Giving Just Kept Pace With Inflation in 2017, Report Indicates

Donations to many of America’s charities barely surpassed inflation last year, according to a new survey. Giving rose 2 percent more in 2017 than in the previous year, a rate roughly even with inflation, according the latest Fundraising Effectiveness Project report.

The larger an organization was, the more likely it was to rack up bigger gains in giving. The report does not include giving to donor-advised funds, which by many accounts saw a tsunami of support in 2017.

Charities in the new report also added new donors at a rate of less than 1 percent last year: For every 100 new supporters they added, 99 were lost through attrition. Charities are not making up for that by increasing the share of donors who give year over year: The overall donor-retention rate, just under 46 percent, inched up only half a percent from the previous year; the dollar retention rate — which tracks the amount raised in one year from donors who also gave in the previous year — remained unchanged from 2016, at 48 percent.

The latest figures indicate a worrisome trend: For the past 10 years, donor and dollar retention rates have stayed below 50 percent.

Since the first Fundraising Effectiveness Project report, which had 2004-5 figures, donor retention has averaged 45 percent and gift retention 46 percent.

“We are losing donors faster than we are losing revenue, and more and more of this revenue is being generated from large donors. And now with donor-advised funds, I can only imagine that trend continuing,” writes Ben Miller, chief analytic officer at DonorTrends, which helped conduct the report’s analysis, in an email to the Chronicle. However, he adds, donors who give larger gifts are more likely to be loyal from year to year.

The Fundraising Effectiveness Project is a collaboration between the Association of Fundraising Professionals and the Urban Institute.

The report relies on data from the Growth in Giving database, which includes information from several fundraising software companies and a few national charities. More than 13,600 charities’ data was included in the analysis; they raised $11.3 billion in total last year. The report says many large organizations that use proprietary, or “enterprise,” software for fundraising were not included in the data.

Charity Size Matters

The smaller an organization was, the weaker its fundraising results. Organizations raising less than $100,000 in 2017 saw giving drop a median of 8 percent, while charities raising $100,000 to $500,000 had a median growth rate of under 3 percent, and those that raised more than $500,000 saw giving jump a median of 9 percent.

The proliferation of new charities—giving donors more choice—likely poses a disadvantage to small organizations, Miller says in an email. “It is harder to hold on to your donor because of all the competition, and the resources required to administer these organizations is not centralized and therefore [increases] the cost of fundraising.”

The report offers growth guidelines aimed at helping charities set fundraising goals. To double annual giving in five years, the report says, an organization’s donations must grow nearly 15 percent during that time. To double giving over 10 years, the average rate of growth must be just over 7 percent during the decade.

Retaining donors is often the best strategy to increase fundraising gains, according to the report. It urges charities to evaluate their net returns on their investments in each gift and donor category (online annual-fund appeals, for instance, or major donors), compare results, and recalibrate how their resources are allocated to maximize their fundraising results.

Each year, the report says, charities must:

• Make “significant, incremental” increases to their budgets by type of fundraising.
• Measure the return on those investments.
• Make additional incremental investments in those segments of their fundraising operations that have performed well.