Major studies of giving during 2018 are starting to show agreement that philanthropy lagged Gross Domestic Product (GDP) during 2018 and the only reason giving was up is because of donors who gave at least $1,000.
Giving increased by 1.6 percent in 2018, according to the Fundraising Effectiveness Project’s 2018 Fourth Quarter Report, released today. While the federal government is still tabulating GDP for 2018, it is estimated to have been approximately 2.6 percent.
The data also shows a plunge in the number of donors. Data in the report is based on a panel of more than 4,500 charities selected from the Growth in Giving Database of 161 million individual transactions, which includes more than $72 billion in donations and 18,348 organizations since 2005. Organizations included in the panel have raised $5,000 or more from 25 or more donors in each of the last six years. Revenue figures were adjusted for inflation.
After a sluggish first half of the year, charitable giving rebounded during the third and fourth quarters of 2018 to end with an overall increase. However, the increase was smaller than in 2017 with other key giving indicators continuing to fall. And, the month of December 2018 was down compared to December of 2017.
While total giving of gifts of $1,000 or more increased by 2.6 percent, revenue from smaller gifts decreased. Gifts in the $250 to $999 range dropped by 4 percent, while gifts of less than $250 declined 4.4 percent, according to data in the report. The number of donors fell, as did retention rates (the percentage of donors who continue to give to the same organization).
“The headline may show an increase in giving, but that increase masks some serious long-term trends that are presenting huge challenges to the sustainability of fundraising and philanthropy,” said Elizabeth Boris, chair of the Growth in Giving Initiative of the FEP. “Giving is increasing because of larger gifts from richer donors. Smaller and mid-level donors are slowly but surely disappearing — across the board, among all organizations. Philanthropy should not and cannot be just the domain of the wealthy, and the entire sector needs to look at how we reach out to and engage these donors.”
The total number of donors dropped by 4.5 percent from 2018 to 2017. In that total includes:
* New donors to an organization, which dropped by 7.3 percent from 2017;
* Newly retained donors, those who have given a second time to an organization, which dropped by 14.9 percent;
* Recaptured donors, those who stopped giving to an organization but returned and gave again to the same organization in 2018, which dropped 1.6 percent; and,
* Repeat retained donors, who have been giving to the same organization for at least three years, which increased by 0.2 percent. The overall retention rate — the percentage of all donors making a gift to the same organization in 2017 and then again in 2018 — declined almost two percentage points from the 2017 rate to 45.5 percent. The repeat retention rate (the percentage of repeat donors who gave in 2017 and then again in 2018) remained fairly steady at 61 percent, while the new donor retention rate (donors who gave in 2017 for the first time and gave again in 2018) fell four percentage points to 20.2 percent.
“What’s concerning about this data are the significant decreases in the new and newly retained donor groups,” said Ben Miller, chief analytic officer at DonorTrends, which created the final report. “From past reports, we’ve seen that charities seemed to do well at acquiring new donors but retaining them was a challenge. Now we’re seeing difficulties in acquiring donors, and that could spell real trouble with fewer donors giving. Again, it’s great to see giving increasing overall, but the question remains around the long-term sustainability of the sector if these trends continue.”
The FEP was created in 2006 through the collaboration of the Association of Fundraising Professionals (AFP) and the Urban Institute. The Growth in Giving database, with more than 161 million donation transactions, is continuously updated by fundraising software firms Bloomerang, DonorPerfect, and NeonCRM. In addition, Softrek contributes data on an annual basis. Additional partners include the 7th Day Adventists, YMCA of the USA, DonorTrends, and DataLake.
Tax Bill’s Impact
Trends and changes in giving are not typically caused by one single factor. However, the federal tax law signed in late 2017, which doubled the standard deduction and likely caused many taxpayers to take fewer itemized deductions including the charitable deduction, might have played some role in the results.
“I think one of the reasons that we’re seeing more larger gifts is that donors had to give more — and have other itemized deductions — in order to exceed the standard deduction threshold,” said Jay Love, chief relationship officer and co-founder at Bloomerang. “What’s fascinating is that over a third of donors — 37.4 percent — in the $1,000-plus gift range were new to that category. That’s a lot of new donors giving significantly more, which tells me that some of those donors were likely giving larger sums in order to itemize their deductions. Smaller gifts also fell, as those donors couldn’t take advantage of the charitable deduction anymore.”
A direct comparison of giving in fourth quarter 2018 vs. fourth quarter 2017 shows potentially more impact from the tax changes. Giving spiked in all three giving categories in the fourth quarter of 2017, when President Trump signed the tax bill into law. In fourth quarter 2018, all three giving categories fell. Gifts of more than $1,000 fell by 5 percent, while gifts in the $250 to $999 range decreased by 12 percent and gifts less than $250 dropped by 15 percent.
“These are overall numbers for the entire sector, and despite all the challenges, giving did increase,” said Jon Biedermann, vice president at DonorPerfect, the final data provider. “What’s most important are the decisions your organization makes, its giving and fundraising strategy, and its willingness to focus on donor cultivation and stewardship.” Biedermann added, “None of this research would have been possible without the fantastic collaboration of my industry colleagues, who are also my competitors. We invite other industry colleagues to join our efforts so that we can all work together to reverse these alarming trends.”