When Hope the Mission Chief Executive Ken Craft first founded the North Hills-based nonprofit in 2009 to help prevent and eliminate poverty, hunger and homelessness in Los Angeles County and beyond, he knew there would be strategic and financial challenges.
Fifteen years later, the nonprofit is now the largest rescue mission in the U.S., with 35 site locations across greater L.A. which includes 23 interim housing facilities, two community access centers, an inpatient recovery program, a recently launched mental health department and six social enterprise thrift stores.
To keep this massive operation running, he relies on both government contracts and other sources, ranging from individual and foundation donations to thrift store revenues, special events and corporate giving.
But with an annual budget of over $100 million, the numbers don’t always add up.
For example, Craft loses $1.26 million annually on the recently established 107-bed Trebek Center.
It’s a reality many nonprofits are facing as costs rise due to inflation and revenue from charitable giving, including corporations, fails to keep up with the new economic reality.
A look at the numbers
According to Giving USA Foundation’s annual report on philanthropy, individuals, bequests, foundations and corporations gave an estimated $557.16 billion to U.S. charities in 2023.
On paper, it’s a 1.9% increase from 2022 – but when adjusted for the 4.1% inflation rate, it effectively represents a decline of 2.1%.
While individual donations remain the largest source of charitable giving at $374.4 billion, corporate dollars were up by 3% to $36.55 billion. That’s a 1.1% decrease when adjusted for inflation – the smallest drop in all categories except for bequests ($42.68 billion), which remained essentially flat at 0.6%.
In the case of Craft, he saw a small bump in government contract revenue, but a decline in other areas, including the loss of one longtime corporate donor in 2023 that has not returned this year.
“I was told by my contact that the company’s bottom line is hurting and they just couldn’t do it this year,” said Craft. “Given the rising cost of food, gas, payroll and other supplies, charitable donations are not keeping pace with inflation.
“There’s also been a shift in the way corporations distribute their funds to charities,” he added. “Instead of making contributions to one specific shelter, they are more inclined to give to an umbrella organization like United Way, which is charged with distributing the funds to charities.”
In addition, he said the upcoming presidential election will likely impact where individuals and corporations direct their donations.
“Most big election years are challenging, and this one is especially so,” said Craft.
Adding to these factors, many nonprofits like Hope the Mission now carry additional responsibilities as they have expanded their work to new areas due to post-Covid challenges, including the lifting of rental moratoriums which has led to an increased number of newly homeless individuals due to evictions.
The financial pressure means Craft will have to hold a lot more fundraising campaigns this year.
It’s also led him to eliminate pay raises for hourly employees, and for the first time since Hope the Mission was launched, to tap a line of credit.
“As a 15-year-old charity, we are a relatively new organization, so we don’t have the endowments that many older charities have,” said Craft. “As a result, we rely heavily on donations, but when inflation surpasses what we receive, we have to look at other measures.
“There’s a lot of uncertainty in the air,” Craft added. “Unfortunately for us, people and corporations are more inclined to defer giving or give substantially less.”
New trends
Wendy McGrady, chair of the Giving USA Foundation, said although corporate giving has increased in inflation-adjusted dollars over the past few decades, companies are donating a smaller portion of their pretax profits, with charitable contributions being around 0.8%.
It’s a noticeable contrast to the 1.6 to 2% of earnings that were given to such efforts in the early 1980s.
“Typically, a corporation has several sources from which it pulls charitable funding,” McGrady said. “When a corporation’s pretax profits are up, we usually see a boost in giving, but corporate giving can also be influenced by a variety of economic factors, including GDP and inflation.
“This year there was a boost, but when adjusted for inflation it didn’t keep pace,” she added.
“Corporate philanthropy has traditionally been the smallest component of charitable giving, accounting for 4 to 6% of all private donations, and that has been true for decades,” said Geoff Green, chief executive of the California Association of Nonprofits. “How nonprofits are impacted by an increase or decrease in how businesses give depends on the organization’s revenue model.”
If a nonprofit relies heavily on corporate giving and the numbers decrease, Green said it will be forced to find revenue elsewhere.
McGrady said there’s also been a change in the way corporations seek to make an impact, with leaders taking a big picture approach based on their business goals and what is happening in the world.
For example, in the wake of the George Floyd murder, there was a major uptick in funding from corporations and their foundations to address racial inequality.
“Giving has become more strategic,” McGrady said. “Whereas a business may have spread donations around in the past, now they are more likely to give to the nonprofits that align with their specific missions. They offer their employees multiple ways to give or get involved.
“If I’m Subaru, for example, which has made the environment a top priority, then it’s no surprise that the National Parks are one of the recipients of their corporate philanthropy,” McGrady added.
Employees are also demanding that businesses demonstrate more social responsibility, not just by making contributions directly but by matching an employee’s giving and creating strong volunteer programs that incentivize workers to give back.
“Workers, especially younger employees, want to feel their employer is aligned with their personal goals for community impact and engagement,” McGrady said. “They see generosity broadly and want opportunities to make a difference.”
Diversifying their impact
While some corporations give to causes strategically aligned with their businesses, Green said others are more likely to sponsor a gala or fundraiser, which provides “a natural opportunity for the business to get its logo and name out there.”
Companies like downtown-based City National Bank take a holistic look at their impact, said Senior Vice President and Head of Community Relations Milton Dellossier.
“At City National, serving our communities, especially those most in need, is part of our DNA,” said Dellossier. “We know that when our communities thrive, we thrive.”
There are a variety of ways in which they strive to make a difference.
In 2023, City National donated over $5.7 million to nonprofit organizations in L.A. County, and more than $11.3 million nationwide, up from about $5.66 million and $10.1 million, respectively, in 2022.
Employees are also encouraged to do their part by donating to organizations in L.A. County through the annual Workplace Giving Campaign, which raised almost $727,000 in L.A. County in 2023, and $1.3 million nationally.
In addition, employees spent 15,000 hours volunteering in L.A. County in 2023.
“City National provides all eligible colleagues up to three hours every month to volunteer,” Dellossier said. “Our Dollars for Doers volunteer grant program will award up to $500 each fiscal year to qualified nonprofit organizations for every full-time colleague who volunteers with them.”
There are also targeted and fluctuating initiatives designed to address current societal needs.
“In recent years, we have been directing large portions of our donations and support to the areas of education, homeownership and entrepreneurship,” Dellossier said.
Dellossier said the bank has reinvested millions of dollars in its signature Dollars + Sense financial education program and its Reading is The way up Fund literacy initiative.
In 2019, the company began supporting Habitat for Humanity on a national level, donating more than $1 million toward affordable homes in communities around the country.
In L.A. County, City National has been the 2024-presenting sponsor for the Los Angeles Builders Ball; Power Women, Power Tools, Habitat’s largest women-focused build event; and the Los Angeles Veterans Home Repair Blitz event.
It also supports Habitat’s Advancing Black Homeownership program in L.A. County.
City National colleagues have spent nearly 1,000 combined hours volunteering with Habitat LA and other affiliates nationwide in the past year alone, said Dellossier.
In addition, City National supports homeownership with initiatives like the Ladder Up Home Loan Grant program it launched last year to help borrowers in underserved areas become homeowners in Southern California, New Jersey and New York.
Between 2022 and 2023, the bank also awarded $10.8 million in grants nationally to community development financial institutions and community organizations.
Like City National, U.S. Bank has taken a multipronged approach to making a positive impact on the community.
In the greater Los Angeles/Orange County area, it provided $22.3 million through the U.S. Bank Foundation and corporate donations from 2021-23.
Locally, employee volunteers dedicated 23,000 hours to philanthropic endeavors during that period.
“Giving back to our communities is one way we at U.S. Bank invest in the future,” Erica Opstad, managing director of the U.S. Bank Foundation, wrote in an email. “We provide corporate contributions and U.S. Bank Foundation giving throughout the country, supporting organizations that create stable jobs, affordable housing and vibrant communities.”
“With a unified giving and engagement strategy called Community Possible, we listen and learn from the communities we serve, pairing our people with community partners and opening doors to two-way conversations about prevailing community needs,” she added.
Nationally, corporate contributions and foundation giving reached $96.4 million in 2023. In addition, $555 million was committed to community development financial institutions and other intermediaries.
In 2023, Opstad said employees volunteered 360,000 hours at schools, nonprofits and community organizations.
To incentivize these efforts, U.S. Bank offers 16 hours of paid volunteer time off each year to eligible employees. It also hosts an annual Employee Giving Campaign, which in 2023 led $17 million to be pledged to nonprofits nationally.
“The U.S. Bank Foundation matches employee charitable contributions as well,” Opstad said.
A nontraditional philanthropist
The largest nonprofit hospital in the western U.S., Beverly Grove-based Cedars-Sinai Medical Center is not a traditional corporate philanthropist.
“Our mission is to elevate the health status of the local communities we serve,” said Jonathan Schreiber, vice president of community engagement. “We are a strategic and socially responsible grantmaker, with the monies coming directly from the hospital’s operating budget.”
On average, Schreiber said Cedars-Sinai provides $20 to $30 million in grants to nonprofit community organizations annually.
In calendar year 2022, the number rose to $39.8 million to address Covid’s impact on the community and to take advantage of several unique grantmaking opportunities that allowed Cedars-Sinai to leverage its giving.
In 2023 the number decreased to $21.7 million, which is more consistent with its annual commitment.
How the hospital allocates funding does evolve based on the issues faced by the communities it serves, which are determined by its triennial community health needs assessment.
Currently, its efforts are directed in three areas: homelessness and housing ($9 to $13 million); access to care ($7 to $12 million) and civic engagement ($3 to $5 million).
“Access to care is an ongoing challenge, along with how to address chronic disease in historically marginalized communities,” he said.
In 2022, the hospital launched its Black Birth Equity efforts, providing grants to community organizations to reduce inequities in Black maternal and infant health.
The hospital also provides sponsorships to organizations that align with its goals. The average sponsorship is $5,000, according to Schreiber.
And while grantmaking is the main tool it utilizes to effect change in the community, that was not always the case.
“A dozen years ago, we did not do grantmaking,” Schreiber said. “Today, we invest heavily in our community partners rather than acting alone.”
Schreiber said the institution has a robust employee volunteer program.
“Five hundred Cedars-Sinai team members volunteer outside the walls of the hospital to provide services while 3,900 community volunteers come to the hospital to help patients, loved ones and staff on an annual basis,” Schreiber said.
Renewed commitment by some
While people rely on nonprofits to deliver services, provide help in emergencies, and improve communities, Green said many fail to realize that the sector is also a massive part of the overall economy.
“In California, there are more than 110,000 501(c)(3) nonprofits and taken together, the sector is the fourth largest employer in the state,” Green said.
Although charitable giving has failed to keep up with inflation for the past two years, he said there are signs that giving may be stabilizing after some of the wild swings of the Covid-19 pandemic and inflation.
“The various drivers of charitable giving are complicated,” Green said. “Inflation has been improving in recent months and we all hope that will continue, but corporate giving also depends on profitability, company values, giving strategies and tax policy.
“Nonprofits are indispensable partners to for-profit businesses,” he added. “We care for the communities in which they exist, support their employees in a myriad of ways, and offer them a way to express their values. My hope is that these partnerships will grow, and corporate philanthropy will grow along with them.”
