Need Up, Donations Down

Charitable giving the US fell last year by the largest margin in 50 years, according to a study by the Giving USA Foundation. Donations declined almost 6% in inflation-adjusted terms in 2008, after reaching a record high of $314 billion in 2007. What’s most revealing is the breakdown. Three-fourths of all donations are gifts from individual philanthropists – NOT corporations or foundations. Foundations account for 13% of all giving, while corporations top off at 5% (the last 7% or so comes from charitable bequests). But while individual donations declined over 6% in 2008, foundation giving decreased only .8%, despite a 30% drop in foundation assets. Foundations also rose to the challenge by creating community relief funds, giving nonprofits more flexibility in spending grant dollars and focusing grants where they are most needed. This may indicate that structural giving is less susceptible to volatile economic swings. In fact, community foundations increased their grant making by 2.7% to aid those in need. And while corporate giving dove 8%, the majority of companies actually increased their cash and in-kind donations while corporate profits slumped.

Amidst the economic mash-up, nonprofits are forced to be even more resourceful to raise already scarce funds. Some are doing so through social media sites, contests, and web donations, while others are turning to grassroots donors to give small amounts. The Salvation Army has introduced ways for people to use their iPhones or Facebook pages to give to its Red Kettle Drive and to solicit friends to donate online. J.C. Penney has created an online version of the Angel Giving Tree Program, and Catholic Charities has plastered a plea to help the poor on a billboard in Times Square. Talk about visibility! While such far reaching publicity would have been out of the charity’s reach in past years, the advertising downturn allowed the charity to get ad space at a deep discount.

Corporations and foundations that support those nonprofits are getting creative and looking for ways to make their donations stretch further. Wachovia, now Wells Fargo, started a new grant program in Atlanta to give 208 grants of $1,000 each to grassroots nonprofits across the southeast. Executives in Atlanta ask local bankers to choose charities they know are visibly making a difference in their communities. Schwab Charitable Fund, which allows people to set up charitable accounts known as donor-advised funds, saw contributions spiral downward by nearly 50% or $482.4 million at this year’s fiscal close. However, Schwab has also received more than $21 million in assets from family foundations who are too busy keeping their companies afloat to manage charitable assets and administer grants. It is clear that donations are far from extinct. And shaking up nonprofits may be a good way to weed out ineffective organizations. Most importantly, getting the funds to the people in most need should be the focus of philanthropy, especially around the holidays.