Drakes Bay Fundraising
A Next Generation Fundraising Company

Part One: The impact of the partial federal government shut-down

Posted by Christopher Dann
Thursday October 10, 2013
Categories: Uncategorized

Nonprofit managers don’t have to concern themselves with how complex the nonprofit sector is until one of the sector’s journals writes about general trends or someone in the general media suggests something like a partial shut-down of the federal government is going to have negative impact on nonprofits.

It seems impossibly hard to get journalists — even those specializing in news of the sector — to understand it is comprised of business models as diverse as those in, say, retailing.

This is part one of a two-part blog. Here we’re going to address the impact of the partial federal government shut-down through the lens of sub-sector diversity. In part two we’ll look at more financial detail.  We’ll be using the latest data from The Urban Institute to help fundraisers and other management — and perhaps even board members — better locate their places in the complexity of the sector.

The question today is how dependent the nonprofit sector is on government. And in answering this question it’s appropriate to look at all government funding since one major area affected by the federal government partial shut-down is state and local government.

While government funding represented 24% of overall revenue for the sector in 2010, according to The Urban Institute’s The Nonprofit Almanac 2012, its shares of revenue across sub-sectors varies from a low of 13% for Arts, Culture and Humanities to 48% for Human Services. For the table below, we have selected three principal sources of revenue to show how their percentages vary across major sub-sectors.

 blog 47

*Reporting charities are those with minimum income of $100,000 in 2010 and were therefore required to file form 990 with the IRS.

Apart from reckoning what the temporary — or perhaps permanent — loss of government funding might do to one’s own organization, there are a number of other points to make about these data.

  • The data well and truly represents a broad diversity of nonprofit business models. No two of these sub-sectors is alike in configuration of sources of revenue. Each has to contend with different degrees of impact, whether directly as a result of curtailed or withdrawn government funding or the indirect but just as powerful influence of legislative activity on the general economy, particularly on how much disposable income people have and what they chose to do with it.
  • It’s ironic that the partial shut-down of the federal government was triggered by an interest in de-funding the Affordable Care Act. In terms of total dollars, the greatest impact of the shut-down is likely to be on healthcare because the Health sub-sector accounts for 60% of all nonprofit sector revenue.
  • Human Services, however, with a 48% dependence on government funding will be hurt the most, as we have already begun to hear. Human Services comprises the largest share (34%) of reporting charities, so the impact will be more broadly felt.
  • The national capitol imbroglio is sure to have impact on consumer confidence squarely in the midst of the season of giving, and that will impact private contributions, subscription sales among performing arts organizations, and fundraising events, all nonprofit sources dependent on household discretionary budgets.

A Special Report for Estate Gift Fundraisers

Posted by Christopher Dann
Tuesday August 27, 2013
Categories: 2010 Census, Fundraising

For those of your colleagues responsible for current operating and program support, we focus on discretionary income. Estate giving is different. It almost always comes from donors who have been engaged in support of operations and programs, but it doesn’t come from current income. It comes from wealth.

Among the useful data that comes from the Census Bureau are measures of wealth by household characteristics. If you go to www.census.gov/people/wealth/ you can find more data than you’ll ever need or want.  Below is a selection of data excerpted with a planned giving fundraiser’s eye to where the veins of gold lie in one’s donor base.

These are general population data. The chances are any given donor base looks much wealthier, as we have repeatedly seen in research studies. But it’s the profile that is important.

We’ve shown over and over again that the principle demographic factors influencing all giving — current or deferred — are, in order of importance, age, education, household characteristic, and residence ownership and tenure.

By household characteristic is meant whether or not there is a committed couple. The Census — at least for 2010 — used the then-conventional definition of “married couple.” And it provides home ownership without length of community residence. Nonetheless, the distinctions in wealth shown between household with married couples and those headed by singles and between those where the householder owns or rents are telling.

I have indexed the selected data to the base, overall net worth numbers, again to underscore that it is the profile, not the dollar data we should have in view when it comes to transposing this information for donor bases across varying markets and types of organizations.

Table for Aug 29 blog

The largest share of the nation’s wealth — 43% — is held by people over 65, and the next highest — 26% — is held by people 55 to 64.  There’s nothing wrong with having a mature donor file!


When is a Donation a Contract?

Posted by Christopher Dann
Thursday August 15, 2013
Categories: Fundraising

This from The Star-Ledger’s nj.com, August 5, updated August 6:

Trenton — People who cut checks to charities in New Jersey to help pay for everything from a new university building to an expansion of a local dog shelter are entitled to a refund if the organization does not use the money as intended, a state appeals court ruled today.

In a precedent-setting decision that affects hundreds of organizations across the state, a three-judge panel said nonprofit groups cannot ask for money for a specific purpose and then pull a bait-and-switch, spending it on something completely different.

The news article quotes the plaintiff’s attorney: “In the end, the appellate decision relied on a very, very most basic principle of charitable giving: what was the donor’s intent?”

Ask any seasoned major gift fundraiser when a gift is a contract and the response is likely to be “always!”  In this case the gift was $50,000 and given to a community animal welfare organization. It was a major gift, and its donating couple was certainly treated as if it was.

Does the amount matter? My guess is that the three-judge panel would say it does not, even though they might not have considered hearing the case were the amount much less than $50,000.

I have been expecting this to happen for decades. In fact, I have been expecting a class action suit to emerge and am sure that is now inevitable.  Here’s why:

  • The donor marketplace is getting more and more demanding about accountability for giving, especially giving in response to broad direct response fundraising.
  • Auditors have gotten tougher and tougher about scrutinizing fundraising messages to ensure money goes to the purposes for which it has been solicited.
  • Watchdog competition has intensified and most seem to relish headlines.
  • The press, albeit not much smarter, has become more aggressive.
  • Litigation seems to be replacing baseball as the national pastime.

The New Jersey story is one of those dumb and dumber stories. First, the organization was dumb in its treatment of the donating couple. Then it proved itself dumber by not keeping the matter from going all the way to that three-judge panel.

This is a precedent that is good for the nonprofit sector.

No one ever has to give money

Posted by Christopher Dann
Monday August 12, 2013
Categories: Fundraising, Trends, Uncategorized

No one ever has to give money. Donations come at donor discretion. So while we have to know a lot about competition within the donor marketplace, we also should know about competition for discretionary money. The former helps us position our fundraising; the latter helps us frame our business model with realistic expectations.

There’s a valuable source of good data for studying trends in discretionary spending. The Bureau of Labor Statistics’ Consumer Expenditure Survey (http://www.bls.gov/cex/) primarily serves to track consumer prices. But it provides an annual trove of data on how much consumers are spending on a wide variety of goods and services.

The editors of The New Strategist Publications draw on all that data and reconfigure its presentation for easy and convenient reference. The Survey is, they have said, “the best source of information about spending behavior of American households.”

The survey also asks about cash contributions and personal tax payments. So it gives us three valuable perspectives on trends affecting charitable giving: changes in cash contributions alone; changes in other areas of discretionary spending; and changes in cash contributions relative to changes in personal tax payments. Here are summary views of each of these three perspectives.

First, we look at trend data for cash contributions in the context of other discretionary spending. For that we’ve selected five items out of the 101 categories and sub-categories New Strategists report in their recently released Who’s Buying – Executive Summary of Household Spending, 8th Edition.

Table 1

We also selected just key fundraising demographics out of the multitude available: age ranges in which discretionary income makes its way into charity, household income and configuration where giving is maximized, and the key threshold of education attainment at which giving also becomes significant.

On the one hand, it’s a bleak picture, albeit one that shouldn’t surprise. On the other hand it offers us a clearer understanding of why recovery in areas of discretionary spending is so sluggish and extended.

Next, we looked at cash contributions and personal tax payments, knowing that there is a general functional relationship between household tax burden and giving, especially at higher levels of charity and philanthropy: the higher the tax burden, the more those who itemize deductions tend to give.

Table 2


Third, just looking at cash contributions alone, we wanted to check on our assumptions of key demographics. We do that by looking at the report’s useful indexing of expenditures. For Table 3, we have selected the two most important demographic indicators of giving, age and education, finding that patterns seen for decades haven’t changed.

Table 3

A Dope Slap

Posted by Christopher Dann
Thursday July 25, 2013
Categories: Uncategorized

This lead article from the Chronicle of Philanthropy’s e-mailed headlines yesterday:

Philanthropy Today


We just had to respond, and here’s what we added to their comments pages:

Once again the Chronicle has reported research developed by a vendor of services the research supports without noting the obvious conflicts of interests. Journalists should do that. More importantly, journalists would investigate carefully the methodologies of all such studies to determine or at least question whether or not conclusions being drawn by the research sponsors can be reliably projected to the universes they claim to be representing. Cursory investigation — just a few questions — would reveal that most of the research the Chronicle reports is based on non-probability sampling that has undisclosed and perhaps unfathomable bias and error.

Quoting a June 2013 report issued by the American Association of Public Opinion Research on non-probability sampling, “Transparency is essential. Whenever non-probability sampling methods are used, there is a higher burden than that carried by probability samples to describe the methods used to draw the sample, collect the data, and make inferences. Too many online surveys consistently fail to include information that is adequate to assess their methodology.”

The nonprofit world’s trade press is a chronic practitioner of press pass-along articles someone wants to be treated as news. And the managing editors appear especially gullible about and vulnerable to research reports.

The nonprofit sector — each sub-sector in particular — has never needed disciplined quantitative research more than it does now.  That means that samples are drawn with the probability that each and every person of the universe (meaning the subject population) being studied has an equal chance of being in the sample. This is hard and increasingly expensive to accomplish. But in a field in which fractions of percentage points have significant financial meaning, buying error-prone, biasing research methods on the cheap is truly a waste of money.

Better to keep guessing.

Insights into a large class of elite donors

Posted by Christopher Dann
Monday June 24, 2013
Categories: Demographics, Fundraising, Research, Statistics, Uncategorized

…are the major contributions to our understanding of giving found in the Fidelity Charitable Giving Report, 2013 edition recently published through Fidelity’s website.

Fidelity sampled their 94,000 donors connected to nearly 58,000 giving accounts to produce multiple perspectives on who these donors are and how they give.

Their profile underscores a point we have had occasion to make repeatedly, that the prime time age range of giving begins at 55 when household discretionary income tends to have its growth spurt. While the average age of the Fidelity Charitable donor is 62, the average age at which funds are established is 54.

In all the age profile looks very much like that of most donor files we have researched:


While the age profile of Fidelity donors varies little or not at all from that of the general donor population, patterns of their giving do vary.  In contrast to the approximate $3,500 the average itemizing tax filing household gives, the Fidelity donor’s average grant was $3,773 in 2012 and they gave an average 7.1 grants.

Here are the variances from norm of the distributions of Fidelity donor grants:


*note, giving in response to Sandy increased Human Services sub-sector giving an estimated 1% in 2012

Donor-advised funds such as Fidelity Charitable have become an important sub-sector on their own. While overall individual giving, adjusted for inflation, dropped 11.3% from 2007 to 2012 (despite Sandy), gifts to donor-advised fund accounts grew 17%. While the former is clearly an effect of what’s happened to the economy, the latter seems to be because of economic uncertainly. Donor-advised funds have become a means of a new form of planned giving.

What Are Our Best Prospects Worried About?

Posted by Christopher Dann
Thursday May 30, 2013
Categories: Fundraising, Gallup, Statistics

We have frequently advanced the thesis that the bull’s eye of fundraising’s target market is people from the ages of 45 to 64, more precisely those between 50 and 64. These are the ages in which people have the most money at their discretion; and since all giving is voluntary it depends on discretionary income.

When we look at fundraising performance, and it’s not what we expected it to be, it helps to know what’s on our donors’ minds. We often reference the Consumer Confidence Index as a reliable barometer of donor disposition. Earlier this month the Gallup organization released findings from their annual Economy and Personal Finance Survey that adds valuable perspective.

Table1As part of their survey, Gallup asked their national probability sample how much they worry about eight different personal financial matters. In general, those most worried about most of the eight topics were people age 50 to 64.  At right are the percentages for very and moderately worried, by age range, for the eight personal financial matters.

Gallup’s data helps us narrow this perspective by looking at the same financial matters from the standpoint of household income.  They reported five ranges, but since discretionary income is most likely to be found in the top three of the five, we’ll just show those here:

Table2Think of these percentages as magnitude of wind in our faces. It takes a lot more skill and finesse to sail into the wind than is does to sail with the wind behind you.

A Ginormous 501(c)(3)

Posted by Christopher Dann
Wednesday February 6, 2013
Categories: Uncategorized

One 501(c)(3) will be accounting for more than 10% of all giving in 2012 and all that giving will have come from individuals. For the year ending June 30, 2012, Fidelity Charitable Gift Fund reported that donor contributions received amounted to $3.3 billion. Because of the uncertainty of charitable deductibility in 2013, surely the calendar year’s giving to Fidelity will be even greater.

The numbers are staggering and impressive. Contributions to the Fund increased 89% from FY2011 to FY2012 and the Fund’s accounts — its donor base, as it were — increased almost 5%. Yet Fidelity donor grants to charitable organizations increased only 2.4%. So the excess of contributions over grants amounted to 61% of contributions.

Clearly uncertainty over the charitable deduction is one big reason for these fantastic statistics. Surely another cause is the dominance of Boomers in the donor marketplace.

In 2012, Boomers were between 48 and 66, both the leading and core cohorts well within the prime age range of giving. They’ve been expected to take greater control of their giving than their predecessors, and donor advised funds like Fidelity’s are perfectly suited to that inclination. That inclination is also manifest in direct giving through what we called charity facilitators in our January 31 post (link to white paper: Mananging Disruptive and Transformative Changes in the Media of Fundraising) and in increasing anecdotes of challenges about how institutions are handling donors’ major gifts.

At the same time, as more Boomers approach retirement, many are also likely inclined to amass funds for charitable giving post retirement.

What has so suddenly become phenomenal is the enormity of assets awaiting giving decisions. One assumes that the “reserves” created at Fidelity are matched in magnitude at Schwab, Vanguard, and community funds across the land. This phenomenon gives new definitions to the terms planned giving and deferred giving and interesting new challenges and opportunities for fundraisers.

The 2012 Annual Report of the Fidelity Charitable Gift Fund shows that as the fund has grown, the average donor gift has declined 34%, adjusted for inflation, and the decline began well before the Great Recession. This is a trend that one would expect in the realm of donor advised funds and likely speaks more to declining giving capacity of the average donor than declining donor generosity.

In any case, the average Fidelity Fund grant in 2012 was $3,294 — we wish we knew the mean — and that offers a guide to assumption of how the reserved fund may play out over time.

Make Room for Charity Facilitators

Posted by Christopher Dann
Wednesday January 30, 2013
Categories: Charity Facilitators, Fundraising

In a paper we are circulating today, Mananging Disruptive and Transformative Changes in the Media of Fundraising, we describe the new, internet-spawned charity facilitator as having both disruptive and transformative impact on the nonprofit sector.

A charity facilitator is an entity whose purpose is to connect donors to organizations, projects, and people doing good work. For the most part, these new web-based enterprises are facilitating connections to the developing world. www.globalgving.org and www.givingwhatyoucan.org are good examples. But some – most prominently www.guidestar.org and www.greatnonprofits.org  – focus domestically.

Whether an organization regards charity facilitators as threat or opportunity at present, the fact is they are bound to grow in influence over future giving. To the extent they undermine middleman organizations or employ questionable criteria for selecting candidate beneficiaries, they pose a threat. To the extent they bring internet traffic to organizations that don’t have the means to do that themselves and welcome the help of facilitation, they offer opportunity.

In either case, we must also pay attention to two ways in which charity facilities could cause great mischief. One is adopting a crowd-source Yelp or Zagat approach to grading charities. It’s hard to foresee any real good coming of that. The other is promoting direct funding of projects in the developing world simply on the basis of maintaining that donors can achieve more good with their charity.

Charity facilitators and the disruptive and mischievous effects they can have underscore once again the need for organizations to better account for themselves to their donors and to market themselves better to the donors they would like to have.  It’s a given that no one can tell an organization’s story better.

Trends in Public Support

Posted by Christopher Dann
Thursday January 3, 2013
Categories: Fundraising, Statistics, Trends, Uncategorized

In a November posting Fiscal Chasm we reported and commented on data from the Urban Institute Press Nonprofit Almanac 2012 showing, across a selection of sub-sectors, the disparities between increases in the numbers of organizations from 2000 to 2010 and increases in income.

We referenced total income in that posting. That is useful for CEOs. For CDOs it’s more useful to look just at income that comes from fundraising. The Urban Institute combines private contributions and government grants into data labeled public support. If we look at the disparity between sub-sector growth and percentage change in public support, we see a different picture. Then, if we add reference to each sub-sectors share of overall public support, we get an assessment of the fundraising competition for each sub-sector.

Changes in numbers of orgs Jan 3 2013

That is what is shown in the table for a selection of sub-sectors. The data pertain to those 366,086 organizations in 2010 classified as reporting public charities. These are nonprofit organizations with charitable purpose that had $50,000 or more in gross receipts in 2010, were required to and did file 990s. While we can’t ignore the 613,815 additional public charities that were registered with the IRS in 2010, focusing on reporting public charities gives us more solid analytical standing.

Figures here showing shares of public support are different than what one regularly sees in GivingUSA annual reports. The data here are based strictly on IRS filings of reporting organizations while GivingUSA data are based on tabulations of tax data as well as econometric analyses of data and information from a variety of sources. Urban Institute data reflect only reporting religion-related nonprofits, substantially understating religious giving, which GivingUSA addresses through special (unpublished) methods.

There are only three sub-sectors where change in public support between 2000 and 2010 exceeded growth in the number of reporting organizations.

  • The extraordinary 190.2% increase in public support in the Human Services/Public Safety & Disaster sub-sector reflects the Haiti earthquake in 2010 and the lack of a major, high-profile disaster in 2000.  It’s an anomaly.
  • The 101.7% increase in International & Foreign Affairs is likely also reflecting response to Haiti channeled through organizations not classified as public safety and disaster responders. But we should also be mindful of the growing emphasis on impact investing and other forms of human health and welfare giving in the developing world, particularly by online charity facilitators such as GiveWell and GlobalGiving.
  • And in the Education sub-sector, it’s worth a contemplative pause to think about what’s happened in elementary and secondary education where public support increased 84.1%. Undoubtedly we are seeing evidence of both increasing numbers of charter schools as well as public schools’ increasing dependence on charity to supplement tax-based funding.

In all other cases, expansion of the sub-sector over the decade exceeded expansion of its public support. More organizations are competing for fewer dollars in grants and the contributions of individual donors. One or more of three things is likely happening to organizations as a consequence of these trends: they are reducing their program expenditures; they are financing deficits from endowments or reserves; or they are building sources of non-charitable funding.

The best course for building sources of non-charitable funding is in fees for services that are program related. Developing program-related service revenue not only avoids unrelated business income tax but takes advantage of skills and resources organizations already employ. It also often opens opportunities for beginning relationships with customers (or subscribers or patrons) that can later be expanded to charitable donor relationships. As smart as this course is it needs to be pursued with very careful attention to integrating strategies between the two areas of income development and between the marketing efforts for each of them. Because, as this blog often reiterates, all giving is voluntary, the downside of uncoordinated strategy is far greater for charitable support than it is for program service income.

Next Generation Fundraising and Drakes Bay Fundraising merged in the fall of 2013, bringing the longstanding professional acquaintances of their four principals – Tim Oleary, Carol Leister, Cindy Germain, and Christopher Dann – into a single company and combining the special resources and experiences of each to provide clients greater breadth and depth of service.

For more information about Next Generation Fundraising, click here.