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Bob serves as President and CEO of GuideStar and serves on the boards of Vision TV, Grameen Foundation USA, and the AAFRC Trust for Philanthropy. More...

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Averages are Deceiving

Posted By on June 29th, 2011, in these categories: Fundraising | Nonprofit Practice

Are the newly released Giving USA numbers good news or bad news?

The Good

It is good news that philanthropic donations from individuals, foundations and corporations increased 3.8 percent to $291 billion in 2010, or little more than 2 percent adjusted for inflation. After two bad years, it is good to know that we’re starting to experience an increase, albeit a small one.

It’s good news to realize that Americans gave $291 billion to philanthropy despite the terrible toll that the Great Recession has taken on employment and retirement accounts. It is indeed an extraordinary act of generosity. Even more remarkable is that giving remained at about the 2 percent level of GDP, where it has been for years.

The 2010 numbers are good news if your nonprofit is engaged in international affairs, since giving this past year increased by over 15 percent. This is a category that includes development and relief activities, including more than a billion dollars to Haiti relief.  2010 wasn’t so bad for education and the arts, either, with increases over 5 percent. 

The Bad

However, it’s truly sobering to think that after peaking at over $310 billion in 2007, giving plummeted nearly $19 billion in 2008 and 2009. It took Giving USA two revisions of its numbers in order to recognize the full extent of the fall. No wonder our economic survey last summer reported that 8 percent of all organizations feel that they are on the brink of going out of business.  

At this point, philanthropic giving is looking a lot like the state of my 401k account. As Patrick Rooney, Ph.D., executive director of the Center on Philanthropy, pointed out, at an average growth rate of 2 percent, it will take at least six years just to return to 2007 levels.  More proof that my theory of a “new normal” is going to be here for a while in the nonprofit sector.

The Ugly

If you run a human services organization, 2010 wasn’t a good year at all with a decline in contributions of 1.5 percent (in inflation-adjusted dollars). If giving to Haiti disaster relief were not included, giving to human services would have declined by 4 percent.

Ruth McCambridge and Rick Cohen, in an interesting piece in the Nonprofit Quarterly, recalled the days of the 1962 study titled “The Other American” and pointed out that we are seeing a class divide where the groups that do well in charitable solicitations are those with higher income social connections. Ruth observes that there is a crisis among human service or social safety net groups, with declining charitable giving coinciding with decreases in government support for those that need it most.

In the end, the Giving USA statistics remind me a lot of the characteristics of GuideStar’s economic surveys and the country’s general recovery from the Great Recession. The recovery is uneven and unfair. Some are doing quite well (corporate profits are better than ever; the stock market has regained 90 percent of its value since 2007) while others are suffering greatly (high unemployment; high mortgage defaults). In the nonprofit world, the recovery is also uneven depending on what your organization does and where it is located. Averages can be deceiving.

We have long known that people think globally and act locally, which is why community philanthropy may be a real solution for organizations that continue to struggle for funds and increased demand for their services. These trying times may require a new approach. If you haven’t connected to your local community foundation you may want to consider it. Community foundations offer a powerful and personal approach to giving – they simply know the nonprofits in their areas the best, and they can funnel donations to those organizations in the community that need it the most. Check out GuideStar’s DonorEdge Learning Community, a group of community foundations who are the model of effective local philanthropy.

What do you think of the Giving USA numbers? Are they good news or bad news for your organization?

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New Survey Gives Credence to the “New Normal”

Posted By on August 18th, 2010, in these categories: Economy
Map of Responding Organizations

GuideStar June 2010 Economic Survey - Map of Responding Organizations

GuideStar’s latest economic survey has just been released, and you can find the results here. Over the last two years, we’ve increased the number of economic reports we undertake in order to get a better feel for what is happening in the field. This was our first economic survey this year and the fourth survey we have released in the last 18 months. Participation in the survey was high, with more than 7,000 nonprofits responding.

The headline for this latest report:  the economic recovery is slow and painful for many nonprofit organizations.

About 40 percent of respondents have seen a further decline in contributions in the first five months of 2010 compared to the first five months of 2009. at the same time, a majority (63 percent) have seen an increase in demand for their services. 

Given the general state of the economy, I don’t think we should be too surprised by these results. After a nice boost in the first half of the year, the recovery seems to have stalled and maybe is even beginning to drift—sideways if we’re lucky, but perhaps even downwards.

We know from experience that the most accurate predictors of charitable giving are such indexes as the stock market, the unemployment rate, and consumer confidence. If these are uncertain or declining, so too will charitable giving. And now we have a new factor: the sorry condition of state government budgets, which is putting enormous pressure on nonprofits that rely on fees for services.

When the Great Recession hit in late 2008, I began writing about the “new normal” for the nonprofit sector—a period where the nonprofit sector will no longer experience the revenue growth (from foundations, individuals and government) we had become accustomed to over the last few decades. In Monday’s Wall Street Journal, Mort Zuckerman said he thought the “new normal” meant that our children will not have a better economic life than we have had. That’s very sobering, more than I’m willing to admit at this point. I wasn’t saying that the “new normal” meant nonprofits wouldn’t have any resources, since many still have plenty, but that for most the next few years will be a time when consolidation and contraction are more likely than growth and expansion.

Back in 2009, a few friends and correspondents took me to task, saying I was unnecessarily negative and that things would quickly bounce back to normal. The “new normal” may not apply for certain subsectors of the nonprofit sector and for some regions of the country, but in general our new survey underscores the fact that we still have a slow and painful recovery ahead.

To read GuideStar’s press release about our economic survey, please click here.

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Current and Past Disaster Giving

Posted By on January 21st, 2010, in these categories: Disaster Relief

On January 18 the Giving Institute and Giving USA Foundation, working with the Center on Philanthropy at Indiana University, released an analysis of giving during the first five days since the earthquake in Haiti.

As of the 18th, $189.9 million had been donated to 43 organizations for relief efforts. This tracks with the five-day fundraising response to the 2004 Asian tsunamis and the 2005 hurricanes.

In 2006, the Giving USA Foundation reported that the previous year, American individuals, corporations, and foundations donated $7.37 billion for disaster relief in the aftermaths of the hurricanes that struck the Gulf Coast of the United States, the Asian tsunami, and an earthquake in Kashmir. An additional $1.17 billion was raised for hurricane relief in 2006.

Donations are sure to increase with the news of the aftershock Haiti experienced yesterday and with continuing media coverage of relief efforts on the island. Only time will tell if this year’s contributions for disaster relief will reach 2005-2006 levels.

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The Near Future of Fundraising

Posted By on November 11th, 2009, in these categories: Economy

We’re in the midst of the giving season, a time when many nonprofits raise the majority of their contributions for the entire year. Last year individual donations fell for the first time in many years. Soon we’ll know how 2009 turns out, but so far the indicators—things like the unemployment rate and the psychology of the stock market and personal confidence—suggest a tough year. Read about GuideStar’s own economic surveys >

There is an important new report out from Giving USA that looks at how long it will take for the nonprofit sector to get back to normal funding levels. The bottom line from the report is sobering but not surprising: it will take a few years for the sector’s contribution revenues (as opposed to fees and contracts) to match where they were in 2007. Regarding individuals, the report concludes, "It is likely that donations from households and individuals will not reach their 2007 levels until at least three years after the end of the current recession." Why is this important? As we know from the annual Giving USA surveys, 75 percent of charitable contributions come from individuals. In comparison, foundations contribute about 13 percent and corporations only about 5 percent.

As for foundations, the recovery could take even longer, depending on the state of the stock market. After the 1973-1974 recession, for example, it took foundations nearly 10 years to recover to pre-recession levels. But some of this slow recovery could be affected by the creation of new foundations and tax policies. The Foundation Center is out with a new report that reports foundation giving will likely decline by more than 10 percent in 2009. Based on responses of close to 600 foundations, Foundations’ Year-end Outlook for Giving and the Sector also finds that continued reductions are expected in 2010.

The Giving USA report ends with a few good tips on fundraising strategy. The key one to me: "Keep demonstrating your organization’s success and impact. Continue to communicate and to make your organization’s story known." Nancy Rabin, a New York-based fundraising consultant, suggests this as well: "Be candid, but upbeat. Donors are hungry for good news." Good luck to all, and stay positive.

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