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Charity Groups Finding Savior In Foundation

NON-PROFIT: Weingart to pay operating costs.

Los Angeles Business Journal Staff

In a move that could have big repercussions in L.A.’s world of philanthropy, one of the area’s largest charitable foundations is departing from tradition by giving grants — not for programs but for operating expenses — to financially battered nonprofits.

The Los Angeles-based Weingart Foundation, which distributes about $45 million annually in Southern California, is expected to announce Monday that it will offer unusual “core support” to underwrite administrative costs for social service agencies that provide necessities such as food, shelter and health care to the region’s poor, unemployed and sick.

Most philanthropic foundations traditionally give large grants that pay the costs of specific programs but do not underwrite non-profits’ operating costs, such as staff salaries and rent. Many non-profits get their operating cash typically from their own fund raisers or from direct donations.

Weingart’s move is being hailed by some potential recipients as a “fundamental shift” in charitable giving as nonprofits nationwide report unprecedented drops in donations as the economy deteriorates.

“This certainly reflects the exceptional times,” said Steve Lawrence, senior director of research at the New York City-based Foundation Center, which tracks grant-making foundations and philanthropic institutions.

Though a minority of foundations offer operational support, Lawrence said Weingart is the first U.S. foundation he knows of to lift restrictions on the use of grant money since the current economic crisis began. He expects others to follow.

Fred Ali, chief executive of Weingart, said the foundation’s decision to offer the one-year grants of up to $150,000 to “well-managed” nonprofit organizations providing essential human services was made in recognition of their urgent needs.

“What this says to the Southern California nonprofit community is that we are in absolutely unprecedented times,” he said. “What we are essentially saying to nonprofit organizations is that ‘You are no longer coming to us with expanded programs; you are in a situation where you are trying to keep your doors open.’”

As the country’s economy darkens and stock market losses mount, many donors are dramatically scaling back their contributions in a period – the year-end holiday season – when charities typically receive a large portion of their budgets for the year.

Major corporate donors are reneging on commitments or downsizing the size of their pledges. Some philanthropic leaders, including Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. have gone out of business or changed hands. Even the Bill & Melinda Gates Foundation, one of the country’s titans of philanthropy, recently slowed the pace of its grants.

Indeed, Weingart took its step even though the foundation itself is facing potential financial shortfalls due to big investment losses. (Weingart was the 10th largest charitable foundation in Los Angeles County with $934 million in assets, according to the Business Journal’s ranking in May.)

“Our drop in assets has been in the multi-million dollar category, but we are taking a long approach to investing,” Ali said. “Part of this announcement is to reassure our grantees that, despite that drop, we are going to remain active and aggressive in our grant making.”

Experts say that charitable donations are typically resistant to economic turmoil, falling by only an average of 1 percent during tough times. But this year the fall off is far steeper.


  February 8 - 14, 2010
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