Most Churches Ended 2017 In Good Shape
July 30, 2018 Andy Segedin
Churches and nonprofit missions ended 2017 on a higher note than 2016. While some organizations might be feeling momentum through 2018, Dan Busby, president of the Evangelical Council for Financial Accountability (ECFA), is preaching caution.
Better than three-quarters of organizations (78 percent) saw year-end giving remain the same or improve in 2017 compared to 2016, according to “Charitable Giving Inches Upwards,” a survey of 680 charities, churches, and ministries conducted by the Winchester, Va.-based ECFA. Midwestern organizations fared best with 85 percent holding steady or improving on 2016 year-end effort, followed by Eastern (79 percent), Southern (79 percent), and Western (73 percent) organizations.
More than one-third of survey respondents (35 percent) saw December giving improve by 7 percent or more. Midwestern organizations fared best again at 41 percent, followed by Southern (37 percent), Eastern (31 percent), and Western (30 percent) organizations. Those in the Midwest were also the least likely to have seen giving drop by 3 percent or more, something that happened to 17 percent of Midwestern organizations as compared to 22 percent in the South, 28 percent in the East, and 30 percent in the West. Almost a quarter of organizations (24 percent) overall saw giving drop by 3 percent or more.
Aside from continued strong support from states that comprise the Bible Belt through the Midwest and into the South, Busby said that there is no strong indicator as to why Midwestern organizations ended 2017 on a better note than peers across the country.
One reason for the overall success of organizations, according to Busby, was year-end tax reform. The new tax law was approved by Congress at the end of December, leaving donors with a few days to think about how they would to respond. Some donated dollars in 2017 that would have otherwise been given in 2018 to enjoy the tax benefits that might no longer be there with the increased standard deduction, up to $24,000 for joint filers.
Moving forward, Busby said that he understands that many accountants are telling clients to hold back on giving in 2018 and carry dollars over to 2019 or 2020, a method called “bunching.” That way, donors can give larger sums once every few years and enjoy the related tax deduction.
“We are in an era of uncertainty until taxpayers file their 2018 tax returns in early 2019,” Busby said. “We are not going to know exactly the impact on giving.”
The survey also illustrates churches’ and nonprofit missions’ reliance on donations and the tight margins on which they operate. Greater than three-quarters of respondents (78 percent) receive at least three-quarters of funding from donations; this includes 94 percent of churches and 66 percent of nonprofit ministries.
At the same time, most organizations do not have enough reserves to handle a moderate drop in funding. If met with a 3 percent decline in fundraising in 2018, 61 percent of respondents said that they would have to maneuver budgets as opposed to dip into reserves — 65 percent of ministries and 57 percent of churches. Larger churches — those with at least 1,000 members — have more flexibility as 53 percent of large churches could cover the loss with reserves as compared to 38 percent of smaller churches.
Busby explained that a typical ECFA member is modest in size, about $3 million to $5 million in annual revenue, but many raise less than $1 million per year. When accounting for inflation, these organizations have yet to meet pre-recession yields and have been unable to stash away funds for a rainy day.
ECFA is advising members to proceed through 2018 with caution. Members are being encouraged to carefully monitor giving patterns in 2018 beyond totals and into gift size and the number of new and lapsing supporters. Efforts have also been made to remain active on the advocacy front. ECFA has, for instance, collected 2,500 signatures from nonprofits opposing the new tax law’s tax on employer-provided parking.
“2018 is not a year to go crazy on spending,” Busby said. “It’s a time to operate with sound budgets and be prepared for the eventualities that are not that clear. It’s a time to carefully manage your resources and determine what’s happening in giving.”