A Year of Big Gains

Largest charities saw donations rise 13% in 2005

Donations to America’s largest charities grew by 13 percent last year, to $62.7- billion, according to The Chronicle’s

annual Philanthropy 400 survey.

That increase matches the highest percentage gain in the 16 years that The Chronicle has been ranking the 400 most-successful charities. At the height of the technology boom, in 1999, charities in the Philanthropy 400 achieved a 13.4-percent increase.

All signs suggest that the pace of giving continues to be strong this year: Among 49 charities on the list that projected a rise in 2006 giving, contributions are expected to grow by a median of 13 percent, meaning that half the groups expect a greater increase and half expect less.

The robust increase for 2005 reflects not only a strong economy but also the outpouring of donations following Hurricane Katrina and other natural disasters.

Charities in the Philanthropy 400 reported that they raised $2.6-billion last year to help the victims of the two most devastating crises: the December 2004 tsunamis and Katrina.

New Fund-Raising Approaches

But those disaster donations do not account for the fund-raising success of many charities in the survey. Many organizations that were not involved in providing disaster relief also reported that giving rose sharply. When Katrina and tsunami contributions are removed from the total amount raised by organizations in the survey, giving still rose by 8.3 percent, even after adjusting for inflation, which was 3.4 percent last year.

Those results demonstrate the growing fund-raising prowess of charities on the Philanthropy 400 list, many of which worked hard to reverse declining contributions after the technology bust in 2000 by diversifying the methods they use to raise money, reaching out to new groups of potential donors, cutting costs through online communications, and hiring new development officers to seek big gifts from individuals and corporations.

‘Exciting Time’ in Philanthropy

Last year’s increases are the second year in a row of double-digit percentage gains for charities in the Philanthropy 400. In 2004, giving to the charities on the list rose by 11.6 percent over the 2003 total.

Veteran fund raisers say the outlook for giving is the most upbeat in a generation. Landmark philanthropic pledges — most notably Warren Buffett’s announcement in June that he plans to award the bulk of his $44-billion fortune to charity — are likely to lead to increased donations for many charities.

And people like Mr. Buffett, Bill and Melinda Gates, and many other wealthy Americans are changing the face of philanthropy by serving as an example to donors, raising the bar in fund raising, getting involved full time in their philanthropy, and blending business and charitable ventures in new ways to expand giving, fund raisers say.

“It is the most exciting time in philanthropy right now in my over 30 years in fund raising,” says Doug Picha, executive director of the Children’s Hospital Foundation and Guild Association, in Seattle, which ranked No. 394 in the survey. “More people are involved in deeper ways. When you have leadership like Gates, that impacts everyone, and there is greater interest in philanthropy. It makes philanthropy what is on people’s minds.”

The fund-raising climate, while increasingly vibrant, is not without challenges, however. Many development officers cite competition for donations as their biggest concern, followed by difficulty in recruiting and keeping qualified fund raisers. Others point to problems in raising money for general-operating costs and capital projects, because fewer and fewer donors are interested in those needs. Still others worry that the continuing focus on ever-bigger gifts from wealthy people will sideline donors who make smaller donations but are critical to fund-raising operations.

Not every charity in the Philanthropy 400 had a good year. Giving to Volunteers of America (No. 176) dropped by 7 percent, to $88.6-million.

The decrease was “across the board,” says Joe Budzynski, the organization’s chief accounting officer. Gifts from individuals declined by $2-million, bequests and other estate gifts dropped by $1-million, and United Ways awarded $1-million less than in 2004. What’s more, the charity received 37 percent fewer donations to a program that encourages people to donate used cars, which it then sells. (The drop came after a federal law tightened the write-offs donors can take for such donations.)

Other organizations in the Philanthropy 400 are facing tough new legal restrictions. A law passed in August placed new limits on deductions that donors can take when they give artworks, leading many museum officials to worry that it will be harder to attract such gifts. Meanwhile, some state regulators are arguing that many nonprofit hospitals and medical centers provide little or no charitable care and do not deserve the benefits of tax exemption, including giving donors a tax break for contributions.

The Top 10

In this year’s Philanthropy 400, United Way of America was again No. 1, with more than 1,300 local United Ways reporting $4-billion in contributions last year, a 3.9-percent increase over 2004.

The Salvation Army held onto the No. 2 spot, raising $3.6-billion, more than double what it did in 2004. The charity was a major beneficiary of donations to help Hurricane Katrina victims and also received a large distribution from the estate of Joan B. Kroc, the wife of the McDonald’s founder. And even though many fund raisers worried that last year’s disasters would depress year-end giving, the Army’s Red Kettle drive in November and December raised a record $111-million, up from $102-million in 2004.

The AmeriCares Foundation, which received $1.3-billion, mostly in donated goods to distribute overseas, was No. 3.

The American Red Cross, which fell out of the top 10 for the first time on last year’s Philanthropy 400 list, vaulted back up to No. 4, by raising $1.3-billion, including $553-million in response to the tsunamis and another $128- million for hurricane-relief efforts. However, because of the timing of its fiscal year, those figures do not include gifts in response to Katrina and two other hurricanes. Those contributions — some $2.1-billion — will be reported in next year’s survey.

The American Cancer Society (No. 5) raised $929.6-million last year, a 7-percent increase. The remaining top 10 charities in the survey were the Fidelity Charitable Gift Fund (No. 6); Gifts In Kind International (No. 7); the YMCA (No. 8); Feed the Children (No. 9); and the Tulsa Community Foundation (No. 10), which raised $791.3-million last year, more than any other community foundation in the country.

The foundation was one of 27 charities where donations rose by more than 100 percent last year. Some of those soaring increases were the result of fund raising for disasters.

Fifty charities in the survey reported contributions in response to Hurricane Katrina totaling $335.7-million last year, with a median of $772,000.

Fifty-four charities reported receiving $1.7-billion in 2005 in response to the tsunamis, with a median of $3.3-million.

Donations to Philanthropy 400 groups, at $62.7-billion, accounted for more than $1 out of every $4 raised by charities last year. And as a whole, their contributions rose at a much faster rate than giving grew overall. Americans gave $260.3-billion to charities in 2005, an increase of 2.7 percent after inflation, according to Giving USA, the annual measure of philanthropy published by the Giving USA Foundation. To be included in this year’s Philanthropy 400, charities had to raise at least $37.7-million last year.

Donor-Advised Funds

Among the fastest-growing fund-raising approaches last year were donor-advised funds, which allow people to create grant- making accounts and recommend which charities get the money.

Community foundations, which raise a large percentage of their money by offering such funds, raised 42 percent more last year. And corporate-sponsored philanthropies that also offer donor-advised funds, like the Fidelity Charitable Gift Fund, grew by 30 percent.

The gains reflect the strong stock market, says David L. Giunta, president of Fidelity, where donated stock accounts for about 70 percent of all contributions, and gifts rose by 30 percent last year, to $891.4-million. Many people prefer to put highly appreciated stock into donor-advised funds; that way, they get a more generous tax write-off — and have more money to give away — than if they contributed stock that wasn’t faring well.

Steve Maislin, president of the Greater Houston Community Foundation (No. 116), where contributions more than doubled in 2005, to $130-million, largely in response to Hurricane Katrina, says his organization has successfully persuaded people with small family or other private foundations to transfer the assets into a donor-advised fund.

That approach takes some of the administrative burden off donors, he says, and it also offers a measure of anonymity that philanthropists lose when their foundations are listed as grant-making entities.

“These smaller foundations are saying, ‘We can have all the fun and make grants and not have to worry about administration if we have a donor-advised fund,’” says Mr. Maislin. “And it’s confidential. That’s huge. They don’t want to be on the list of development officers.”

Competition among organizations that offer donor-advised funds remains strong, however, as colleges and universities, relief organizations, and other groups have begun to offer the funds to donors. At least 89 of the charities in the Philanthropy 400, like Habitat for Humanity (No. 22), Boy Scouts of America (No. 39), and Willow Creek Community Church (No. 382), now offer donor-advised funds.

Online Giving Grows

Three organizations in the Philanthropy 400 each raised more than $140-million via the Internet last year: the Fidelity Charitable Gift Fund ($180-million), the American Red Cross ($157.7-million), and United Way of America ($140.9-million).

The Red Cross says that in the 2006 fiscal year, the growth has been far more substantial — it raised $496-million in disaster-relief gifts online.

“Our online growth has been exponential,” says Kathleen Loehr, the charity’s interim senior vice president for development. In the aftermath of Hurricane Katrina, she says, “we clocked 1,000 gifts per minute.”

The relief organization World Vision (No. 13), which raised more than $37-million online out of its total $647.9-million last year, says the amount it collects online has grown by more than 2,000 percent in the past five years. The charity attributes the increase partly to its concerted effort to collect e-mail addresses from donors and potential supporters, 800,000 of whom have now agreed to receive its electronic communications.

“When you have 800,000 e-mail addresses, you can communicate at a very low cost,” says Atul Tandon, World Vision’s senior vice president for donor engagement. He says many donors find the online communications far more compelling than mass mailings.

“Frankly it excites them,” he says. “You’re not just looking at a piece of direct mail. On e-mail you can have a video available, you have audio, you’re listening to a child in Uganda or a soldier in the Congo.”

New Donors

While some charities in the Philanthropy 400 have struggled to raise money from companies in recent years, others have greatly increased corporate contributions.

The Marine Toys for Tots Foundation (No. 59) raised 26 percent more from private sources last year, or $236.3-million, in large part by expanding the number of regions in which it recruits new corporate sponsors who give $25,000 to $250,000 in cash or at least $50,000 worth of toys per year.

As a result, corporate contributions have increased by nearly 50 percent every year since 2001.

The Dana-Farber Cancer Institute (No. 124), which has already raised $9-million from companies this year, expects to raise significantly more soon, after joining with City of Hope (No. 197), the University of Texas M.D. Anderson Cancer Center (No. 153), and 10 other cancer centers nationwide to form the Cancer Research Alliance, a separate nonprofit organization that will focus on raising money for the institutions through marketing promotions with companies that have a national reach.

Three years ago, St. Jude Children’s Research Hospital (No. 25) started a project called Thanks in Giving to get companies to donate the sales price of a product or undertake other marketing efforts during the holiday season to benefit the hospital. The hospital expects to raise $20-million this year from 50 corporations; fund raisers plan to increase that amount to $100-million in the next few years.

Many charities are reaching out to other new donors such as Hispanics or women and children. St. Jude, for example, recruited 20 Spanish-speaking radio stations last year; each one broadcast four spots every hour for two days, asking listeners to call in and make a one-time or monthly gift. The new radiothon raised $3-million.

Ducks Unlimited (No. 126), a charity traditionally supported by male hunters and other sportsmen, is trying to recruit more women. Five years ago, only a quarter of the more than 400,000 men who attend the organization’s fund-raising events brought their wives; now more than half do. The charity has been able to raise more money with women at the events, which include silent and live auctions, because they have expanded the offerings to include jewelry and other items with a feminine appeal. What’s more, fund raisers have found that couples, some of whom bring children to the events, are more likely to come to subsequent events than men who come alone.

Ducks Unlimited is doing more to promote its Greenwing membership program for youngsters, which focuses on conservation projects and other activities that children and parents do together. The number of members has grown by 6 percent to 8 percent annually for the past five years, to 80,000 today.

A Shift in Focus

While United Way of America topped the list, many local United Ways faced stagnant or declining donations. But other United Ways achieved impressive returns last year by continuing to redefine their organizations, moving away from United Way’s traditional image as a fund-raising campaign that funnels money to other charities and toward a more active role in improving conditions in the neighborhoods they serve.

At the United Way of Tucson and Southern Arizona, where contributions grew by 39 percent last year, the new orientation has helped attract more big gifts from individuals, including a $1-million donation, and more foundation grants, says H. Daniels Duncan, group vice president for community development. “Since we stopped being a fund-raising organization, we are raising more money.”

According to research conducted by United Way of America, 46 percent of local United Ways now operate under the new approach. And the umbrella organization has found that the smallest United Ways, those raising from $1-million to $2-million annually, can raise 12 percent more in their fund-raising campaigns if they pinpoint specific local issues to work on, get board members involved in setting goals for accomplishments in those areas, and measure the results.

Social-service and youth organizations in the Philanthropy 400 did well last year, raising 40 percent more money than in 2004.

Some of the groups raised a lot of money for disaster aid, but others said they benefited from their focus on winning new gifts from individuals.

Beginning in 2004, for example, Boys & Girls Clubs of America (No. 15) has spent $3.5-million on a new project to train 368 of its local clubs to conduct face-to-face solicitations with potential donors. With each club raising an average of $111,000 from the effort, the charity received $40.8-million in new contributions last year. That helped Boys & Girls Clubs achieve a 24-percent increase in contributions last year, after reporting a 1.8-percent increase in 2004.

Unusual for a local social-services organization serving a small urban area, the Harlem Children’s Zone (No. 356) has already received two donations of $25-million this year, one of them from its board chairman, Stanley Druckenmiller, a Wall Street billionaire.

The gifts are part of an ambitious plan to expand the charity’s programs from a 60-block radius to 100 blocks in the city. The charity is in the midst of a 10-year plan for expansion and has also begun a campaign to increase its endowment from $50-million to $150-million, the interest of which would cover its operating costs.

Environmental groups and charities that help animals also fared much better in 2005, raising 16 percent more and reversing a 2.8-percent decline in 2004. While animal-welfare groups received substantial sums to rescue pets and other animals after Hurricane Katrina, environmental groups have benefited from donors’ growing concern over climate change and related issues, fund raisers say.

At Environmental Defense, contributions climbed by 38 percent, to $65.4-million, pushing the organization to No. 247 on the Philanthropy 400 list, up from No. 306 in last year’s survey.

Paula Hayes, vice president for development, says affluent donors are making big gifts to battle global warming, which she says organized philanthropy has been slow to tackle.

“Individuals are making riskier donations — they want to step in and pick an issue philanthropy has ignored,” Ms. Hayes says. “Foundations used to be where discussions occur about where philanthropy needs to go. Now more of this conversation is taking place among donors who are used to making calculated risky investments, not having the comfort of a bunch of people preceding them.”

Maria Di Mento, Candie Jones, Sam Kean, Harvy Lipman, Peter Panepento, and Elizabeth Schwinn contributed to this article.