The financial downturn means that charity funds are drying up just as they come under even greater pressure to protect the most vulnerable. But does the start of a recession have to mean the end of philanthropy?, writes Fiona McCann

CHRISTMAS IS traditionally a time for giving. But increasing unemployment and the financial crisis means the incomes of Irish charities will be substantially less this year.

A survey of 362 UK charities published this week reveals that their incomes are expected to fall dramatically while costs continue to rise. The survey, by PricewaterhouseCoopers, the Institute of Fundraising and the Charity Finance Directors' Group, estimates that the charity shortfall could reach £2.3 billion (€2.7 billion) next year as the UK heads towards recession.

Here in Ireland, indications from charities is not good. Trócaire is reporting a 10 per cent fall-off in donations in 2008, while Concern reports that donations are down 5 per cent. Barnardos, meanwhile, has cancelled a planned charity event due to the lack of corporate sponsorship and postponed another originally scheduled for early in 2009.

"We are in the region of 10 per cent down on income in comparison to the same time last year," says Éamonn Meehan, deputy director of Trócaire, who adds that individual donors are not the only ones giving less.

"Official donors, governments, institutions like the European Union, are also going to have tighter budgets . . . You have to add to this that donor governments probably have less money, therefore UN agencies will have less money, so I think 2009 for poor people in the developing world is going to be very difficult."

The shortfall means that Trócaire will have less to give relief projects, says Meehan.

"We're involved in assisting Burmese refugees who live in camps on the Thai-Burma border. If we have less money, we will be able to support a smaller number of those refugees. There are 8,000 nursery-school children in those camps, and we are involved in a lunches programme for those children.

"If our income declines we will be able to support a smaller programme, so less children will get their lunch."

Trócaire is not the only Irish charity suffering in the current climate.

"It's a perfect storm," says Richard Dixon, director of fundraising at Concern, who says costs have risen. "VAT is up. The general cost of living is up. Demand is up, whether you're operating domestically or internationally.

"We're handling climate change, world food crises, huge levels of additional demand. Those are all on one side of the equation, and on the other side, income is down."

Concern is already seeing a fall-off in donations from individuals. "Our supporters are continuing to be generous, but whereas last year they might have sent in a donation for €20, this year it's a tenner," Dixon says.

The result is that the organisation has already taken in some 5 per cent less than expected this year, which will translate into a shortfall of €2 million in 2009 after Concern's figure for expected income is revised to account for the changing financial situation.

Irish-based charities raise funds through various methods, including church collections, Christmas gifts, direct mail and debits, sponsored challenges, fasts and charity shops.

Specific types of fundraising appear to be more vulnerable than others, with direct mail and special events particularly badly hit during recessions. This is borne out by the experience of Barnardos, which has already cancelled one event and postponed another.

"One issue is corporate sponsorship and the other is table sales. It's getting much more difficult to sell tables now," says Ruth Guy, fundraising and marketing director at Barnardos, which has also noticed a downturn in individual donations.

"It started on a slow basis with people who used to give monthly donations," she says. "We started getting phone calls saying they had lost their job or things were getting tight and they couldn't continue. Corporate donations have also reduced."

THE DECREASE IN cash flow comes at a time when demand for the services provided by charities is increasing, as Stuart Kenny, spokesman for St Vincent de Paul, points out. "Calls for help are up between 35 and 40 per cent," he says. "It's pretty grim, frankly, and some of our conferences have run out of funds already this year."

Given the increased demand, the charity is looking to increase its expenditure this year by almost €4 million, money which it depends on raising from donors.

"We spent €46.2 million in 2007. The best 'guesstimate' is that we will be spending, by the end of this year, more than €50 million," says Kenny.

Although donations were up last year, the toll that the financial crisis is taking on this year's income has yet to be calculated. But Kenny is optimistic.

"Every time we've been in a situation like this before, like back in the 1980s and 1970s, when things were really bad, the Irish public has come up trumps," he says. "St Vincent de Paul started in the Famine years, so we know what tough times are, and these are not Famine years."

St Vincent de Paul may have longevity on its side, but smaller, newer charities may be more vulnerable.

Camara, an Irish charity that takes in second-hand computers, refurbishes them and sends them to Africa along with volunteers who train teachers in computer literacy, was set up just over three years ago. While its fundraising income has not been affected, the organisation has seen the effects of the recession in other areas.

"In the last two months we have seen not a drop-off but a slowdown in the PC donations," says Eoghan Crosby, Camara's technical director. Though times are difficult, he says Camara is continuing to grow and is optimistic about expanding over the next year. "We'll have sent out about 5,000 computers this year, almost 2,000 more than the previous year. We hope to send 7,500 out next year just from our Dublin hub."

For Crosby, the crisis in fact might help charities such as his, in that donating to Camara is a way of doing business.

"At this time all businesses need to be promoting themselves," he says. "Companies should look at our service as providing not only education for schools in Africa, but providing them with a good corporate image."

Dennis O'Connor, director of strategic management consultant 2into3, which specialises in the non-profit sector, is co-author of the report, Fundraising in a Cold Climate. The report was presented to a gathering of some of Ireland's leading charities in October, as the most important time of year for fundraising approached.

The report examined trends in donations during financially difficult periods in the history of the US and the UK, and placed the findings in an Irish context.

The report's findings were surprisingly optimistic. In looking at economic trends and philanthropic giving over a 40-year period, it found that, on average, total donations dipped only slightly during times of recession. In some instances of declining markets, philanthropy even increased.

"The report would indicate that the bigger organisations who have a diversified income stream, who are well understood by the donor base, and who are keeping touch with their donors will do better than those who are smaller, less well understood and not in contact regularly with their donors." said O'Connor

He says the 1973 stock market crash in the US was the biggest market fall in a single year until now, yet its impact on charitable giving was minimal. "The total levels of giving rose . . . so there was no fall at all, even though there was a 31 per cent fall in the stock market."

The financial crisis has potential benefits for charities, he stresses. "There's already some anecdotal evidence that volunteering is going up. Also, if you have a good relationship with donors and if they do understand what you're doing and if the need for your services has grown, you can go to the existing donors, explain why the need is greater and look for a greater level of support."

It's a support that is increasingly necessary, as Dixon testifies. "I've been working with Concern for the best part of 20 years, and I've worked overseas and here in Ireland, and I've never seen a situation like this in which the various elements have come together in such a way that they impact on the most vulnerable people on the bottom of the pile."

ALTHOUGH IRISH people may feel they have enough to worry about this Christmas, Dixon is keen to remind them that the global financial chaos has left many other victims.

"In any recession, everybody's going to be affected, but the impact overseas and the impact on the most vulnerable is always a lot more severe than the impact domestically," he says. "They're borderline surviving, and we've moved the border. Where does that leave them?"

Despite the positive experience in previous recessions around the world the reality is that there is evidence from some of Ireland's big charities of a fall-off in donations here, concedes Dennis O'Connor.

"We don't know yet what the final market finish will be in Ireland this year, but it is going to be greater than that ," he admits.

Crunch time - How the charities are feeling the squeeze

• Trócaire, the official overseas development agency of the Catholic Church in Ireland, with 127 programmes across 39 countries, is expecting a 10 per cent decrease in income this year. Total income in 2007: €65 million (€35 million from donations).

• Concern,a non-governmental humanitarian organisation that works to eliminate extreme poverty, projects a 5 per cent reduction in income this year. Total income in 2007: €116.3 million (€55.6 million from fundraising).

• Barnardos, an independent children's charity working with disadvantaged children in Ireland, expects a reduction in income on this time last year of between 10 and 20 per cent. Total income in 2007: €21.5 million (€5.2 million through fundraising).

• St Vincent de Paul, a longstanding voluntary charity organisation that supports those experiencing poverty, predicts a €4 million rise in expenditure next year. Total income in 2007: €57 million.

• Camara, which takes in second-hand computers, refurbishes them and brings them to schools in Africa, sent 5,000 computers last year, almost 2,000 more than the previous year. Total income in 2007: €892,293 (€61,125 raised from data destruction and computer recycling business).