June 26, 2003 | Read Time: 8 minutes
Amid last year’s sluggish economic growth, charitable contributions by individuals, corporations, and
foundations totaled $241-billion but failed to keep pace with inflation, according to estimates to be released this week in “Giving USA,” an annual report on the state of philanthropy.
But the report usually slightly underestimates charitable giving, only to adjust its estimates upward when more complete federal tax data become available the following year — making it likely that, in fact, donations actually increased by more than the cost of living in 2002.
“Donations pretty much held their own in spite of economic uncertainty and multiple geopolitical concerns,” says Patrick Rooney, director of research at the Center on Philanthropy at Indiana University, which conducted the research for the survey. “Giving USA” is published by the American Association of Fundraising Counsel Trust for Philanthropy, the research arm of an organization that represents fund-raising consultants.
After adjusting for inflation, “Giving USA” estimates that charitable giving fell 0.5 percent last year.
While donations to most types of nonprofit groups rose or fell by small percentages from 2001, giving to human-service organizations fell more than 11 percent, according to “Giving USA.” Researchers say that people who gave more to social-service groups after the September 11 terrorist attacks in 2001 — when giving to such groups increased by 11.9 percent — may have reduced their donations in 2002. Traditionally, they add, giving to human-service organizations tumbles when the economy is sluggish.
The other large change was in contributions to nonprofit groups that work in international affairs, which saw donations rise nearly 10 percent.
Among the report’s other key findings:
- Giving by individuals, which accounts for more than three-fourths of all donations, decreased by 0.9 percent after taking inflation into account. Individuals contributed an estimated $183.7-billion to charity in 2002.
- Corporate giving rose an inflation-adjusted 8.8 percent last year to an estimated $12.2-billion. Mr. Rooney attributes the increase in part to the aftermath of the September 11 attacks. “Some of the pledges that were made in 2001, because the attack on America was so late in the year, were not actually paid until 2002,” he says. In addition, Mr. Rooney says, the tightening of accounting procedures as a result of corporate scandals in 2002 have led some businesses to do a better job of reporting their philanthropy accurately.
- Giving by foundations dropped 2.7 percent after taking inflation into account, to an estimated $26.9-billion.
In addition to estimating how much money was donated to charity from various sources, “Giving USA” also analyzes how contributions were distributed.
Religion. As in past years, the biggest share of donations went to religious institutions. The survey estimates that gifts to religious causes totaled $84.3-billion last year, or 35 percent of all charitable giving.
Religious donations rose 3.3 percent from 2001, after adjusting for inflation.
Giving was a “mixed bag” for churches and religious groups, according to Paul D. Nelson, president of the Evangelical Council for Financial Accountability, in Winchester, Va., which certifies that religious groups comply with ethical standards. Half of the group’s 1,087 members had a slight increase in contributions last year, but for some groups “the decreases are steep,” he says.
Sylvia Ronsvalle, executive vice president of Empty Tomb, a Christian research organization in Champaign, Ill., says that giving to churches appears to be holding up well, although gifts to other types of religious organizations are falling.
Education. Educational institutions received the next-highest portion, with $31.6-billion in contributions — 13.1 percent of the total. Giving to education declined from 2001, however, by 2.6 percent after taking inflation into account.
Vance T. Peterson, president of the Council for Advancement and Support of Education, says one reason for the decline is that some donors to colleges and universities want to wait a year or two before making large gifts in the belief that the value of their stock holdings or other components of their finances will have improved by then.
“It’s become more a question of timing, and not a question of whether or not to give,” he says. “There seems to be no general retreat by donors.”
Health. Health organizations received $18.9-billion, or 7.8 percent of the total. Donations to health charities declined after adjusting for inflation, by 3.8 percent.
A drop in donations to hospitals accounted for part of the decline. William C. McGinly, president of the Association for Healthcare Philanthropy, says his own organization’s study found that hospital giving dropped from about $8-billion in 2001 to about $7-billion in 2002.
Human services. Charities providing human services received $18.7-billion, or 7.7 percent of the “Giving USA” total. Social-service groups suffered the largest drop in contributions from 2001, falling 11.4 percent after accounting for inflation.
Arts, culture, and humanities. Arts-related groups received $12.2-billion, 5.1 percent of the total. Giving to those groups dropped 0.9 percent from the prior year, after taking inflation into account.
Public policy. Nonprofit organizations that focus on public-policy issues received $11.6-billion, or 4.8 percent of all contributions. Donations to those groups were down 3.4 percent from 2001, after adjusting for inflation. Some advocacy groups with antiterrorism messages reported strong giving in the wake of the September 2001 attacks. But United Ways, which are included in this category, as well as other advocacy organizations, struggled in 2002.
Environment. Environmental groups and charities that work on animal issues received $6.6-billion, or 2.7 percent of the total. Such organizations saw their donations rise by 1.2 percent after inflation.
International affairs. Organizations that focus on international affairs received $4.6-billion, 1.9 percent of all charitable giving. Donations to those groups rose 9.7 percent after accounting for inflation.
For humanitarian groups that operate overseas, news about relief efforts in Afghanistan and elsewhere have helped spur gifts from individuals, but foundation grants and major gifts in some cases have shrunk.
The remaining portion of the “Giving USA” total, $52.5-billion in contributions, went to foundations or was not allocated to a specific charity, according to the survey.
Mr. Rooney emphasizes that “Giving USA’s” figures are estimates, calculated from several sources. The Internal Revenue Service issues data showing how much taxpayers who itemize on their income-tax returns claimed in charitable deductions. Secular nonprofit groups also file tax returns with the IRS showing, among other things, how much money they receive in contributions. However, the IRS does not release complete data on charitable deductions and contributions until two years after returns are filed — meaning that only partial figures were available for 2002.
To estimate the actual totals, “Giving USA’s” researchers have devised a mathematical model, based on a variety of economic factors, that tries to predict what the final figures will be, using the data that are available.
“Giving USA” also uses statistical formulas that estimate how much people who do not itemize deductions on their tax returns give to charity. In addition, researchers survey about 2,000 charities to find out how much they have received in contributions.
When the final IRS data are released, “Giving USA” annually updates its estimates from the prior year’s report. Those updates can drastically change its findings.
Last year, for example, “Giving USA” estimated that overall giving in 2001 was $212-billion, which, after adjusting for inflation, amounted to a 2.3-percent decline from the previous year. However, it has now revised that estimate to $238.5-billion, which would mean donations rose by 1.6 percent in 2001.
The percentage impact of the revisions can be even larger when looking at certain types of donors. Last year’s report, for example, estimated that corporate giving had fallen tremendously in 2001, to $9.1-billion, which represented a drop of 14.5 percent after inflation. But this year’s report revised the 2001 corporate-donation figure upward, to $11-billion. That meant that rather than having suffered a large decline, corporate giving was virtually unchanged from 2000 to 2001.
“These are soft numbers at best,” says Peter Dobkin Hall, a lecturer on nonprofit organizations at Harvard University’s John F. Kennedy School of Government. “They’re probably jumping the gun by releasing them in such a high-profile way before the final numbers are in.”
Mr. Hall adds, “The numbers are very problematic, first because most Americans aren’t itemizers, and second because a substantial portion of contributions go to religious organizations that don’t have to file” federal informational tax returns. As a result, he says, “we have neither solid data on giving or receiving.” The “Giving USA” report, he says, “is the best we have, but far from perfect.”
But Elizabeth Boris, director of the Center on Nonprofits and Philanthropy at the Urban Institute, in Washington, says that “Giving USA’s” purpose is to provide researchers and others in the philanthropic world with a timely snapshot of giving, which means it must release estimates before final data are available.
“People want some way of having the giving temperature taken in the year it is happening, not two years later,” says Ms. Boris, who worked on the “Giving USA” advisory committee during the survey’s formative years. “I don’t think anyone associated with ‘Giving USA’ would say these are the real, true numbers, but they’re the best we have. There is some level of comfort with the numbers because they’re consistent, seriously done, and well thought through.”
Mr. Rooney acknowledges the problems inherent in making such estimates, but adds that researchers are constantly working on improvements to the methodology. Among this year’s changes are a more detailed analysis of the factors affecting corporate giving and the addition of information from a University of Michigan study on giving by taxpayers who do not itemize their deductions.
Copies of “Giving USA 2003″ will be available in July for $65 each from the AAFRC Trust for Philanthropy Fulfillment Department at (888) 544-8464. Order forms can also be downloaded from the group’s Web site at http://www.givingusa.org, or obtained by sending a written request to the trust at 10293 North Meridian Street, Suite 175, Indianapolis, Ind. 46290.
