Opinion: Don’t Be Calm Before The Coming Storm

There’s no doubt that $410 billion is a lot of money. Calling it an outpouring of generosity would be a mistake. When you consider the soft giving numbers from the first quarter of 2018, the 2017 charitable wave that tabulated the gelt might be labeled an aberration.

The Giving USA numbers released last month showed that actual dollars donated to tax-exempt organizations during 2017 increased roughly 5 percent compared to 2016. That’s good news until you find out that it’s from significantly fewer donors and only about 60 percent of households are participating in the philanthropic process.

There’s headline after headline of positive economic news. The stock market continues its nine-year climb out of near collapse during the George W. Bush administration. More Americans are working, according to federal statistics, and there was economic optimism in general during the first five months of 2018.

Those buoyant federal statistics have not moved giving off the 2.1 percent of gross domestic product where it has stalled for decades. All but one of the fundraising metrics tracked by the Fundraising Effectiveness Project declined for the first three months of 2018 when compared to the same period in 2017, sending warning signs of giving weakness. The only exception was an increase in donors giving $250 or less.

And then there is the evaluation in the recent study from The BDO Institute for Nonprofit Excellence that, “the overall thread of the survey is the nonprofit sector overall is struggling to achieve financial sustainability.”

What has erected a border wall at the roughly 2 percent level? It’s not as if the money isn’t available. More than $600 million was raised for storm relief in Texas between just the American Red Cross, the United Way and various state charities. Millions more was raised for Puerto Rico relief. It will be a combined roughly 3 or 4 percent of the $410 billion making most of the growth about storm relief. Toss in two mega gifts of at least $1 billion and the sector is stagnant for all intents and purposes.

There is also the issue of donor-advised funds, a veritable rest home for charitable dollars. Fidelity Charitable, the nation’s largest donor-advised fund, reported $8.5 billion in unaudited contributions during calendar year 2017 while distributing roughly $4.5 billion. That’s a lot of money donated and on the sidelines. The same is true with most donor-advised funds. The rules need to be changed to get money doing what is intended, not piling up fees and interest.

There are fewer overall donors and they tend to give to an immediate need or stash it away for safekeeping because they can’t make a decision. That does not bode well for charity in general. Many researchers are asking why fewer people are giving but not really getting answers of depth.

Giving is often an impulse buy, like that York Peppermint Pattie at the checkout counter. When you buy that candy you have a pretty good idea of how it is going to taste. That might not be true in giving anymore. The flavor of giving might not be appealing enough.

Fundraisers have been testing giving models in one form or another for decades. The modern discussion is whether a gift was generated by direct mail pushing donors to a website, a digital message reminding donors to send a check in the recently-received fundraising package, or if a donor went directly to a website.

How they gave is important but it might be taking too much time when more resources should be spent making the case for giving. The challenges of an aging U.S. population, people in their middle-40s still raising kids and juggling debt and Millennials, who by all accounts are at least five to eight years behind their parents when it comes to connecting with broader society, should be keeping senior managers in all aspects on charity up at night.

When it comes to donor-advised funds, those making the “gifts” should be forced to make a decision on where it should go. It shouldn’t count in the giving calculations until deployed to an organization.

The toes of some in the sector curl when fundraising is directly compared to sales. There is a sales mantra that he sales process is as simple as A-B-C – Always Be Closing. An “ask” is a close and fundraisers need to get better at it very soon because the numbers are not matching need and haven’t been for quite some time.

An economic storm is building on the charitable sector. It’s going to toss the tax-exempt boat as if it’s the S.S. Minnow without the professor. It’s a flip of a coin as to whether donors will respond without a more compelling case being made.