Despite a raging, worldwide pandemic and near historic unemployment, charitable giving increased by almost 7.5 percent during the first half of 2020, compared to the first half of 2019, according to data in the Fundraising Effectiveness Project’s 2020 Second Quarter Report.
A 19.2-percent increase in smaller donations (less than $250) during the second quarter was an important driver for this turnaround. The overall number of donors increased by 7.2 percent with new donors increasing by 12.6 percent, showing a renewed interest in supporting the work of nonprofits.
Giving during the first quarter of 2020 was 6 percent behind first quarter giving in 2019, and many charity officials were worried that the data didn’t yet show the impact of the pandemic because COVID-19 had not spread significantly by the end of March.
The Fundraising Effectiveness Project (FEP) operates the Growth in Giving Database. It is a database of actual donations to nonprofits in the U.S. and Canada. The FEP publishes quarterly and annual reports that examine key fundraising metrics that serve as benchmarks for nonprofit leaders and development staff.
The data analysis includes giving details from 2,496 nonprofits based in the U.S. as a subset of the FEP. The distribution of National Taxonomy of Exempt Entities (NTEE) codes for the 2,496 organizations is comparable to the sector-wide distribution.
Organizations that did not have a minimum of 25 donors and $5,000 in donations in each of the previous five years were removed from the study. From the remaining organizations, the FEP randomly sampled organizations from each of the four organization sizes based on 2019 annual donations: $100,001 to $250,000; $250,001 to $1,000,000; $1,000,001 to $5,000,000; and $5,000,001 to $10,000,000, so that there was a balanced stratification reflective of IRS filers.
“We were concerned that COVID-19 could have a detrimental effect on giving, but the American people are generous even in tough times,” said Elizabeth Boris, chair of the Growth in Giving Steering Committee. “The significant increase in gifts under $250 shows many donors have been moved to give even amid the pandemic and resulting economic uncertainty.”
The number of mid-level gifts ($250 to $999) and major gifts ($1,000 or more) had year-over-year increases of 8.1 percent and 6.4 percent, respectively, compared to 2019 data. In the first quarter, both categories trended behind 2019 results.
“We’re seeing increases across almost every category the FEP measures — including overall donor retention, recaptured donors, and gifts of all sizes — which is absolutely stunning given the impact of the pandemic on planned fundraising activities,” said Woodrow Rosenbaum, chief data officer of GivingTuesday, a co-producer of the FEP report. “Organizations have had to pivot quickly, with many fundraising campaign plans being altered and events going online. Despite these challenges, giving has increased relative to last year — so far — which is encouraging as we look ahead to the rest of the year.”
The continued increase in smaller contributions of less than $250 is likely due, in some part, to the universal charitable deduction that was enacted into law as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, according to Nathan Dietz, senior researcher at the Do Good Institute at the University of Maryland in College Park, Md. “However, we’re also hearing from charities the deduction isn’t big enough to have a significant impact because the cap on deductible contributions, currently at $300, is too low, and taxpayers don’t have a huge incentive to make use of it,” said Dietz.
“These early signals point toward increasing the cap, some legislation has proposed a $4,000 cap for individuals and $8,000 for couples, which would serve to increase the generosity of the American public even further,” said Dietz.
It isn’t all good news. There are warning signs and historical trends to consider when thinking about what charitable giving might look like for the rest of 2020. There were a few soft spots.
The increase in the number of repeat donors retained (2.5 percent) offset the decline in new donors (-6 percent) retained for an overall increase of 1.8 percent in donor retention. Fluctuations in the numbers of donors these retention metrics show how effective the sector is at engaging donors. Donor recapture rate was down 2.1 percent. New retained donors declined 8.6 percent.
“We almost always see decreased giving in the first quarter of the year, and fundraisers should be cautious about getting too excited about the uptick in giving in the second quarter,” said Lori Hunter Overmyer, a member of the Growth in Giving steering committee and chair of the AFP Research Council. “We are likely to see a continued increase in need for the important services the social sector provides to communities, and we’re watching the impact of a very slow economy — which could potentially depress giving over the long-term. One of the most important things charities can do now is to build strong relationships with their supporters and encourage existing donors to continue to give when they can,” she said.
“Typically, external events don’t affect overall giving significantly, but 2020 could prove to be the exception,” said Boris. “The continued impact of the pandemic on the economy could prevent the giving growth from continuing, especially if Congress doesn’t approve another COVID-19 relief bill and people become more worried about their financial situation,” she said.
“On the other hand, we know that the fourth quarter of the year is, by far, the most important time for giving. So, we still have a long way to go in seeing how much giving will occur in 2020. It’s good to see gifts by mid- and higher-level donors increase in the second quarter, and hopefully that trend will continue into the latter stage of the year. The stock market also remains relatively strong, which often portends strong giving at the end of the year.”
Fundraising software firms Bloomerang, DonorPerfect, and NeonCRM, and additional partners the 7th Day Adventists, The Biedermann Group, DataLake Nonprofit Research, and DonorTrends (a division of EveryAction), provided data for the study.
The FEP 2020 Second Quarter Report is available free at www.afpfep.org