$471 Billion in American Philanthropy

Summary of “Giving USA’s 2021 Annual Report on Philanthropy for the Year 2020.”

Giving USA is a public service institute out of the University of Indiana, and each year, they release an annual report on philanthropy representing the previous year.

This report analyzes giving in the year 2020, was released in late 2021, and while it may feel like old news, it is relevant, and this information for nonprofit leaders can be summed up as aggregate trends in philanthropy. Their next report on the year 2021 is set to come out in the summer, and I will be sure to do a review and share differences in trends between the two years.

My method in summarizing this report is simple: I read the report, re-read it, highlighted sections that I found were relevant, and now, I am sharing that information with you along with my comments and perspective.

Before I jump in, you should know that my views stem from over a decade in what this report classifies as Human Services, specifically Youth Development and Family Services. I suggest that folks who come from other areas of community service and nonprofit work read the report and take the time to zoom in on the sections that are relevant to you. And if you don’t want to read this report, or do not have the time or funds to purchase the annual subscription that gets you access to this report, I hope that what I share in this summary helps you.

Let’s jump in…

$471 billion was donated to charities in 2020.

The big money number. In the year 2020, donors of all types gave a combined $471 billion dollars to charitable organizations. Again, this is a big number, and it was all given over the course of one year.

Who gave this money?

The report tells us that:

  • 69% of that was given by individual donors.
  • 19% of that was given by foundations. For some background, foundations are non-profits that take donations from wealthy donors and usually invest them in hedge funds and private equity (both of which are usually unavailable to the public), and then each year, they donate a portion of their profit and/or some assets to charitable organizations.
  • 9% of the donations made in 2020 were through bequests. As someone who doesn’t see these numbers regularly, I found this to be surprising. 9% of $471 billion or $42 billion dollars came from folks who, upon their death, bequeathed or donated some or all of their estate — what they own, to charities they cared about. From my small experience, this type of giving is not focused on by grassroots/small/medium sized non-profits, mostly because we do not have the capacity to fund the labor needed to develop outreach and seek this type of donation. However, given the size of this number, I would suggest that folks who have donors loyal to their cause create an outreach plan and offer them an opportunity to give upon passing.
  • 4% of giving was from corporations. And this resonates with my experience with corporate giving. Talking to corporations and raising funds from them has always been really hard. The folks at corporations in the community support position often do not have a lot of money to give, and there has been, again from my limited experience, lots of turn-over in that position. And while we as non-profits really need unrestricted funds to do our best work, corporations are often looking to give other gifts like old computers and furniture or volunteer time. All of this is kind, and if you are not an organization that focuses on computer related services, like community coding classes, or senior tech classes, and so forth, these in-kind gifts are not as helpful as cash. I believe that corporations should give more. Otherwise, after expenses, profit goes to wealthy shareholders, who then have to be courted to give.

Where did the money go?

Religion took 28% of total giving in 2020 or $132 billion. This makes sense. Churches are a big part of every community, folks love their churches, and churches survive through the giving plate and tithes.

The number two biggest area where money flowed was Education with 15% of all donations in 2020 or $71 billion dollars. For folks who work in Youth Development, which is often providing services on campuses or inside of Education, this does not include us. They define the Education sector as preschool through grade 12, vocational schools, higher education, and so on. And that makes sense; education should be a top priority of any civilization, and folks like to give and support local school systems and/or their alma mater.

Coming in third place for where donations flowed in 2020 was the Human Services sector, which took 14% of the donation pie or $65 billion dollars. The term Human Services sounded very general to me, so I looked closer at how they defined this sector. Fortunately for the reader, in the report, on page 170, Giving USA gives a breakdown of all sectors as classified by The National Taxonomy of Exempt Entities or the NTEE — essentially a categorized list of the types of charitable organizations that are registered with the IRS as a 501(c)3 corporations. This list includes: Criminal and Legal-Related; Employment related work; Food Agriculture, and Nutrition; Housing and Shelter; Public Safety and Disaster; Recreation and Sports; Youth Development; and Human Services such as family services and so on. While we see that $65 billion went into Human Services, we don’t see a concise breakdown of how this $65 billion was allocated to all of the subsections I just mentioned. That is something I’d like to see.

The report goes on to share that giving to Human Services was up almost 10% from the previous year, and this is attributed to the folks wanting to help those that are more vulnerable to shocks from the pandemic, as well as donors, including high-net-worth donors and corporations giving to organizations fighting for racial justice.

Fourth place on the list of where money went in 2020 was 12% or $58 billion dollars going to Grantmaking Foundations. I described the function of a foundation earlier.

The next slice of the giving pie went to the Public-Society Benefit sector at 10% of total giving in 2020 or $48 billion dollars. The NTEE tells us that the Public-Society Benefit sector is defined as: Civil Rights, Social Action and Advocacy, Community Improvement and Capacity Building; Philanthropy, Volunteerism and Grantmaking Foundations; Science and Technology; Social Science and Public and Societal Benefit organizations such as Military and Veteran organizations.

The slices of the pie get smaller from here with Health at 9% or $42 billion, International Affairs at 5% or $24 billion, and very surprisingly low numbers for Arts, Culture and Humanities at 4% or $19 billion, and the Environment and Animal Welfare at 3% or $14 billion, and lastly 3% or $14 billion directly to Individuals.

The last big number I want to share from the report is that, here in the United States, there are 1.37 million charitable organizations. This number is taken from the IRS reporting of numbers from 2019. In plain speak, that means there are 1.37 million currently registered non-profits. I would personally be curious to see this number breakdown in the buckets of active, dormant, and how these organizations break down in terms of what services they provide.

This report also has a special section highlighting the amount of donations that flowed in reaction to the social unrest that occurred due to the highly publicized killings of George Floyd, Breonna Taylor. And while I did not see their name in this report, I also name Elijah Mitchell, and Trayvon Martin.

With regards to the ultra wealthy donors, the report states that, in 2020, they gave to COVID-19 and racial justice causes at impressive rates. This was comforting to hear as it shows that there isn’t a disconnect between the causes being championed by the people and the wealthy class.

This special section also discussed donors’ strong response to help combat the shocks the pandemic had on folks.

A shift to online giving.

Due to how physically separated we were due to the pandemic in 2020, nonprofits had to cancel their in-person fundraising events and shift to online fundraising events. Online events is a new function for most nonprofits, and in this year, they report that it yielded uneven results. My personal opinion is that uneven results are acceptable given that everyone was learning to put on virtual events, and many donors were learning how to attend virtual events. I think it is safe to say that nonprofits who held online events did their best in a learn-as-you-go scenario as did donors who tried their best to get to the online events to support causes that they care for.

Virtual events will be here to stay, and they will continue to get stronger and yield higher results.

And in general, online giving will continue because it’s just too easy. It’s an easy way to connect people. It is a cost-effective way to connect people. The nonprofits that get good at virtual events and get good results from online giving can choose to skip hosting elaborate and often expensive in-person events, or more likely do a combination/hybrid of the two. The report points out that nonprofits can also do really interesting things with the online event format, like bring donors on a virtual tour of our services, and hold more intimate conversations between donors and staff members. In my opinion, when done correctly, this approach should improve donations raised and diminish time spent courting donors and fundraising. They go on to share that, like the behavioral shift to online purchasing, the pandemic sped up a behavioral shift to online giving. And that giving via mobile devices continues to grow. With that, the report suggests that nonprofits create a strategy and invest in equipping themselves with the tech tools to capitalize on this trend of online engagement and giving.

For me, what comes to mind from building a community service from scratch over a decade ago now is that today, right now, it is much easier to seek support online and crowdfund your way forward. It should still be stated that fundraising is a burden to the nonprofit sector and not what most folks sign-up for. I hope that technology can bring us to a place where fundraising is automated, and all a nonprofit has to do is serve people well and their funding will basically be guaranteed.

With regards to fundraising, the report states that in the year 2020, new donors grew for nonprofits, yet donor retention, or hanging on to your old donors and getting another gift from them, declined. Personally, I believe this aligns with what I experienced. 2020 was one of the most, if not the most challenging year, we have lived through. Donors turned their attention to emergency matters involving the pandemic and social justice. And a small percentage of donors may have passed on charitable causes they normally support. And that is okay. As community service folks, we should not freak out about this number. Yes, we need to keep doing great work and continue to reach out to our donors. More importantly, if you saw an overall loss in donor support, you should be implementing pragmatic changes to your services to reduce costs, so they are aligned with your donations. Again, this was one of the most challenging years ever, so stay prudent, keep your services running, keep reaching out, and invest some of your time and energy in building-out an online fundraising strategy.

The report mentions that Giving Tuesday in 2020 was a huge day with $2.47 billion donations, with almost a billion of that being raised online. I remember when Giving Tuesday started, and I never expected it to get this big. Not only has it caught fire, but now all charitable organizations should make this day a part of their yearly fundraising efforts. They also come back to the mobile giving topic and share that mobile devices became a more prominent giving channel in 2020, at 28% of total giving. This is an important trend, and nonprofit leaders should be refactoring their internet presence to ensure that their webpages and donation portals look great on mobile, load fast, and that there are only a few taps between the donor and finalizing their gift. The report states that soliciting donations via text messaging continues to grow and is increasingly important although it was relatively small compared to email solicitation of donations with 50 constituents receiving text messages for every 1000 constituents receiving emails. I think text message solicitations will continue to grow, and that nonprofits should adopt technologies, like Hustle, to get the word out by text. Also, for a long time now, community organizers have utilized text messaging to mobilize people to act, to give, and to lobby government officials because it works. Nonprofits should be incorporating text messaging into their outreach cannon, and in my opinion, a fundraising campaign should always include text, especially small grassroot upstart services. Anyways, my point is keep sending the email campaigns, and if you haven’t already, start using text messaging.

Donor Advised Funds are here to stay.

In regards to donations, this report shares that giving via Donor Advised Funds, or DAFs, reached high levels in 2020. This is likely a confluence of two factors — one, a pandemic, and two, DAFs are becoming more commonplace. An additional factor is that foundations, the nonprofit that manages DAF accounts, are effective at motivating the owners of these DAF accounts to give.

There is a lot of money parked in DAFs, and as the report states, DAFs can give gifts and donations quickly as they are administered by foundations and that we should be encouraging giving by DAFs in our outreach, as well as improving our relationships with local community foundations so as to drive more DAF giving.

More on the controversies surrounding DAFs later.

On Mackenzie Scott’s trusting approach to giving:

Next, I’ll share that this report mentions Mackenzie Scott a lot, and not just because of her generosity, but because of the way she gave, and they quote her: “The gifts are given with full trust and no strings attached.” For me, this is important. As someone who works inside of the “charitable industrial complex”, one of the problems with our work is sourcing the money and the burdensome reporting requirements and that there are too many strings attached.

The way in which she is giving is also referred to as “Trust-based Philanthropy”, and this is a small but growing movement. I personally saw lots of giving in this way through the pandemic. However, I am not sure it will catch-on long-term, and that is because wealthy people are often business minded and want to apply business principles on their giving. In other words, they are seeking a “Return on Investment” or ROI.

Also, side note, if you haven’t read Peter Buffet’s opinion piece that he wrote for the New York Times titled “The Charitable Industrial Complex”, you should. In it, he lays out all of the problems he sees in philanthropy, as well as speaks directly to the ROI problem. And what Mackenzie Scott is doing, in my opinion, should be considered part of the “new code” that Peter Buffet speaks of, which is simply wealthy donors giving money with trust and no strings attached.

The report calls out that Mackenzie Scott’s approach, as the major donor that she is, may just change the expectations of other ultra high net worth donors, and could have a positive effect on the future of giving. In other words, people will hopefully follow her lead and give with trust and without strings attached.

More on foundations.

The report tells us that foundations attracted 19% of total giving in 2020 and that this was the largest share for this sector on record. And they state that this trend of increased giving by foundations will likely continue due to healthy stock market returns.

I took a hard pause when I read that last line and was reminded that foundational giving is tied closely and underpinned by the market, market forces, and basically is tied to the fate of capitalism itself. And that, I do find to be concerning. For example, if the supply chain breaks down or inflation starts to sky rocket (which we know is a very real economic problem lately), and say it causes the market to tank, then charitable giving will suffer. Disruptions to the economy should not cause disruptions and/or decreases in giving; it should be the inverse. And given that many foundations decide on how much to give each year as an average of previous years returns, a few bad years of stock market returns could greatly damage philanthropy and those that the funds go to support.

This report also calls out that, due to the highly public racial injustices of 2020, foundations are examining their internal practices, policies, and demographics with an eye towards diversity, equity, and inclusion. This is a good thing as a diverse body of individuals, representative of the people they serve, is truly required to make better decisions on how to give in the most impactful way. Let the power-holders at foundations be those who have lived experience and who know the problem most intimately. I appreciate that the report highlighted this as a positive trend.

On foundations and the growing controversies surrounding DAFs.

This report also tells us that the top 100 largest community foundations held $86.5 billion dollars in assets and gave $7.9 billion dollars in grants in 2019. They also share that, while the amount of Donor Advised Funds at community foundations grew in size, grantmaking through DAFs declined by 7.9%. This aligns with what I have been hearing from colleagues at foundations which is that DAFs are a growing problem for them. They say that too much of the money sits there in the accounts.

The report shares that there is an effort to require DAFs to give away more each year and that Scott Wallace, head of the Wallace Global Fund, wrote an open letter to Congress asking for a passage of an emergency charity stimulus bill that would impose a required 10% payout rate from DAFs.

The report also calls out Google’s Larry Page: “In 2020 Google’s Larry Page faced criticism after Page’s charitable foundation made several large end of year gifts to one of Page’s DAF accounts in order to reach the required minimum payout rate for the foundation. While this approach is generally frowned upon. It is technically legal.” Basically they are saying that his foundation, which is required by law to give 5% of their assets away each year, chose to give it away to one of his DAF accounts, essentially shifting the money from one of his nonprofit entities to another, and that this is technically legal. The Washington Post goes in on Page and others in what they call “zombie philanthropy”, and the article basically says the money is not going to people in need but just sitting in their DAFs and and personal foundations earning interest.

Wrapping it up.

Overall, I found this report insightful, well-organized, and easy to read. I have a lot of bookmarks on my physical copy as they give actionable information to nonprofits on how to improve their donations. And it does a great job of backing up its statements and figures, as well as bringing transparency to the methods they used to draw their conclusions.

Clearly philanthropy is a very complex space with a lot of stakeholders and issues. And while my commentary stems from my place in the “nonprofit industrial complex”, this report does a good job of remaining neutral while not shying away from the social justice issues and the donations they attracted.

Every community service and nonprofit leader should be aware of this important yearly report as it is a benchmark on giving and provides charitable organizations a concise understanding of trends in giving and actionable insights.

[Article originally posted to http://kian.io]

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