June 29, 2006 | Read Time: 14 minutes
Gifts in 2005 nearly matched all-time high of 2000
American charities are achieving their strongest fund-raising results in years — in many cases coming
close to the sums raised at the height of the technology boom.
Giving USA, the annual tally of philanthropy in the United States, has announced that Americans donated $260.3-billion to charity last year, an increase of 2.7 percent after inflation. And in interviews with more than 50 fund raisers and other nonprofit officials, The Chronicle found that most groups expect 2006 to be a banner year.
In part, donations rose because so many people made gifts in response to Hurricane Katrina and a spate of other natural disasters. But many fund raisers say they are also benefiting from new approaches to soliciting gifts and efforts to streamline their development operations.
About half of last year’s $15-billion increase in donations over 2004 — some $7.4-billion — was given in response to three natural disasters: the Indonesian tsunamis, the Gulf Coast hurricanes, and the earthquake in Pakistan.
The report said that when disaster gifts are excluded from the tally, donations to charity were about even with 2004. That suggests that the disasters did not cause people to cut back their giving to other causes last year.
“People responded over and above what we might otherwise have seen, given the economy and personal income remaining flat and not a whole lot of movement in the stock market,” says Richard T. Jolly, chairman of the Giving USA Foundation, which publishes the report.
Growth at Many Charities
The amount donated last year nearly equaled the all-time high reported by Giving USA of $260.5-billion in 2000.
Nearly 60 percent of 803 charities that were surveyed by Giving USA reported that they had raised more money in 2005 than in 2004, and 28 percent said they raised less. The remaining groups raised as much as they did in 2004.
That was the highest percentage of groups reporting growth and the lowest percentage reporting declines since 2000, the report said. Even when disaster-relief donations were excluded, the majority of organizations still achieved increases in giving, the researchers said.
Social-service charities were the main beneficiaries of the disaster giving: Donations to such groups rose by 28 percent, the report said, reversing three years of fund-raising declines. Even when disaster donations are excluded, they raised 11.3 percent more than in 2004. Environmental groups and international organizations also achieved big increases last year: 12.6 percent and 15.6 percent, respectively.
Among other key findings:
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Donations from living Americans grew by 2.9 percent, to $199.1-billion. But charitable bequests dropped by 8.6 percent to $17.4-billion, reflecting what the researchers said was a “steep decline” in the number of deaths over the past two years.
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Corporate giving, including grants from corporate foundations, increased by 18.5 percent to $13.8-billion. The report said that a sharp rise in company profits was behind the increase, as well as the substantial donations businesses made to disaster-relief groups.
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Grants from private, community, and operating foundations rose by 2.1 percent to $30-billion.
Not all types of charities fared well last year. Contributions to churches and other religious organizations failed to keep up with inflation, while health charities and cultural groups suffered declines in donations. Health organizations raised 0.7 percent less than in 2004, according to the report, while gifts to arts and cultural groups dropped by 6.6 percent.
Rising Gas Costs
Despite the strong giving climate, charities say they face many financial challenges in 2006.
Rodney Bivens, executive director of the Regional Food Bank of Oklahoma, says he worries about the effect of high gas prices on his donors. “They will have to spend more on fuel; that will drive up food and utility costs, so they have less disposable income,” he says.
Mr. Bivens has already seen gas prices drive up costs at his food bank, which serves 53 counties spread out over 45,000 square miles. “For every penny gas goes up, our costs go up by $650 per day,” he says.
Another problem: Mr. Bivens’ $300,000 budget for obtaining food products from outside Oklahoma this year is not going to cover the cost, which has ballooned to $500,000 with higher gas prices.
Even though Giving USA reported that foundations increased their giving last year, Mr. Bivens and several other charity officials say they are seeing smaller grants and fewer multiple-year payments from grant makers. Most nonprofit leaders attributed the change to an upswing in competition from a growing number of charities vying for grants.
Troubling Decline
The drop in charitable bequests reported by Giving USA is also a worrisome sign for the coming decade, some fund-raising experts say.
Bequests will probably continue to decline in number and size over the next 5 to 10 years, due in part to low birth rates from 1924 to 1935, says Robert F. Sharpe Jr., a Memphis planned-giving consultant. “We are now seeing the echo of low birth rates during the Depression,” he says.
To offset the fall in bequests, he urges charities to step up their efforts to reach donors in their 70s and 80s and to aggressively promote other types of gifts such as charitable annuities and trusts.
Such gifts, he says, can help protect donors who want to make a sizeable gift but are concerned about spending too much of their savings.
Steve Francisco, federal-policy director of the Minnesota Council of Nonprofits, in St. Paul, says that, like many nonprofit officials, he is concerned that Congress will abolish the estate tax or change it so that fewer people have to pay it — and those who do will pay lower rates. Such changes, he says, could lead to fewer bequests because people will not have the incentive to reduce their taxes by increasing their charitable gifts, and could mean that fewer people will leave money to create or supplement their foundations when they die.
“Some of the largest foundations in our state wouldn’t exist except for the estate tax,” he says.
What’s more, he says, by depriving the federal treasury of billions of dollars — $1-trillion in the first decade, according to one study — repeal of the estate tax would add to the deficit. That, says Mr. Francisco, would make less money available for federally supported programs such as veterans’ medical care, low-cost housing, and food for the needy, putting more pressure on charities that are already struggling to fill gaps left by steep cuts in government aid.
Appealing to the Wealthy
The potential drop in bequests is one reason that Mr. Sharpe and other experts advise charities to find ways to persuade more affluent people to make big gifts while they are alive.
More and more small charities are joining large, sophisticated organizations in stepping up efforts to get major gifts, says Terry Axelrod, founder of Raising More Money, a Seattle consulting firm that helps small charities start major-gifts programs. When she started the firm 10 years ago, Ms. Axelrod says, local groups often resisted her suggestion to ask individuals to pledge to make large annual gifts for five consecutive years. “Each group had a sad story to tell about why this wouldn’t work for them,” she recalls. “Now they are starting to get it.”
Washington Women in Need, a Bellevue charity, took Ms. Axelrod’s advice for improving fund raising for its programs, which help poor women move out of poverty by paying their health-care costs and tuition in an accredited educational program. Two years ago, the charity scrapped an annual fund-raising luncheon, which raised some $250,000 each year from donors who paid $125 to attend.
Now, every month, the charity asks potential donors to visit its premises for a free breakfast or lunch and a 45-minute tour in which visitors are treated as if they are clients, providing a firsthand experience of the charity’s services. The visitors are not asked for money — either during the tour or in follow-up telephone calls to ask what they thought of the tour and how it and the charity’s work might be improved.
At year end, Women in Need invites all the visitors to another free luncheon at which women helped by the charity speak. At that event, the charity finally makes a solicitation, asking each person to donate $1,000 each year for five years. The first luncheon raised $424,000 and the second raised $857,000 in outright gifts and new pledges.
“In the past, there was a minimum donation of $125, and donors would pay only the minimum, not thinking outside the box,” says Donna Batter, the charity’s development director. “We were not giving them opportunities or inspiring them.”
The new pledges, she notes, have provided her group with a steady stream of general operating support and a new pool of donors to turn to for big gifts and endowment-campaign donations in coming years.
But not all fund raisers are convinced that it is good for organizations to count on getting a bigger and bigger share of their donations from wealthy people, particularly in the long run. They worry that the increasing emphasis on raising such donations is harming some charities’ ability to recruit donors who start out by making small gifts, often in response to an annual-campaign appeal, and build their support over time.
“Little gifts are getting tougher to attract and retain. That is a huge issue,” says Bruce Flessner, a Minneapolis fund-raising consultant. “It’s a game of mega-gifts, and organizations are giving up on little gifts. All they talk about is major gifts. If you talk to vice presidents of development now, many have never run an annual campaign. Years ago, everyone started in the annual fund.”
While individuals make the bulk of all charitable gifts — they accounted for 83 percent of all donations last year, according to Giving USA — many nonprofit groups are also benefiting from a surge in corporate giving.
Hurricane Katrina and other disasters attracted significant interest from businesses, which distributed $1.4-billion in cash, products, and services. But even without those gifts, corporate giving would still have increased by 7.3 percent, more than donations by individuals or foundations did.
Fund raisers also point to another reason behind the upswing in giving by companies: increasingly multifaceted and lucrative relationships that many charities are developing with companies — involving employee volunteerism, marketing arrangements, and sponsorship of events, in addition to corporate grants and donated products and services.
“People are being much more creative and thoughtful in how they put big asks together when they approach corporate donors and talk about a whole range of ways for them to be engaged, in addition to having an executive on the charity’s board,” says Edith Falk, president of Campbell & Company, a Chicago fund-raising consulting firm.
One sign of the growing complexity of corporate-charity relationships is Habitat for Humanity International’s recent overhaul of its corporate-giving division.
The charity no longer hires only fund raisers to work with corporations; instead, it now also has 12 certified project managers, three of whom work full time with a single corporate donor, ensuring that logistical details of revenue-generating partnerships with companies are handled efficiently and that companies are given timely reports. As a result, Habitat now raises $60-million to $65-million annually from corporations, up from its previous high of $35-million two years ago.
The biggest advantage of using project managers, says Mark Crozet, Habitat’s senior vice president of development, “is incredibly happy CEO’s.” Previously, he adds, with corporations “we had dropped a lot of stuff, missed details, but that is not happening anymore, and companies have expanded their work with us.”
New Approaches
Many other organizations are using fund-raising innovations to raise far more money than they did previously and to persuade donors to support the projects that charities believe matter most.
While some religious groups faced a decline in their donations, the 1,200 members of the Evangelical Council for Financial Accountability raised 16 percent more last year than they did in 2004.
Dan Busby, the council’s vice president, says that a growing number of donors have agreed to automatic monthly gifts, either electronically debited from their bank accounts or charged to a credit card. Studies have found that those two giving methods increase both the amount that people contribute annually and the length of time they give to an organization.
“This is a trend that seems to be catching on,” Mr. Busby says, adding that the Christian tradition of tithing may predispose donors to agree to automatic monthly gifts. Some of the council’s member organizations now have up to 50 percent of their donors making such gifts, he says.
At the Hunger Project, in New York, donations grew by nearly 8 percent last year, to $7-million, and the group is on track to reach its $10-million goal this year, according to Mimi Evans, the group’s director of philanthropy. One reason, says Ms. Evans, is that the charity is promoting its projects “as venture-capital programs in the developing world.”
The charity encourages donors to support its plan to spread its antipoverty programs country by country in the world’s poorest regions. First on the list is Ghana, where over the next 10 years the charity intends to build “epicenters” — buildings that serve as education, health, and financial centers — within 10 kilometers of every citizen.
“Our epicenters have been very successful, and now we have a very specific goal to scale up,” Ms. Evans says.
For many charities, persuading donors to give unrestricted funds has been a major challenge, as more and more people want to specify where their contributions will go.
“You are constantly battling the idea of designation, but the $1 here and there does not equal what the collective can do,” says Paul Kane, senior vice president of financial resource development at the United Jewish Appeal-Federation of Jewish Philanthropies of New York. Mr. Kane says that the federation’s annual campaign raised $131-million in 2004 and $140-million last year. And he expects to raise at least $143-million this year.
Federation officials say that one way they have kept donors from earmarking their gifts is to arrange for them to make site visits to charities supported by the annual campaign. Nearly 2,000 donors made such visits this year, up from 500 seven years ago.
An Online Gain
The swell of disaster-related giving last year helped many charities, big and small, enhance their ability to raise money electronically. The Salvation Army, for example, raised $50.8-million online last year, $35-million of which was designated for hurricane relief, up from a total of just $5.5-million donated online in 2004.
The Volunteers of America affiliate in Shreveport, La., began sending out daily e-mail appeals to donors after opening a small shelter for some of the thousands of Hurricane Katrina victims who evacuated to Shreveport.
The organization, which had never provided disaster relief before, decided to open the shelter because other charities were overwhelmed.
It had a building, a former church called the Highland Center, that could provide temporary housing for a few dozen people for two to three months and some continuing services for evacuees, such as day care for children.
Lisa Brandeburg, the charity’s vice president for development, says that, because she had 500 to 600 e-mail addresses for donors and volunteers, she started sending those people daily e-mail messages, describing conditions at the new shelter, the people arriving there, and their needs.
“I had never done group e-mails before,” she says.
The result after two months: $400,000 in cash for the shelter’s operations, in addition to donations of goods and services worth far more, such as an electric wheelchair, airline tickets to help evacuees return home, and doctor visits.
Gradually, as conditions stabilized, Ms. Brandeburg decreased the frequency of her e-mail appeals to weekly, then twice monthly and, finally, monthly.
Only two recipients of the e-mail messages asked the charity to stop sending them, Ms. Brandeburg says. She has continued the monthly e-mails, which are now raising money for other projects, such as an adoption program for older children. She says the e-mail appeals are also helping her charity save money it would otherwise spend on postage and printing newsletters and other mailings.
The complete Giving USA 2006 report will be available in late June and may be ordered by calling (847) 375-4709 or from the Giving USA Web site (http://www. givingusa.org). It is available in print and electronic versions at a cost ranging from $70 to $130.
Debra E. Blum contributed to this article.
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GIVING TO CHARITIES, BY SOURCE OF DONATIONS
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HOW MUCH AMERICANS GAVE FOR DISASTER RELIEF Individuals last year contributed $5.83-billion to help victims of Hurricane Katrina, the South Asia tsunamis, and the earthquake in Pakistan. Companies provided $1.38-billion to those causes, while foundations provided $160- million.
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