It seems like there’s only one topic of discussion in the non-profit world right now—donations have plunged after two record years of giving during the COVID-19 pandemic. Data pouring in from the IUPUI Lilly Family School of Philanthropy is startling. But it also provides clear signs of how your organization can fund your good works this year—and into the future.
As stated, IUPUI researchers recently released their report, Giving USA 2023: The Annual Report on Philanthropy for the Year 2022. The number catching the most attention from reveals total giving declined 10.5% after accounting for inflation. (Making such an adjustment is key, thanks to the serious inflation hurting the economy, along with pocketbooks of donors.)In fact,the largest single-year drop—just as communities need nonprofits more than ever—is a serious enough issue even the mainstream media is taking notice.
Accordingly, there are several major takeaways from this development every nonprofit should consider. Despite the bad news, it’s not all doom and gloom. Even in a difficult environment for nonprofits, organizations can not only survive, but they can also thrive,if they take the right steps in response.
Without further ado, here are three insights you need to know.
Insight #1: There is No Safe Harbor in this Economy
According to the report, giving declined in seven out of nine recipient subsectors. The first that didn’t suffer a drop is foundations. Typically nonprofits founded by ultra-high net worth (UHNW) individuals, they often continue to fund them for their own purposes. The second is international affairs, driven by the war in Ukraine and continued COVID-19 response efforts in poor countries. Especially if your organization isn’t involved in these two areas, it’s increasingly clear you must work harder to achieve your goals, continuing to best serve your community.
A mistake some nonprofit leaders make is to assume their organization exists in a safe zone—that their donations and charitable gifts will continue flowing—no matter what happens in the broader world. This may be due to their particular mission, the length of time they’ve been active, or their donor makeup. Unfortunately, the Giving USA data shows no nonprofit now enjoys this luxury of security.
#2: Foundations Wield Massive Power—For Some
Just over $1 out of every $5 given to charity comes from foundations, most of which are established, operated, or controlled by UHNW individuals. This is a dramatic change from the 1980s. Giving by foundations has increased from 5% of charitable donations in 1982 to 21% in 2023. This is a challenge for several reasons. For one, giving by foundations dropped 5%. For another, while megagifts draw mega publicity, they only impact a small number of nonprofits.
To this point, MacKenzie Scott has received massive press attention for giving away more than $12 billion dollars so far, but those donations remain quite concentrated. Scott has donated to about 1,600 nonprofits so far—out of 1.5 million nonprofits in the nation. That’s about 0.1% of the nonprofit economy positively impacted by her efforts.
#3 Individual Giving is Alarming, Yet Filled with Opportunity
Individuals gave $319 billion to charity in 2022, a plunge of $49.1 billion from the previous year. That’s a shortfall of 13.4%, a greater drop than in giving overall. When donations are measured as a percentage of disposable income, it fell to 1.7%, the lowest level in 27 years. This figure can be hard to wrap your mind around on a macro scale, so let’s consider what it means in terms of individual gifts.
Using an average gift size of $239 (an average calculated using $14B in gift transactions), there were 225 million fewer gifts in 2022 as compared to the previous year. To many organizations, when individuals don’t show up, their operational budgets cannot be met. Given the smaller drops in giving by corporations, bequests, and foundations, it’s clear to the DonorSearch team that restoring America’s tradition of individual giving should be priority one for every nonprofit leader and fundraising professional.
How DonorSearch Can Help You Rebuild Individual Giving
The reduction in individual giving is a major component of the overall drop in charitable donations, meaning it’s also the area with the most room for improvement. As DonorSearch Senior Vice President Nathan Chappell explains, “Americans didn’t wake up in 2022 and say, ‘I think we’ll skip donating this year.’ Instead, the typical family struggles with rising inflation, political tensions, and a transition back to working outside the home, among other factors. In this tough environment, it’s understandable that giving may take a backseat to just getting by. But nonprofits can overcome this challenge by doubling-down on meaningful engagement and positioning their organizations as an amplifier of generosity.”
DonorSearch Executive Vice President and Co-Owner Sarah TeDesco adds, “Our team helps nonprofits determine who their most engaged community members are, whether they are current donors or not. These are the people who will support your worthy cause through good times and bad—not just megadonors and their foundations.”
Ultimately, by placing the emphasis on building engagement with individual donors and strengthening a nonprofit’s relationship within its community, DonorSearch partners with charitable organizations to ensure their success—no matter what’s happening with the economy on a macro scale.
To learn just how we can help your organization restore a culture of individual giving, contact DonorSearch for a demo today. Also, if you’re an experienced non-profit professional interested in helping new nonprofits build for future success every day, please consider a career with DonorSearch.