Charities See Uptick in Giving in Second Quarter 2020
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In a shift from the first quarter of the year, charitable giving increased by almost 7.5% over the first half of 2020, compared to the first half of 2019, according to the Fundraising Effectiveness Project's 2020 Second Quarter Report.
Giving from the first quarter of 2020 was 6% behind first quarter giving in 2019, and many charities were worried that the data didn't yet show the impact of the pandemic because COVID-19 had not spread significantly by the end of March. But a 19.2% increase in smaller donations (less than $250) in the second quarter was an important driver for this turnaround. The overall number of donors increased by 7.2% with new donors increasing by 12.6%, showing a renewed interest in supporting the work of nonprofits.
The Fundraising Effectiveness Project (FEP) is the provider of the Growth in Giving Database, the world's largest publicly available database of actual donations to nonprofits in the U.S. and Canada. The FEP publishes quarterly and annual reports that examine key fundraising metrics that serve as benchmarks for nonprofit leaders and development staff.
"How do we explain these numbers?" asked Elizabeth Boris, chair of the Growth in Giving Steering Committee. "We were concerned that COVID-19 could have a detrimental effect on giving, but the American people are generous even in tough times. The significant increase in gifts under $250 shows many donors have been moved to give even amid the pandemic and resulting economic uncertainty."
Increases Across Many Categories
In addition, the number of mid-level gifts ($250 - $999) and major gifts ($1,000 or more) saw year-over-year increases of 8.1% and 6.4%, respectively, compared to 2019 data. In the first quarter, both categories trended behind 2019 results.
"We're seeing increases across almost every category the FEP measures—including overall donor retention, recaptured donors, and gifts of all sizes—which is absolutely stunning given the impact of the pandemic on planned fundraising activities," said Woodrow Rosenbaum, chief data officer of GivingTuesday, a co-producer of the Fundraising Effectiveness Project report. "Organizations have had to pivot quickly, with many fundraising campaign plans being altered and events going online. Despite these challenges, giving has increased relative to last year—so far—which is encouraging as we look ahead to the rest of the year."
"The continued increase in smaller contributions—less than $250—is likely due, in some part, to the universal charitable deduction that was enacted into law as part of the CARES Act," said Nathan Dietz, senior researcher at the Do Good Institute. "However, we're also hearing from charities the deduction isn't big enough to have a significant impact because the cap on deductible contributions, currently at $300, is too low, and taxpayers don't have a huge incentive to make use of it. These early signals point toward increasing the cap—some legislation has proposed a $4,000 cap for individuals and $8,000 for couples—which would serve to increase the generosity of the American public even further."
Warning Signs Still Exist
Despite the impressive lift in giving, there are warning signs and historical trends to consider when thinking about what charitable giving may look like for the rest of 2020.
"We almost always see decreased giving in the first quarter of the year, and fundraisers should be cautious about getting too excited about the uptick in giving in the second quarter," said Lori Hunter Overmyer, member of the Growth in Giving steering committee and chair of the AFP Research Council. "We are likely to see a continued increase in need for the important services the social sector provides to communities, and we're watching the impact of a very slow economy—which could potentially depress giving over the long-term. One of the most important things charities can do now is to build strong relationships with their supporters and encourage existing donors to continue to give when they can."
"Typically, external events don't affect overall giving significantly, but 2020 could prove to be the exception," said Boris. "The continued impact of the pandemic on the economy could prevent the giving growth from continuing, especially if Congress doesn't approve another COVID-19 relief bill and people become more worried about their financial situation."
"On the other hand, we know that the fourth quarter of the year is, by far, the most important time for giving. So, we still have a long way to go in seeing how much giving will occur in 2020. It's good to see gifts by mid- and higher-level donors increase in the second quarter, and hopefully that trend will continue into the latter stage of the year. The stock market also remains relatively strong, which often portends strong giving at the end of the year."
The FEP 2020 Second Quarter Report is available for free at www.afpfep.org.
The data analysis includes giving details from 2,496 nonprofit organizations based in the U.S. as a subset of the Fundraising Effectiveness Project. The distribution of NTEE codes (a way to organize nonprofits by industry type) for the 2,496 organizations is comparable to the sector-wide distribution.
From the Growth in Giving database, organizations that did not have a minimum of 25 donors and $5,000 in donations in each of the previous five years were removed from the study. From the remaining organizations, the FEP randomly sampled organizations from each of the four organization sizes based on 2019 annual donations: $100,001 - $250,000; $250,001 - $1,000,000; $1,000,001 - $5,000,000; and $5,000,001 - $10,000,000, so that there was a balanced stratification reflective of IRS filers.
For more information about the Growth in Giving Initiative and Fundraising Effectiveness Project, please visit www.afpfep.org.