Top Charities See Donations Surge Again

13% jump represents third year in a row of double-digit growth

The nation’s largest charities continued to benefit last year from the longest economic

expansion in American history, raising 13 percent more from private sources than they did in 1998, according to The Chronicle‘s 10th annual Philanthropy 400 survey.

The gain made 1999 the third consecutive year with double-digit percentage increases in giving to organizations on the Philanthropy 400. Last year’s rise far outdistanced the inflation rate of 2.2 percent.

The top four charities on the list all saw donations jump by at least 10 percent. For the eighth year in a row, the Salvation Army ranked No. 1, raising $1.4-billion — up 13 percent from 1998. The Y.M.C.A. of the USA (No. 2) took in $693.3-million, a 10-percent rise. The American Red Cross (No. 3) had a 25-percent jump, to $678.3-million. The American Cancer Society (No. 4) raised $620-million, up 11.5 percent.

The Fidelity Investments Charitable Gift Fund (No. 5) — a donor-advised fund into which individuals can put cash, stock, or other assets, claim a tax deduction, and then recommend which charities should receive contributions — saw its donations increase by less than 1 percent. That’s the first time since the Charitable Gift Fund was created in 1992 that its annual growth has been less than 25 percent.

Giving to other commercially operated donor-advised funds, however, continued to shoot up, with two making the list for the first time: Ayco Charitable Foundation (No. 195), at $60.5-million, and the Vanguard Charitable Endowment Program (No. 201), at $59.8-million. Donations to Vanguard more than tripled in 1999.

Lutheran Services in America (No. 6), a human-services organization, with $559-million in donations, jumped from No. 42 on the list last year. The charity’s total support figure increased significantly because it hired an outside consultant who gathered more complete financial information than in past years from all its member groups.

Rounding out the top 10 were United Jewish Communities (No. 7), the organization formed in 1999 through the merger of the United Jewish Appeal, the United Israel Appeal, and the Council of Jewish Federations, with $524.3-million in contributions; America’s Second Harvest (No. 8), with $471.8-million; Habitat for Humanity International (No. 9), with $466.7-million; and Harvard University (No. 10), with $451.7-million.

Total Raised: $38.2-Billion

To be included on this year’s 400, organizations had to raise at least $26-million from private sources — foundations, corporations, or individuals.

Nearly 70 percent — 279 — of the organizations on the 2000 list were also on the first one published in 1991, although some have been off the list at times during the intervening years. Many have changed their approaches to fund raising in the face of new challenges posed by donor-advised funds and new opportunities offered by the Internet and other technological advances.

Altogether, the organizations on the list raised $38.2-billion, accounting for about one of every five dollars donated to American charities in 1999, according to an estimate published by Giving USA, which analyzes charitable-giving patterns annually. Giving USA also found that charitable donations nationally rose 6.7 percent last year, or about half the rate of increase for the groups on the 400.

As they have throughout the history of the 400, colleges, universities, and other educational organizations account for the biggest share of donations. The 142 such groups on the list took in one-third ($12.7-billion) of the total raised.

Organizations providing human services and youth services collected $6-billion, or 16 percent of the total. Other types of nonprofit groups that accounted for a significant percentage of the total raised by those on the 400 were international-relief organizations ($3.2-billion, or 8.4 percent), health charities ($3-billion, or 7.9 percent), and hospitals ($2-billion, or 5.3 percent).

Single Donors Fuel Increases

The biggest percentage increase among the top 10 on the list occurred at the Red Cross. John D. Campbell, the organization’s chief financial officer, attributed the big gain to a $100-million increase in disaster-relief donations, prompted largely by two major hurricanes and the war in Kosovo.

“Our contributions are influenced by how many disasters there are,” he says.

Many other big increases in fund raising resulted from large donations by individuals.

Two organizations that work to improve educational opportunities for children from minority and low-income families were among those that benefited from such gifts. They were also among those that received the largest increases in donations in 1999.

The Children’s Scholarship Fund (No. 50) was created in 1997, when two of the nation’s wealthiest men — Theodore J. Forstmann, senior partner at Forstmann Little & Company, a private investment business, and John T. Walton, a director of Wal-Mart Stores and a son of Sam Walton, the company’s founder — created a program to provide scholarships to low-income families who want to send their children to private schools.

“We had a special head start because we had two wealthy and influential businessmen co-founders who made large initial contributions and who were able to open their Rolodexes and ask lots of their friends to contribute,” says Douglas Dewey, executive vice president of the fund. But Mr. Dewey adds that by donating $50-million apiece in the form of matching gifts, Mr. Forstmann and Mr. Walton spurred other people to donate to the program.

“We raised $60-million in three or four months, because we were offering everybody a match,” he says. “We were doubling people’s money.”

The group raised a total of $160-million in 1999, including the matching gifts by Mr. Forstmann and Mr. Walton, nearly 27 times what the organization received in contributions the previous year. The money is being spent over four years, Mr. Dewey says. The fund provides half the tuition to a private elementary school, with families paying the rest.

“The principals and teachers who run these schools have told us that having families paying is a critical element. They want stakeholders, not caseloads,” he says.

The fund awarded 40,000 scholarships in 40 cities in 1999, but that barely reflected the demand for them. Mr. Dewey says that 1.2 million families applied.

Another group new to the 400 — the Hispanic Scholarship Fund (No. 206) — focuses on Hispanic high-school students who need help paying for college.

The bulk of its $50-million increase in donations came from a single grant from the Lilly Endowment. “They gave us $45-million up front, along with a $5-million endowment challenge,” says Sara Martinez Tucker, president of the fund. “As a result of the gift and the challenge, we’ve been able to increase corporate and individual contributions. Success attracts donors.”

She adds that increasing the endowment is essential to giving stability to the organization’s program.

“For years we have been operating on a very simple model: Any money we raised in a fiscal year we distributed in scholarships that same year. That left two significant gaps. We couldn’t guarantee funding from year to year, and we had a hard time increasing the amount of the individual scholarships,” she says. Those issues were included in discussions with Lilly about the grant, and resulted in a portion being split off for an endowment.

The money has already allowed the group to expand its scholarship program significantly. Not only has it given out more scholarships than in the past, but it also has increased their average value. In 1998 it gave out 2,200 scholarships totaling $3.5-million. Last year that jumped to 4,300 scholarships worth $9.3-million. This year, the fund anticipates giving out about 5,000 scholarships at a total value of $20-million. The average scholarship thus rose from about $1,600 to $4,000.

A single bequest from the estate of Rea A. and Lela Axline pushed two California arts groups onto the 400. The estate distributed $30-million apiece to the San Diego Museum of Art (No. 291) and the Museum of Contemporary Art, San Diego (No. 357). Mrs. Axline, who had been on the board of the Museum of Contemporary Art, died in December 1998; her husband, a retired metal-industry executive, died in 1992. The Axline bequest was the main reason the Museum of Art had the biggest percentage increase of any organization on the Philanthropy 400. The museum’s donations were 28 times higher in 1999 than they had been the year before.

Not all of the biggest increases were the result of single large donations, however. The Detroit Institute of Arts (No. 141) started a campaign in April 1999 to raise $120-million over five years for building projects and renovations, along with another $200-million for its endowment. By the end of the year it had raised $78.8-million — nearly six times what it took in during 1998.

“It’s still very much a large-gift campaign,” says Ross Pfeiffer, group director of development at the institute, who notes that seven gifts from individuals and foundations accounted for $68-million of the total. “We have not gone to the general public, or even to our general membership, for donations yet.”

The campaign was the result of several years of discussions on how to deal with major cuts in support from the the state of Michigan that were made in the early 1990s, when Gov. John M. Engler, a Republican, took office and reduced spending on a wide range of programs.

“We went from $16.4-million in annual state aid to $9.7-million literally overnight,” Mr. Pfeiffer says. “That was a huge wake-up call.”

By 1997, the institute’s board had decided that creating an endowment was the solution to its money woes. Simultaneously, the institute changed its management structure. It had been an agency of the city of Detroit, staffed partly by city employees and partly by employees of the nonprofit institute. Now the city owns the building and the art collection, but the museum is operated by the nonprofit institute.

The state government decided to participate in the endowment campaign, pledging to provide $40-million if the museum could raise $120-million on its own. Mr. Pfeiffer says the campaign has already raised $105-million and is about a year ahead of schedule in reaching its goal.

The Economy’s Impact

Individual large donors are not the only ones fueling the growth of this year’s 400. The appearance on the list of two more commercially managed donor-advised funds is driven by a broad base of investors, who have profited from the economy’s record expansion.

The continued growth of commercially managed donor-advised funds like Ayco, Fidelity, and Vanguard has been a controversial topic throughout the 1990s. Fidelity first appeared on the 400 list that covered donations made in 1994, and over the next four years its contributions soared from $102-million to nearly $572-million.

Its slowdown in the 1999 fiscal year was an “aberration,” according to Cynthia L. Egan, president of Fidelity’s charitable fund. The slowdown occurred because the fund’s fiscal year — which runs from July 1 to June 30 — began just a few months before worries about Asian financial markets drove down the American stock markets. That’s significant, Ms. Egan says, because most donors make their biggest contributions in the fourth quarter (from October through December), and donations were lower than usual because of concerns about the worldwide financial situation. The fund’s fiscal year ended before donors began making their annual large gifts in the fall of 1999.

“If you look at calendar year 1999, we received $870-million in contributions, compared with calendar year 1998, when we received $563-million,” Ms. Egan says. “In fact, as of September of this year we’re more than 100 percent ahead of where we were at this time last year.”

‘Not a Zero-Sum Game’

Eugene R. Tempel, executive director of the Indiana University Center on Philanthropy, says the growth of commercially managed donor-advised funds has helped other nonprofit organizations by increasing the total amount being donated to charity, contrary to concerns voiced by community-foundation leaders and other charity officials who thought the funds would siphon contributions away from their groups.

“This is not a zero-sum game,” he notes. “These funds are getting people into philanthropy who never gave philanthropically before.”

Benjamin R. Pierce, executive director of the Vanguard Charitable Endowment Program, says community foundations have actually benefited from the funds’ growth, because much of the money has been designated for them.

He adds that his fund has made an effort to establish relationships with community foundations and other nonprofit groups.

“We’ve tried to build bridges to the community foundations in our area, the Philadelphia Foundation and the Lancaster County Foundation,” says Mr. Pierce. “We meet on a regular basis to discuss their needs and how we can work together. We don’t pretend to have the same level of expertise into the specific interests of geographic regions that they do. Our strength is that we can help donors with multiple interests all around the country and do it very efficiently.”

The continued expansion of the donor-advised funds, Mr. Tempel notes, is contingent to some degree on the continued growth of the economy.

“Giving slows and grows with the economy,” he says. “If the stock markets are not doing as well, people are not going to be making these large transfers of assets.”

Fund raisers at several organizations on the Philanthropy 400 say they’re trying to prepare for the time when the economy does slow.

Deborah B. Smith, director of development for the AmeriCares Foundation (No. 25), says her organization is trying to encourage donors to set up planned gifts that will continue to provide money for the group even if the economy sours.

Big Brothers Big Sisters of America (No. 57) is developing new fund-raising efforts to help protect it from an economic slowdown, says John Lubbe, vice president for fund development.

That includes expanding the use of fund-raising events like the “Bowl for Kids’ Sake” campaign and a bicycle ride from the Chicago Mercantile Exchange to the New York Mercantile Exchange.

Big Brothers Big Sisters is also working with a corporate sponsor, which Mr. Lubbe would not name, to put together a national fund-raising event. The organization is also exploring the possibility of beginning a direct-mail fund-raising campaign.

Mr. Lubbe adds that while the main purpose of expanding the organization’s fund-raising efforts is to meet Big Brothers Big Sisters’s goal of serving 1 million children by 2010 (158,000 were in the organization’s programs last year), the charity also wants to be prepared should the current economic boom end.

“The more fund-raising venues we’re in,” he says, “the more protection we have.”

GROUPS WHERE NON-CASH GIFTS ACCOUNT FOR MORE THAN 50% OF DONATIONS

CAUSES THAT GARNERED THE MOST SUPPORT