June 3, 1999 | Read Time: 9 minutes
When Giving USA next year publishes its annual report on how much Americans donate to charity, it is almost certain to include one significant change from this year’s edition:
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The estimate of how much Americans gave in 1998 will grow or shrink — perhaps substantially — as more-precise information becomes available.
Even then, the revised figure for 1998 will fall far short of certitude.
Twelve months ago, Giving USA reported that charitable contributions in 1997 totaled $143.5-billion. But the latest edition of the philanthropy yearbook says the actual figure for 1997 was $157.7-billion — which means the original estimate was off by 10 per cent.
In fact, Giving USA revises its prior year’s estimate every time it comes out with its annual report, as government and other data are updated. But while the original estimate is trumpeted in a press release that is picked up by most major news organizations and becomes the closest thing there is to an official giving figure, few outside the non-profit research world ever hear about the revision.
Even with the revisions, many of those researchers say that the numbers in Giving USA — published annually since 1985 by the American Association of Fund-Raising Counsel’s Trust for Philanthropy — never amount to much more than educated guesses.
After years of criticizing the yearbook, some observers say the time has come for a major overhaul of the way donations estimates are calculated.
Giving USA made a series of major changes in its methodology last year, which researchers who study non-profit organizations say has improved its accuracy. But they add that those changes can’t make up for the paucity of solid data about donation trends.
And those scholars fear that the lack of knowledge about the state of giving could lead to misinformed public-policy decisions — especially at a time when many government leaders are asking charities to assume more responsibility for social and health-care services. They say that as the World War II generation passes on its wealth in what is expected to be the biggest intergenerational transfer of financial assets in history, it will become increasingly important for policy makers and fund raisers to know whether a significant portion of those assets are being channeled to charities.
The figures now available are not up to that task, says Elizabeth T. Boris, director of the Center on Nonprofits and Philanthropy at the Urban Institute, which is undertaking a major effort to try to improve the measurement of donations. Giving USA’s annual donation figure is “not precise; it’s a guesstimate,” Ms. Boris says. “For a quick analysis, Giving USA is reasonable, but nobody would say its number is accurate.”
Scholars say that the lack of good data is also a problem for fund raisers who want to use the giving estimates to see whether they are leading or trailing the competition.
“If institutions rate their development officers based on what Giving USA comes out with, that would be a travesty,” says Virginia A. Hodgkinson, executive director of the Center for the Study of Voluntary Organizations and Services at the Georgetown University Public Policy Institute.
The editor of Giving USA, Ann E. Kaplan, does not dispute those evaluations of the figures. “People who use Giving USA use it because it’s in the right direction and the right ballpark,” she says. “It accurately reflects, for example, that charitable contributions are running ahead of inflation.”
Ms. Kaplan emphasizes that Giving USA’s figure is only a projection based on the best data available — which in many cases are admittedly skimpy. “It’s an estimate,” she says. “And like all estimates, it’s revised when more complete data come out.” She notes that government estimates like the Commerce Department’s personal income figures or inflation data are revised monthly, “but nobody has a problem using it.”
Regardless of the accuracy of the Giving USA numbers, they invariably become the benchmark for charitable giving. They are picked up by major news organizations and repeated in stories throughout the year. And while Ms. Kaplan emphasizes that the figures are estimates, the news release on Giving USA plays down that fact. It begins by stating flatly that “Americans contributed $174.52-billion to non-profit organizations.” The word “estimate” does not appear until the second page.
Actually, Giving USA’s figure is an estimate built on a series of other estimates — which helps explain the huge revision in the 1997 figure. The key number Giving USA relies on is a projection by the Internal Revenue Service of total charitable deductions claimed by taxpayers who itemize their returns. Even that number is an estimate, based on preliminary findings from a sample of tax returns. That projection is not made until approximately 18 months after the tax year has ended. As a result, Giving USA uses a statistical formula based on the prior year’s I.R.S. figures to project what they might be for the current year.
When the I.R.S. issued its estimate for 1997, it greatly exceeded what Giving USA’s formula had predicted it would be.
Ms. Kaplan says that the study’s methodology was designed to take into account decades of swings in charitable donations, so that it did not put too much emphasis on big jumps or drops in the most recent years.
Some academic experts suggest that, due to the lag in the I.R.S. figures, the safest thing would be for Giving USA to stop issuing estimates for the previous year — and instead tell the public more precisely how much was given two years ago.
Ms. Kaplan says that approach is not appealing. “The longer you wait,” she says, “the more accurate the data, but when you’re fund raising and making public-policy decisions it’s hard to wait.”
The belated I.R.S. projection is not the only problem some researchers have with Giving USA’s calculation. There’s also been heated debate over how to estimate how much is given by the majority of Americans who do not itemize deductions on their tax returns.
Georgetown’s Ms. Hodgkinson says Giving USA is “playing games with about 70 per cent of all taxpayers, who don’t itemize.”
Ms. Kaplan, however, argues that Giving USA‘s estimate of donations by non-itemizers is in line with the best available information. It uses three independent surveys to calculate non-itemizer contributions, and all three suggest that households that don’t itemize contribute about $300 annually.
Researchers also point out concerns with the lack of good data on where charitable donations go. Giving USA reports that contributions to religious organizations account for nearly 44 per cent of all charitable donations — and most researchers agree that that’s where the biggest chunk goes. But there are very few hard data on how much that amounts to, because religious organizations are not required to report their finances.
“The religion numbers are very hard to get,” Ms. Kaplan acknowledges. Giving USA bases its estimate on the sample used by the National Council of Churches of Christ to put together its annual yearbooks of American and Canadian churches. The council’s data are based on information reported by churches that represent about 45 million of an estimated 160 million American members of Christian churches. The yearbooks list no financial data from the Roman Catholic Church, and many of the churches that do participate provide the same contribution figures from one year to the next.
Giving USA uses various estimates to calculate donations to specific fields, in addition to conducting its own survey of organizations. The philanthropy yearbook estimates donation trends in seven areas: arts, education, environment, health, human services, international affairs, and a catchall category that includes United Ways, social-change groups, and public-policy organizations. It accomplished that by conducting a survey of 700 of the 145,000 non-profit groups in those categories that took in at least $25,000 annually in gross receipts.
“That’s much too small a sample for getting any sort of stratified results,” says John Zogby, president of a polling company in Utica, N.Y., that bears his name. Even though Giving USA divides its sample to get responses from large, medium, and small charities and weights them to account for the share of overall donations they receive, Mr. Zogby says, that doesn’t go far enough. “You’ve got big, medium, and small, but you’ve also got national, regional, and local charities too. You could probably divide each category into a dozen sub-categories. It’s very difficult to draw conclusions from that sample.”
Ms. Kaplan points out that Giving USA had tripled the number of organizations it collected data from this year, hiring an outside polling firm to do so. “Could it be improved by quadrupling the sample? Sure,” she says. “It still needs to be larger, I agree.”
Philanthropy researchers say the best thing that could be done to improve the estimates would be to conduct a survey that collected information from many more organizations and donors. Ms. Boris, of the Urban Institute, notes that her organization is creating a committee of experts from various organizations to try to figure out how to accomplish that.
Paul G. Schervish, director of the Social Welfare Research Institute at Boston College and a member of Giving USA’s advisory committee, welcomes the Urban Institute’s effort. “How delightful it would be if a serious survey was undertaken,” he says, “but it would cost millions of dollars.”
Ms. Hodgkinson says she hopes foundations would be willing to put up that money. She says such research would improve public understanding of what philanthropy can — and cannot — accomplish.
“I think it’s very important, not just to the non-profit organizations that need information about trends in contributions,” she says. “In an era when we’re suffering more and more government cutbacks, philanthropy is more and more important in public policy.”
Ms. Boris notes another reason why an improved giving survey would be worthwhile: “There’s tremendous wealth being made in this country right now. There will be a $10-trillion transfer of wealth in the next decade or so. Is a fair share of that going to go to non-profit, civil-society institutions?”
Whether enough money can be raised to pay for a serious improvement in the collection of giving figures is an open question. Ben Shute, Jr., secretary and treasurer of the Rockefeller Brothers Fund, notes that his organization hired pollsters to try a national survey on giving in the early 1980s, “and quickly learned about the expense and limits of survey work.” As a result, he says, he is not sure whether he would encourage his foundation to make such a grant. “I would need to be convinced this should be a high priority,” he says.
Meanwhile, Giving USA’s study, for all its imperfections, is the only comprehensive estimate available. “If there were more data to go on and more organizations doing this, I can’t see how that would be bad,” says Ms. Kaplan. “On the other hand, there aren’t.”
