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Financial Investment Expert Urges Creative Ways For Charitable Groups to Keep Cash Flow Going During This Economy

In the face of this current economic crisis, many charitable foundations are finding their endowments impacted significantly, up to 25-40%. Paul Woldar, Founder of Legacy Financial Management, an asset management/consulting firm for not-for-profits, said that these organizations need to take a hard look at the securities they are holding and — with their financial advisors — determine which pieces have solvency and which may go under.

Now is the time to have your financial advisor earn his/her fee, according to Mr. Woldar. Foundations need to ask what exactly their portfolios hold and what is the economic and investment integrity of those pieces. Some should be liquidated even at this late date, while others are down with the market, but should come back over time. Areas to be concerned with include structured mortgages and structured asset backs. Many of these securities have AAA ratings, but may still be toxic. Other areas to be concerned with are the U.S. auto industry, certain finance names and retailers. He suggests looking at areas that should be more stable over the short term, such as phones, alternative energy (despite the sell-off in oil) and consumer goods.

Foundations that are continuing to fund grantees at last year’s levels are probably funding at greater than 5%, based on current asset values. Given a conservative 3-4% return on moderate risk investments, they are reducing their assets even more. These foundations can look into short-term lending to help multiple charities with the same dollar. Other areas to look include mission-related investing or program-related investing where the emphasis is on aligning investments more with your charitable goals than financial goals.

It was forecast at the November 18, 2008 Economic Storm symposium in Manhattan that 100,000 of the 900,000 charities in the U.S., more than 10%, may close their doors within the next 12-18 months. Mr. Woldar suggests that all charities should establish a database of foundation donors, or use an existing one, to develop a mailing and/or e-blast list, enabling them to aggressively communicate with donors that support their sector, and let them know they are doing similar work. If a foundation is funding a charity that goes out of business, they will at least be aware of those other organizations doing similar things.

Mr. Woldar advises looking to foundations for short-term loans as a way to get charities through their cash flow problems. He cautions that those charities utilizing a single, large fundraiser for the year may need to be creative and supplement this with a few smaller, more intimate fundraisers. This will bring in much needed dollars, and enable the charity to broaden its target base.


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