The Donor’s Attention – Ingenuity of revenue might lose donors

October 4, 2016       The NonProfit Times      

There is a famous cartoon of a man wearing a sandwich board proclaiming “The End Is Near.” If you were in attendance at a few of the most recent fundraising conferences you might think the end is near for charity. Note the difference between phrases charity and the nonprofit sector. There is a technical difference and the gap appears to be getting wider.

Fundraising experts have been saying for the past several years that the pool of available donors is draining, the population increase not withstanding. The reasoning ranges from after effect of the Great Recession to confusion by the com­petitive nature of charities to simple burnout and natural expiration of interest.

The most recent Growth in Giving initiative from The Giving Institute of The Giving USA Foundation shows a slight uptick in donors to human services organization across a 10-year period (2.2 percent) and to non-human services groups (1.45 percent). There’s also an increase in dollars. Again, the increase was marginal when considering it looks at 2005 through 2015.
Don’t even start on donor retention rates, which are staggering depending on whose numbers you’re using. And in this category there are no good numbers.

When it’s all counted, the $258.51 billion given by individuals during 2015 barely keeps the lights on. One shining example of when donor dollars directly impacted a major cause is the Ice Bucket Challenge. The ALS Association announced that Ice Bucket Challenge money that went to research helped pay for the discovery of the NEK1gene, a gene that is responsible for the degenerative disease. Such high-profile wins are badly needed since the everyday successes often go unnoticed by donors.Without these wins donors might feel unneeded.

When it comes to images, you need to factor in the problem-solving, for-profit companies that don’t seek tax exemption. That confuses the donor and politicians who point to such enterprises as shining examples when a tax-exemption is a quaint idea.

The vast majority of money to human services is from government, insurance and fee for service. There are no donors in sight. That is becoming the norm for charities and the nonprofit organizations are seeking other forms of revenue with a fervor. Coincidentally, government on the local, state and federal levels, too, is seeking added revenue.

Charities are looking to the government and government is looking right back. The move against the tax exemption for some charities is being seen across the country. In New Jersey, for example, a healthcare system ended a 10-year court battle on whether some revenue was unrelated and therefore taxable by agreeing to millions in payments.

Paying tax is not unreasonable when the income is not related to the tax-exempt purpose. But, how that purpose is defined is also under assault. Attorneys general are litigating what was believed to be settled law. In California, the 9th Circuit Court agreed with the attorney general that donors on Schedule B of the Form 990 must be revealed to regulators. A California state judge ruled for charities in a different but similar case. The issue of protecting donors has been tried in front of the Supreme Court of the United States, which sided with charities. Expect more litigation on the topic.

What will happen to donors if the charitable deduction is curtailed or abolished during the next 20 years? It is argued by many that the deduction doesn’t mean that much to people who want their names on buildings. That might be the answer given in polite company and can be argued that’s exactly why there is a deduction.

Charities are going to have to learn to fend for themselves on the revenue stream, often forgetting that the trash can with a pink ribbon painted on it is also for advocacy. Decisions are going to be made on cold, hard cash.

What will separate charity from for-profit business and keep donors engaged? That’s a debate that will come up more and more for the next decade. For now, charities need to make a better case to individuals to get and keep the cash flowing.