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Giving up slightly despite fewer donors

Written on Mar 5, 2019

Major studies of giving during 2018 are starting to show agreement that philanthropy lagged Gross Domestic Product (GDP) during 2018 and the only reason giving was up is because of donors who gave at least $1,000.

Giving increased by 1.6% in 2018, according to the Fundraising Effectiveness Project’s 2018 Fourth Quarter Report. While the federal government is still tabulating GDP for 2018, it is estimated to have been approximately 2.6%.

The data also shows a plunge in the number of donors. Data in the report is based on a panel of more than 4,500 charities selected from the Growth in Giving Database of 161 million individual transactions, which includes more than $72 billion in donations and 18,348 organizations since 2005. Organizations included in the panel have raised $5,000 or more from 25 or more donors in each of the last six years. Revenue figures were adjusted for inflation.

After a sluggish first half of the year, charitable giving rebounded during the third and fourth quarters of 2018 to end with an overall increase. However, the increase was smaller than in 2017 with other key giving indicators continuing to fall. And, the month of December 2018 was down compared to December of 2017.

While total giving of gifts of $1,000 or more increased by 2.6%, revenue from smaller gifts decreased. Gifts in the $250 to $999 range dropped by 4%, while gifts of less than $250 declined 4.4%, according to data in the report. The number of donors fell, as did retention rates (the percentage of donors who continue to give to the same organization).

The total number of donors dropped by 4.5% from 2018 to 2017. That total includes:

  • New donors to an organization, which dropped by 7.3% from 2017

  • Newly retained donors, those who have given a second time to an organization, which dropped by 14.9%

  • Recaptured donors, those who stopped giving to an organization but returned and gave again to the same organization in 2018, which dropped 1.6%

  • Repeat retained donors, who have been giving to the same organization for at least three years, which increased by 0.2%. The overall retention rate — the percentage of all donors making a gift to the same organization in 2017 and then again in 2018 — declined almost two percentage points from the 2017 rate to 45.5%. The repeat retention rate (the percentage of repeat donors who gave in 2017 and then again in 2018) remained fairly steady at 61%, while the new donor retention rate (donors who gave in 2017 for the first time and gave again in 2018) fell four percentage points to 20.2%.

“What’s concerning about this data are the significant decreases in the new and newly retained donor groups,” said Ben Miller, chief analytic officer at DonorTrends, which created the final report. “From past reports, we’ve seen that charities seemed to do well at acquiring new donors but retaining them was a challenge. Now we’re seeing difficulties in acquiring donors, and that could spell real trouble with fewer donors giving. Again, it’s great to see giving increasing overall, but the question remains around the long-term sustainability of the sector if these trends continue.”

Trends and changes in giving are not typically caused by one single factor. However, the federal tax law signed in late 2017, which doubled the standard deduction and likely caused many taxpayers to take fewer itemized deductions including the charitable deduction, might have played some role in the results.

A direct comparison of giving in fourth quarter 2018 vs. fourth quarter 2017 shows potentially more impact from the tax changes. Giving spiked in all three giving categories in the fourth quarter of 2017, when President Trump signed the tax bill into law. In the fourth quarter of 2018, all three giving categories fell. Gifts of more than $1,000 fell by 5%, while gifts in the $250 to $999 range decreased by 12% and gifts less than $250 dropped by 15%.