IFAW is latest wealthy animal charity to lay off staff due to cash flow crunch

From ANIMAL PEOPLE, June 2009:
YARMOUTHPORT, Mass.–The International Fund for Animal
Welfare in early May 2009 was identified by Sarah Shemkus of the Cape
Cod Times as yet another of the growing number of animal charities
with huge financial reserves to introduce deep budget cuts because of
declining cash flow.
“A recent internal message from IFAW president Fred O’Regan
to employees, obtained by the Cape Cod Times, cited a need to cut
the organization’s operations budget from $53.6 million to $36.1
million,” reported Shemkus on May 9, 2009. ” Net revenues for
fiscal 2009, which ends on June 30, are down by 32% from what was
budgeted, the message says.” IFAW had total income of $25.6 million
in the preceding fiscal year, and entered the 2008-2009 fiscal year
with $41.6 million in total assets, despite net losses of $4 million.

“Throughout last fall,” Shemkus wrote, “IFAW trimmed its
operations budget without reducing staff. In January, IFAW laid off
10% of its worldwide work force,” including 26 employees at the newly
built IFAW head office in Yarmouthport. The office building was
constructed with the help of a $10 million bequest from Juliana
Kickert, 64, of Sedona, Arizona, who died in March 2006.
“Those cuts left a staff of approximately 140 working at the
headquarters,” said Shemkus. Shemkus anticipated “further layoffs,”
based on the O’Regan memo to staff.
“We now need to find additional structural ways to reduce
expenses so that we operate in a way that is proportionate to our
substantially decreased budget,” the memo said, to make IFAW “a
smaller, more flexible and financially secure institution.”
IFAW did not answer Shemkus’ questions before her deadline,
she said, and has apparently not disclosed particulars about the
downsizing to other reporters, but Shemkus did receive a statement
from “IFAW’s executive team.”
“At this time we do not anticipate that our finances will
recover during the coming year,” said the executive team statement.
“According to the executive team,” summarized Shemkus, IFAW
has adopted a three-year plan which “will include efforts to
consolidate program and operational services, leverage program work
to generate revenue, rely more on partnerships with other
organizations to deliver program services, diversify sources of
revenue and expand the revenue base in the United States.”
The plan appears to involve outsourcing program activity to
overseas charities such as the Wildlife Trust of India, a longtime
IFAW funding recipient, which can perform high-profile projects at
less cost than staff directly employed by a U.S. organization.
IFAW presently has offices in 17 nations. Most of the
offices have local program partners. Partnership arrangements may be
financially attractive to the parties involved, but as more overseas
charities develop programs attractive to U.S. donors, many are
preferring to work with U.S. affiliates that are focused on the
overseas charities’ programs– like Wildlife SOS.
Founded at about the same time as the Wildlife Trust of
India, Wildlife SOS has had a longstanding philosophical conflict
with WTI over how best to rescue and rehabilitate bear cubs, who
usually are confiscated from poachers and smugglers, or are
surrendered by dancing bear keepers getting out of the trade.
Focusing on obtaining bears by helping former dancing bear
keepers into other occupations, Wildlife SOS now houses more than
500 bears at sanctuaries near Agra, Bhopal, and Bangalore.
Favoring returning bears to the wild, IFAW and WTI in late
May 2009 jointly announced only their third release of orphaned
Asiatic black bear cubs. One of the first two cubs they released was
killed by a leopard in 2005, WTI acknowledged to ANIMAL PEOPLE,
after the Assam Tribune alleged that leopards killed both. Two
released in 2007 survived for at least seven months before losing
their radio collars. Their release was disclosed in March 2008.

Financial structure

The source of the IFAW cash flow problem–beyond the weakened
state of the U.S. economy–is believed to be essentially the same as
for the Massachusetts SPCA and the Massachusetts Audubon Society,
which disclosed big cuts earlier in 2009: Massachusetts is among
about two dozen states that prohibit drawing down reserve funds that
are invested in stocks and other growth-oriented investments, if the
value of the investments falls below their original value.
Meant to protect charitable endowments against gambling in
investment markets, such legislation has cumulatively put billions
of dollars out of reach of the charities that raised the money.
Educational and medical charities have been far harder hit than
animal charities, few of which have built reserves large enough for
interest and dividends to be a major part of their revenue.
But the MSPCA, Massachusetts Audubon, and IFAW, among
others, came to depend on interest and dividends to underwrite their
operations. A formula popular among charity managers is that
interest, dividends, and profits from securities sales should
ideally be enough to finance the public fund-raising that pays for
program work.
According to their most recent available IRS Form 990
filings, the MSPCA was still achieving this formula as of the end of
2007, despite a 23% decline in endowment value since the end of
2006–but the MSPCA had an operating loss of $15 million in 2008.
Massachusetts Audubon, with financial reserves of nearly
five times the organization’s total annual budget, received more in
interest, dividends, and net from securities sales in fiscal year
2007-2008 than it spent on fundraising plus administrative expense.
But the value of the Massachusetts Audubon endowment fell 28% in 2008.
IFAW in fiscal 2007-2008 spent about twice as much on
fundraising as the sum it received from interest, dividends, and
net from securities sales, but still had a net decline in value of
assets of about 8%. The losses included a decline of about $1.3
million in the value of IFAW-held securities.

MSPCA shelters

Downsizing for the second time in five years, the
Massa-chusetts SPCA on February 5, 2009 announced the impending
closure of shelters in Brockton, Martha’s Vineyard, and
Springfield, facilitating layoffs of 38 staff, while eight vacant
positions were eliminated. The MSPCA had operated in Springfield
since 1933, at the present site since 1996; in Brockton since 1945,
at the present site since 1989; and in Martha’s Vinyard since 1947.
The cuts left MSPCA with shelters and animal hospitals in Boston,
Centerville, Methuen, and Nantucket.
All three of the former MSPCA shelters are now expected to
continue operations under new management.
Fifty years after the MSPCA opened the first Katherine M.
Foote Memorial Shelter in Edgartown, 23 years after the present
shelter was built after an eight-year fundraising drive led by summer
Martha’s Vinyard resident Anna Bell Washburn, the newly formed
Animal Shelter of Massachusetts opened on May 1, 2009.
“The MSPCA sign came down and the last remaining animals were
adopted or sent to the MSPCA shelter in Centerville,” wrote Jim
Hickey of the Vineyard Gazette.
The Animal Shelter of Massachusetts “signed an open-ended
lease with the MSPCA allowing them to rent the building and take over
most of the equipment at no cost,” said Hickey. “The building must
be used as an animal shelter in perpetuity, and the new facility
will no longer receive funding from the MSPCA. The shelter will for
now be owned and managed through a public-private partnership that
includes a nonprofit board and county government. Dukes County
Commissioners have agreed to provide funding to run the shelter for
the next six months.”
The former MSPCA shelter and animal hospital in Spring-field
has been sold to the Dakin Pioneer Valley Humane Society, already
operating an adoption shelter in nearby Leverett and an animal rescue
and rehabilitation center in Greenfield. The MSPCA had closed the
Springfield hospital in 2007, and closed the shelter on March 31,
2009. Paying $1.2 million for the property, the Dakin Pioneer
Valley Humane Society expected to spend several months in renovating
the facilities before reopening on August 1. The former hospital is
to become a sterilization clinic. The Greenfield site is to be
closed, with the Greenfield workload being moved to Springfield.
The MSPCA plans to leave the Brockton shelter on September
30. Brockton shelter manager Kim Heise in late April said “she is
among a group forming a nonprofit that would take over the shelter,”
wrote Maria Papadopoulos of the Brockton Enterprise News, and hoped
to continued operations as an open admission shelter.
But others “have a different idea of how the facility should
be used and we’re not being allowed to participate in how the new
organization is going to operate,” ojected Brockton Cat Coalition
founder Marcia Motta.
Motta said “she is forming a nonprofit entity called the Bay
State Animal Cooperative, which would operate a no-kill shelter and
low-cost spay and neuter clinic in Brockton,” added Papadopoulos.

Pennsylvania

The Pennsylvania SPCA, coping with budget issues similar to
those of the MSPCA, in mid-May 2009 quit trying to sell the
Stroudsburg shelter that it closed in January, and announced that it
would instead lease it for $1.00 per year to either the Animal
Welfare Society of Monroe or the Pocono Animal Welfare Society.
Monroe County in March 2009 asked the PSPCA “to give the
property back to the community,” reported Pocono Record writer Beth
Brelje. “The PSPCA acquired the land for $1.00 in 1951. If it were
to give back the shelter, the land would be deed-restricted and it
would be operated by a nonprofit representing the community.”
“Giving it back is not an option,” responded interim PSPCA
chief executive Beth Ann Smith-White. “We put almost $1 million in
renovations into the building. If for some reason one group fails,
we’d like to have another group come in. Who knows, the PSPCA may
come back in there,” she said.