Has U.S. Charitable Giving Really Exploded?

This recent article in Forbes highlights the growing professionalism of the Third Sector.  In our view the debate is a good one to have, and is based on increasing competition and growing sophistication of the nonprofit sector.  As Mr. Watson points out, it is easy to focus on the brewing controversy of the big number of total charitable gifts, however, we find the detailed reports of greater importance.  Certainly there are many important national organizations that are generously supported by a broad donor constituency from across our country.  But, the larger majority of organizations operate on a very local basis.  The detailed analysis from both the Atlas of Giving and Giving USA endeavor to report on the giving activity by geographic region and within each distinct sector of the nonprofit world.  We are actually starting to observe a greater interest in the public’s support of Human Service Agencies.  Support of the Environment and Animals also seems to be going strong, while the changing landscape of Healthcare also seems to have affected donor interest in supporting Health and Health Related organizations.  We believe that how these two companies report on the shifting sands between the sectors will be of the greatest interest.

1/21/2014 @ 3:50PM |1,465 views

Philanthropy Food Fight! Has U.S. Charitable Giving Really Exploded?

A winter storm of controversy churned through the normally placid uplands of professional philanthropy this week, pitting academic vs. academic and creating a running battle over just how much Americans gave away to charitable causes last year.

This particular Comptroller Vortex brought the esoteric world of accounting, measurement, financial forecasting and algorithms into public scrutiny, touching off a running skirmish between the old guard philanthropy measurement geeks and the upstarts.

At issue is a new report by the company Atlas of Giving (they’re the upstarts) claiming that giving in the U.S. skyrocketed by 13 percent in 2013. The Dallas-based startup mines economic data to reach its conclusions – which are somewhat stunning to a sector still (or so many believed) coming back slowly from the economic crisis of five years ago. According to the new projections, U.S. philanthropy surged to a record $416.5 billion last year.

Not so fast, say the publishers of Giving USA (they’re the old guard), which has been the gold standard for measuring top-line American philanthropy for a quarter century. Giving USA is a project of Indiana University Lilly Family School of Philanthropy and it uses IRS records and nonprofit and foundation surveys to measure giving. Traditionally, its annual reports are not released until mid-year of the following year – and its estimates of American philanthropy’s bounce back are quite a bit more conservative. Last year, the overall estimates of the two groups were a mere $50 billion apart.

In the Chronicle of Philanthropy, which serves as the paper of record for the nonprofit world, the rhetoric ran red hot (well, kind of warm really – but this is philanthropy we’re talking about):

The Atlas of Giving estimate is “fallacious, simplistic, and wrong,” says Patrick Rooney, an associate dean at the Indiana University philanthropy school.

It’s the “Giving USA” survey that is lacking, according to Rob Mitchell, the chief executive officer of the Atlas of Giving. The university report, he says, “does not give a snapshot that’s representative of the entire giving universe.”

Make no mistake: the numbers are important. If philanthropy really is undergoing a giant structural leap forward then nonprofits should all be looking to dramatically increase their investment in development and fundraising, hiring more staff and considering major campaigns to take advantage of the shift.

Conversely, if actual growth is not there, nonprofits might conserve their resources, rein in expansion, curtail special projects, and even cut programs.

In my view, the battle over the numbers may actually be more interesting than the numbers themselves – and certainly the “big number” on overall giving. My own spider sense tells me philanthropy is not undergoing an explosive period of growth; nonprofits continue to struggle to make their yearly nut just as the public sector continues to curtail social services in many areas. The big fish at the top of each sector’s food chain – major universities, household name national nonprofits, and go-to disaster relief organizations – continue to do well and have stabilized since the recession. Lots of small but worthy charities struggle. And I do not sense that U.S. philanthropy is poised to grow past its traditional 2 percent of GDP in good times or bad.

I’m not sure I buy the Atlas of Giving rationale that a strong stock market led to a wave of giving across all the sectors they track, especially since religious giving (which generally relies on many smaller donations in the middle of the economic food chain) also saw significant growth in their estimates. Did stronger investment portfolios lead foundations to increase giving in 2013? Possibly – though it’s important to note that foundations were quick to pull back in the recession. However, I do think the Atlas breakdown of where the money comes from is right: 75 percent from individuals, 14 percent from foundation, and nine percent from corporations.

I tend to think these competing indexes will even out. Of course, I’ll be curious to see the Giving USA numbers in a couple of months. I’m not sure Atlas CEO Rob Mitchell’s quip to the Chronicle – “It’s like getting excited about reading a newspaper today that specializes in reporting the news events of 18 months ago” – is all that helpful, because as someone who has worked in the sector for 15 years I’ve felt that the Giving USA reports held up pretty well at ground level. Sometimes accuracy does take time. And I’ll continue to monitor monthly results from Blackbaud’s Index of Charitable Giving, which is based on actual results entered into the company’s database software.

All in all, the debate over methodology is probably worth it. Philanthropy (and its funds) deserves more attention and analysis – simply because it carries so much of society’s needs on its thin, under-nourished back.