Tuesday, July 10, 2018

Overall Giving Increases but Challenges Remain

If you haven’t seen the latest Giving USA 2018 numbers covering giving in 2017, I encourage you to look over the materials here (and remember that AFP members get a 20% discount on all Giving USA 2018 materials—you can find the code here behind the member wall).

There’s a lot of positive news from the report with overall giving increasing by more than five percent in 2017 to an estimated $410 billion. Almost every major category of giving that the study tracks increased; the lone exception was giving to international causes, which dropped by 4.4 percent. But beyond the big giving numbers, there are a few trends that are worth highlighting.

First, total giving remains at about two percent of the US. Gross Domestic Product. Historically, giving as a percentage of GDP has hovered in the 1.8 – 2.2 percent range. So, while the growth in giving was strong, we are still fundraising in essentially the same kind of environment we have been for the past several decades.

Second, the growth in major gifts and even mega-gifts (which Giving USA 2018 defined as more than $300 million) continues unabated. That’s very positive—if you have a strong major gifts program. At the same time, the report notes that individual household giving has decreased over the years. Sum it all up, and we’re continuing to see the trend of fewer donors giving more money to charity.

Third, more giving is occurring through vehicles where the money won’t necessarily be used immediately. The biggest increase was giving to foundations, which rose by more than 15 percent. Combine that with the five percent growth in giving to public-society benefit charities, which includes donor-advised funds, and that’s a fair number of funds being left for future years. In a recent presentation, Aggie Sweeney, chair of Giving USA Foundation, said that “at least twelve percent of giving in 2017 did not go out to nonprofits providing direct services.”

That’s not necessarily a bad thing. As a CPA and a planning fanatic, I believe in having funds set aside for the future or “rainy days,” and giving to any sort of charitable entity is a positive thing. But fundraisers need to understand how the growing prevalence of vehicles like donor-advised funds is affecting the actual flow of gifts to charities.

Finally, what about the impact of the new tax law on giving? Based on what happened with other major tax law changes in the past, we may not see the full impact (positive, negative or otherwise) for a couple of years. It may take donors, financial advisors and charities a while to get used to changes and understand how best to move forward. But one trend to look out for is bundling, whereby donors choose to combine all of their charitable giving into one year, as opposed to spreading out their gifts over two or more years.

Why would donors bundle their gifts? By bundling, their combined giving will exceed the newly doubled standard deduction, allowing them to itemize and take advantage of the charitable deduction. The big downside is that in years donors don’t bundle, they won’t give (or likely not give as much), which will make it very difficult for charities to raise funds and plan programs consistently.

The new Giving USA 2018 study has some great data and demonstrates how giving and the philanthropic sector continue to grow. But the results should also give us pause and remind us to prepare for some potentially significant changes over the next couple of years. Focusing on donor retention and stewardship will be key for many organizations, and our fundraising skills and experience will be critical for success. I encourage you to rely on your AFP networks and community for inspiration, ideas, programs and camaraderie you’ll need to meet your goals and inspire donors to create extraordinary impact in 2018 and beyond.

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