Donor retention is an area that sorely needs improvement. Donor-advised funds are rapidly growing and outpace foundation giving. Charitable giving happens in many ways that aren’t well-tracked (yet).
These are some of the findings presented in Nonprofit Quarterly’s free webinar last Thursday by the three main groups involved in producing this year’s Giving USA, the annual publication that tracks charitable giving:
- Patrick Rooney, Associate Dean for Academic Affairs and Research, Indiana University Lilly Family School of Philanthropy
- Nathan Dietz, Senior Research Associate, Urban Institute
- Keith Curtis, Chairman, Giving USA Foundation
Here are some of the more interesting takeaways.
Giving by Source
Total charitable giving in 2015 was a record $373.25 billion, which averaged out to more than $1 billion given each day. However, as the amount of total dollars has grown, so has the number of 501(c)(3) organizations.
Charitable giving by source breakdowns remained roughly the same:
80% came from individuals (71% from individuals, 9% from bequests).
16% of charitable giving came from foundations. More than half of foundation grants came from family foundations, which reaffirmed the importance of forming connections with individual donors.
- 5% came from corporations; this has been steady for many years. Cash makes up a vast majority of corporate philanthropy, but a rule of thumb that has held up for many years is that 20% of this type of giving has come from in-kind giving, largely driven by pharmaceutical and tech firms giving away product at free or vastly reduced prices.
70% of all charitable revenue come from fees for goods and services, but keep in mind that this figure includes hospitals and postsecondary institutions.
Giving by Subject
Religion continues to get the largest share of charitable giving at 32%, but it has grown at a slower rate over history compared to other fields, especially environment and animals and international activities, which have been two of the fastest growing sectors for charitable giving since Giving USA started tracking them in 1987.
2% of giving has gone to individuals, mostly from patient assistance programs that provide free or low cost prescription medications.
Changes in Giving, 2013-15
Giving by individuals continues to grow but has not yet surpassed pre-recession levels (i.e., before 2008). Mr. Rooney roughly estimated that if people re-directed $5 per day of unneeded spending toward charity, that would double the total amount of household contributions.
Bequests saw a large 28.2% increase, but these dramatic changes tend to happen with bequests and foundations, which are greatly affected by “liquidity events” in nation’s wealthiest estates during the past year.
Health saw slower growth, perhaps due to the Affordable Care Act, because historically, when government increases spending in a sector, philanthropic spending in that same sector tends to grow more slowly.
“Dollars Up, Donors Down"
50% of all giving comes from 5.6% of donors. Although total giving dollars is up, the number of donors is down, suggesting that donor retention is still an area that needs improvement. Retaining donors is more efficient; the amount taken in from new donors is always a bit less than the amount lost from lapsed donors.
Organizations need to look at donors as relationships, not transactions. You need to engage donors with your organization's story and how their gifts make that story happen, or else they'll go elsewhere.
Also, some of the things that are most likely to turn off donors are also the easiest to fix, like:
- not thanking donors individually for their support
- sharing their information without their permission
- making too-frequent or inappropriately large charitable requests
Mega-donations tend to give to large organizations, like educational institutions, healthcare organizations, or foundations. They are looking at their donations more as investments, so they are asking more about impact. A vast majority of dollars go to family foundations, which “shows a commitment to philanthropy”.
Thus, it’s important to tell donors what their gifts accomplished, to think about how to move mid-level donors up, and to ask loyal donors and volunteers to leave legacy through planned giving. Even “small shop” organizations need to think about these aspects because even a few of these conversations can help make a huge difference in your fundraising.
Pay Attention to Donor Advised Funds
Rapid growth in donor advised funds (DAFs) has been the main source of growth in the public society/benefit field, so much that national DAFs, like Fidelity, Schwab, and Vanguard (the “big three”), now have more assets than community foundation DAFs. Larger DAFs pay out about 20% of what they take in each year, which is much better than the typical 5% payout rate of private foundations.
One likely reason that DAFs are so attractive is that it allows donors to choose their level of anonymity. If you get a check from a DAF administrator like Fidelity or its counterparts, try to find out the original donor, and be sure to thank him/her, for there’s a good chance they’ll keep giving to you if you acknowledge them.
To avoid double-counting gifts, Giving USA reports the net inflows and outflows between the totals given to and from DAFs. In addition to Giving USA, see these for more info on DAFs:
- Chronicle of Philanthropy's annual study on DAFS
- What are donor-advised funds and how can I research them?
Formal Giving Is Just One Part of the Big Picture of U.S. Charitable Giving
Giving USA’s 70-year history offers useful perspective on traditional forms of giving -- individuals, bequests, foundations, corporations -- but keep in mind that its data doesn't include the following:
Corporate marketing dollars: More corporations are tying their giving more closely with their business mission and vision, and giving back to the community through cause-related marketing, sponsorships, and volunteer engagement.
Social enterprises: Social enterprises and benefit corporations might sacrifice some profit for their social missions. As social enterprises grow, we might need to look for other ways to measure corporate philanthropy more accurately than traditional methods used now.
Volunteer time: About 62.6 million people volunteered through or for an organization at least once, and volunteers spent a median of 52 hours on volunteer activities in 2015, according to the U.S. Bureau of Labor Statistics.
Giving to non-501(c)(3) organizations: People are becoming more sector-agnostic and care more about the recipient’s activities more than whether it’s a public charity. For example, people are giving money to their favorite locally-owned bookstores, donating to crowdfunding campaigns for social enterprises or other small businesses, mowing the neighbor’s lawn when she’s sick, or helping other individuals in need.
“Everyone is a philanthropist in some way. This is important to acknowledge, but it’s impossible to capture all of that,” Mr. Rooney said.
Have More Questions?
Ask your questions live during our free livestream, “Insights on Giving USA” on Friday, June 24, 1:00 p.m. ET, presented by Foundation Center West in partnership with Community Counselling Service, a leading global fundraising consulting and management firm that provides fundraising, development services and strategic consulting to non-profit organizations worldwide.
Visit Giving USA's website to read a summary or download for free the Giving USA 2016 Report Highlights. The 2016 full report will be available soon at Foundation Center regional offices, which have past editions available to use.
If you saw or replayed this webinar, what were your key takeaways? Sound off in our Comments section below.
SANDY PON is GrantSpace Specialist at Foundation Center and leads its GrantSpace and Online Librarian projects. In her 13 years with Foundation Center, she has answered thousands of questions from our visitors about nonprofit grantseeking, fundraising, and management.