter and final third of the year, respectively.

"We had a very strong showing from our annual supporters," said Liberty Hill Executive Director Tone Osborn, who estimated that $750,000 was donated from individuals during the fourth quarter, up $65,000 from the previous year.

In addition to citing a strong showing from its core donors, Make-A-Wish President Judith Lewis attributed its 13 percent increase for its September-through-December donations to the media focus on charitable giving.

"There was so much emphasis on giving to your local charities - that was a persistent message over about six weeks;' said Lewis. "I know we benefited from it."

That response was rare, however.

"The average charitable organization is a neighborhood center in an average income neighborhood, and they're the ones who are hurting because they don't have a base of affluent givers;' said Haggerty.

One that took a hit was the Union Rescue Mission in downtown Los Angeles. "Our donor acquisition programs pretty well bombed this fall, and I think it was directly related to 9-11;' said Andy Ley, URM's chief development officer. "Overall, we were a little bit down from last year."

King McGlaughon, director of the center for philanthropy and nonprofit management at Merrill Lynch & Co., cited his firm's $10 million grant to the Sept. 11 Fund as an example of a corporate gift that may have otherwise been split among smaller, community-based organizations.

But he also cited individual responses to the economic downturn as a major factor.

"Most of the (drop-off in donations) was in small gifts," said McGlaughon. 'The economic situation is what really hurt them."

Still, the worst may be yet to come, as government funding, a cornerstone for many social service-based nonprofits, is expected to decrease this year. 'The other shoe that has to drop are the state and budget cuts" said Ross. "So we're assuming it'll go from bad to worse."