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Financial Planning > Charitable Giving > Donor Advised Funds

What Can Charities Expect in a Recession?

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Charitable giving edged downward in 2019, but remained 6% higher than in 2017, according to the Fundraising Effectiveness Project’s fourth-quarter report, released in late March.

Now, the question is what effect the coronavirus pandemic will have on giving in 2020.

The bulk of losses in donations in 2019 came in the second quarter, when year-to-date giving was down 5.7%. The charitable sector climbed from that deficit in the second half, ending the year with a total loss of 1.4%.

The Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute conducted the analysis. It was based on data from the AFP’s Growth in Giving Database.

Here’s how revenue from different donor groups looked in 2019, compared with 2018:

  • Major donors ($1,000+), representing 84.5% of total: -1.4%
  • Mid-level donors ($250 to $999), 6.7% of total: -1%
  • General donors (less than $250), 7.5% of total: -1.1%

“In 2019, we continued to see the trend of donors not keeping pace with dollars,” Mike Geiger, the AFP’s president and chief executive, said in a statement.

“While there was a modest decline in donations in 2019, the money raised in 2019 is still higher than 2017. What we saw in 2018, then, was a surge in giving, and in 2019, a correction.”

One good sign emerging from the report was that the overall retention rate — the percentage of all donors who made a gift to the same organization in 2018 and then again in 2019 — increased by a tiny 3 basis points compared with the previous year’s rate, halting a downward trend of recent years.

The overall repeat retention rate — existing donors who gave in both 2018 and 2019 — was nearly flat, at 61.3%, as was the new donor retention rate, at 20.3%.

A big issue facing the nonprofit sector in 2020 — especially for organizations not directly serving the victims of the coronavirus — is whether it can attract new donors and keep existing donors engaged.

The 2019 report underscores the difficulty in acquiring and retaining first-time donors. The number of new donors in 2019 and new ones from 2018 who gave again in 2019 fell drastically, by 5.7% and 6.4%. The report said these trends were unsustainable for the long-term success of philanthropy.

“Losses in new, first-time donors is not unusual, but nonprofits should focus their time and budget on retaining current donors,” Jim Greenfield, member of the Growth in Giving Initiative steering committee and an advocate of fundraising performance analysis, said in the statement.

“Not only is their retention rate higher but is accompanied by their higher gift revenues than first-time donors.”

A Look Back and Ahead

A recent study of philanthropy during the 2008–09 recession by the Fundraising Effectiveness Project found an interesting pattern between the U.S. financial markets and giving.

Donations actually increased slightly and then finally declined 10 months after the start of the recession, and the biggest effect was on donation size, not number of donors giving.

The 2019 report said that, like then, it is essential that nonprofits continue fundraising operations as the needs of the greater community will likely only increase because of COVID-19.

As for what lies ahead in 2020, the new report’s data shed some light on what to expect with a declining stock market, according to Jon Biedermann, president of The Biedermann Group and treasurer of AFP’s Growth in Giving Initiative. “A decline in donation size is imminent but should not be as drastic as the decline in the market.”

“While we don’t yet know the relationship with donors and a pandemic of this size, we have seen time and again that humanity shines brightest in our darkest days. All nonprofits, whether on the front lines or not, should continue to serve their missions and be confident that people will be there to support them.”

The Fundraising Effectiveness Project’s first-quarter fundraising report, due May 15, will reveal the effect of the coronavirus on nonprofits.


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