2010 Foundation Growth and Giving Estimates

The Foundation Center has been one of the most important nonprofit resources for years.  Along with providing training for grant seekers, they also conduct amazing research to help nonprofits navigate giving trends.  This year is no exception as they publish their 2010 report "Foundation Growth and Giving Estimates."  While their findings may seem a bit depressing regarding the reductions in grants and giving, it is important for nonprofit boards and staff to understand the trends in order to adjust their behaviors accordingly.  Below I have excerpted a few key points, but I urge you to go to the Foundation Center and download the entire report.

On a personal note...while the current state of the economy can certainly be stressful for all who work in nonprofits, I'd like to encourage you.  The beauty of adding a few years to your life is that it gives you perspective.  In the late 1970's and early 1980's there was a terrible recession that matched what it is we are experiencing today.  I remember record unemployment, businesses going under, nonprofits struggling.  It won't always be this way, things do go through cycles.  Your challenge is to retain optimism and to do the best you can with what you have.  I hope the articles we provide here give you good information and tools to meet the challenges before you!  Bunnie

2010 Foundation Growth and Giving Estimates
A Report of the Foundation Center by

Steven Lawrence, Director of Research and Reina Mukai, Research Associate

Overview, Page 1

"The worst economic crisis since the Great Depression resulted in the biggest reduction in U.S. foundation giving on record. In 2009, the nation’s more than 75,000 grantmaking foundations cut their giving by an estimated 8.4 percent, or $3.9 billion, to $42.9 billion. Since the Foundation Center began tracking foundation giving in 1975, current-dollar giving had declined in only three
years—1983, 2002, and 2003—and in each year by less than 1 percent.

Despite its unprecedented severity, the reduction in 2009 foundation giving could have been worse. According to a 2009 Foundation Center survey, roughly four out of five foundations indicated that they determine their grants budgets based primarily on their assets, with half of these funders basing their calculations on their prior year’s assets (see Foundations Address the Impact of the Economic Crisis at foundationcenter.org). Given the 17.2 percent drop in foundation assets recorded in 2008—a $117.3 billion loss—a larger reduction in giving would not have been surprising.

Several factors helped to moderate the overall decline in foundation giving. Among foundations that base their grants budgets on their asset values, more than one-quarter do so using an average of their asset values over the prior two-to-five years. During less volatile economic periods, this practice allows grantmakers to maintain more stable levels of giving. In the current period, it enabled foundations to average in the asset growth in years prior to 2008, which lessened the amount by which they had to reduce their giving in 2009."

Community Foundations, Page 7

"Historically, community foundations have tended to fare relatively better in both more and less prosperous times from having a broad pool of individual donors. Decreased giving by some donors would tend to be balanced out by increased contributions from others. Community foundations also experienced a more modest reduction in their assets in 2008 (-12.5 percent) relative to independent foundations (-19.2 percent). Nonetheless, as institutions that must raise funds, community foundations may have been particularly hard hit by the economic panic that led individuals to pull back drastically on their personal consumption and charitable contributions."

Community foundations may also face restrictions on giving through their donor-advised funds, specifically with funds stipulating that their current value cannot drop below the value of the donors’ original contributions. Especially for donor funds established in recent years, their values may not return to the level of the donors’ original contributions until the market regains all of its 2008 losses, which could take a number of years.

Despite reductions in giving, community foundations have been leaders in responding to needs generated by the economic crisis. According to a Foundation Center survey conducted at the height of the crisis in early 2009, 35 percent of community foundation respondents were engaging in special initiatives to help their communities cope with repercussions from the economic downturn, such as rising unemployment and homelessness. By comparison, about 14 percent of overall foundation respondents reported providing exceptional support related to the crisis (see Foundations Address the Impact of the Economic Crisis at foundationcenter.org). To date the Foundation Center has tracked nearly $60 million in grants and program-related investments from community foundations that specifically addressed the economic crisis (see foundationcenter.org/focus/economy)."


Read the full report at 2010 Foundation Growth and Giving Estimates (The Foundation Center)

General Principles of Nonprofit Fundraising

I kept looking at this article and everytime I would go back over it and read it again, I'd find a tidbit that I thought was spot on. For instance, how many nonprofit board members really don't understand the IRS designations and what they mean for the organization? And the information about organizations that form a 501 (c)(3) arm, like the American Pharmaceutical Association, to make contributions more attractive to donors is excellent. Being in the DC area, there are a lot of nonprofits that are formed as 501 (c)(4), so they can conduct lobbying, but many of those organizations fail to understand the benefits of forming an additional 501 (c)(3). This is another one of those good articles to print off and pass out at your next board meeting. Enjoy. Bunnie

General Principles of Nonprofit Fundraising
by Terry Scott Boykie, CSO, ABS, Inc.

Charitable Nonprofit Organizations

All charities are nonprofits, but not all nonprofits are charities. The Internal Revenue Code defines more than twenty categories of nonprofit organizations under Section 501(c). Examples include labor organizations [501(c)(5)], fraternal societies [501(c)(10)], cemeteries [501(c)(13)], pension trusts [501(c)(18)], veteran's organizations [501(c)(23)], and charities [501(c)(3)].

Colloquially, the terms "nonprofit" and "charity" are often used interchangeably. Technically, a 501(c)(3) organization is a charitable nonprofit organization as opposed to a labor nonprofit, a fraternal nonprofit, a business league nonprofit, etc. To avoid confusion, many charitable nonprofits say, "We are a 501(c)(3)."

Those nonprofit groups that want to raise tax deductible contributions seek classification by the IRS as charities under Section 501(c)(3) of the Internal Revenue Code. They also register with their respective state governments, and most do not pay sales, real estate, income or capital gains taxes on their investments. Because the tax deduction for a charitable contribution is so attractive to potential donors, nonprofit groups that are classified by the IRS as other than 501(c)(3), often establish ancillary 501(c)(3) charitable nonprofit organizations as a base from which to raise funds. Example: The American Pharmaceutical Association established The American Pharmaceutical Association Foundation.

The vast majority of charitable nonprofits form a corporation in order to limit their board members' liability in case of litigation. In reality, 501(c)(3) organizations are special business corporations that operate for the benefit of the general public; they have special tax dispensations under the assumption that their work can not be accomplished at a profit by a commercial business corporation.

There are direct parallels between charitable nonprofits and commercial businesses: each has incorporation papers, a board of directors, a vision of what is to be accomplished, products or programs/services, budgets, staff, a physical plant, a public image, and a need to plan long range for programs, personnel, and funding. They are more similar than dissimilar, and their operations are about 80% parallel. (That is not surprising when one realizes that Benjamin Franklin borrowed the business corporation model and modified it for charitable nonprofit use when he established the first charity after the Revolutionary War.)

When a business corporation wants to raise money by obtaining a bank loan or selling more stock, it produces a business plan to prove its management ability to potential investors. Charitable nonprofits generally call their business plan a long range strategic plan; it demonstrates to key donors that the organization can manage well and convinces them that a gift to that particular organization is an "investment" in the betterment of society.

Boards of Directors

A charitable nonprofit's directors are volunteers who govern the organization in the name of the general public. The board approves the work (programs) and the budget of the group, and it is responsible for seeing that the funding is there to achieve that work. Therefore, a key component in successful fundraising is the selection of board members who are willing and able to raise money. During long range planning, a strategy is drawn up to recruit people for the board who have direct connections to funders identified as likely to give support. While some charitable nonprofits hire staff to assist in raising money, the principle underlying charitable fundraising is that it is done by volunteers who first have made their own donations to the group and now are requesting similar contributions from others. A skilled development (fundraising) staff can greatly facilitate board fundraising.

Non-Board Volunteers

Volunteers appear in a variety of places in charitable nonprofit fundraising. Organizing volunteers requires a decision by the board to commit a board or staff member and a budget line to recruiting and training volunteers for fundraising. Well trained volunteers equipped with high quality material about your work can make effective solicitation calls or produce a variety of events. The key to keeping volunteers involved is offering a permanent liaison to the volunteer corps who is knowledgeable about fundraising goals and about the organization and who is available to volunteers when needed. Volunteer fundraisers respond best when they have job descriptions, specific goals and timetables, and know how the money they raise will be spent.

Competition for Funding

Many charitable nonprofits collaborate in program work, public education activities, and legislative liaison. Some even coalesce in united fundraising drives. However, the majority of philanthropic organizations raise money for themselves alone. Competition between charitable nonprofits for financial resources is an integral part of the philanthropic field and will not disappear in the foreseeable future. Only a group which has an endowment large enough to fully generate its annual budget can be classified as a non-competitor for funds.

The Energy Behind Fundraising
Long Range Market Plan

Unless an organization has a "golden goose" to whom it can turn for short range donations or an asset against which it can borrow, there are no "quick fixes" in the charitable nonprofit world. Traditional funders (foundations, corporations, etc.) usually avoid an organization in crisis because, to them, the need for fast cash means that the group has not planned well for its needs and has not developed alternate sources of funding over time to backstop emergencies. Cold as this may seem, it is a reality of the contributions marketplace.

Successful fundraising is based on the fundamental marketing principle that a contribution is part of a satisfying mutual exchange which takes place between the donor and the organization. The charitable nonprofit facilitates that exchange by carefully analyzing the contributions marketplace and planning to build bridges directly to the funding that seems ideal for their programs. Most of those bridges are board members, senior staff, advisors, and special friends of the organization. Their efforts are augmented by clear, logical material that describes the needs of the group's constituents, the organization's work, its cost, and its projected results. When the exchange happens, the philanthropy receives the funds, and the donor receives the satisfaction of knowing that he/she has helped to provide a service or program for the group's primary constituents.

The strategic organizational market plan comprehensively re-defines the organization for a specific term...usually three to five years...and it acts as an operational blueprint. It analyzes the needs of constituents, offers programs to suit those needs, projects costs and reliable income, provides a specific fundraising plan for each program, and provides sub-plans to recruit human resources, communicate effectively to the world about the group, implement itself over time, and continue to evaluate constituents' needs and responses to the organization's current work.

Keeping in Touch With Donors

Let's face it, you've got heavy competition out there for donor money. There are so many great causes and the donor pool is shrinking due to the times we live in. One of the most important things you can do is keep in touch with your donors. Let them know how much you appreciate their gift, let them know how their gift is being spent. Not an easy task, but Ephy Torenberg (pictured) and William Hewitt of DonorFirst, offer valuable advice on managing donor relations. Bunnie

Keeping in Touch With Donors

by Ephy Torenberg, CEO and William H. Hewitt, CMO
DonorFirst™

With nonprofit organizations struggling to maintain support levels in the wake of the financial collapse, we were reminded this week of the critical importance of donor retention by the release of the 2008 Study of High High-Worth Philanthropy sponsored by Bank of America. This analysis of attitudes and behavior among donors highlights that nearly 60% of households who stopped supporting a charitable organization attributed their decision to a lack of ‘connection’ with the charities.

The good news is that due to recent and dramatic shifts in the technology supporting charitable instruments such as donor advised funds (DAFs), organizations finally have tools available that support these critical engagement and retention needs. These changes are finally enabling charities to support the type of grantee engagement, family collaboration, and use-of-funds transparency that donors have been seeking for decades.

DAFs are playing a central role in helping to manage and direct the flow of billions of dollars of social capital from philanthropic families, and at even modest adoption rates these programs stand to capture and distribute funding totaling trillions of dollars over the next decade. Encouraging this growing flow of donors and charitable capital are an exciting array of features beginning to appear in DAF programs:

Collaboration

The donor’s ability to collaborate with family, foundation staff, advisors and grantee organizations, all within the environment of their personal DAF account, has been missing for generations. New technology enables donors to create an unlimited number of these mini-communities, with each focusing on a particular interest-area, grant program, or need, and ranging in size from two users to every user on a system. This powerful feature enables families to collaborate on grant initiatives, foundations to mobilize donors around cause centered events, and advisors to collaborate with multiple generations of family members.

Transparency

Traditional DAF programs have failed to support feedback on use of funds, appreciation for gifts, and ongoing development efforts of the grantee. The latest DAF technology uses the grant process as an opportunity to build relationships between donors and grantees, and for the first time, supports the ability for grantees to respond back directly to the donor. Donors can focus on multi-year projects, condition future gifts to certain deliverables, participate actively with their charities, and establish new levels of engagement and collaboration with their grantees.

Multimedia Support

Charitable organizations are increasingly recognizing that it is possible to leverage photos, audio and video to help engage donors on a more personal, emotional level. In every context where a sponsoring foundation or grantee can communicate using text, the latest DAF technology supports communication using full multimedia (video and photo) formats. Grantees upload content, highlighting their efforts and populating the site with timely, relevant information.

Holistic

The latest DAF programs present all of the information and functionality donors need in the form of a personalized user Dashboard. Users see which grantee groups they are subscribed to, news that is of interest to them, conversations, grant status, and account balance – across multiple charitable instruments. Each donor may be working with a development officer or advisor and the dashboard includes a prominent personal photo of key contacts making it easy for the donor to initiate contact. The dashboard puts everything a donor needs right at their fingertips.

Thanks to features like these which are helping foundations and nonprofits deliver higher levels of service than ever before, these organizations will finally be able to increase the engagement and affinity levels of their constituency, dramatically improve donor retention, and better mobilize their donor’s contributions for the right strategic causes.

The DonorFirst™ platform is a service of Crown Philanthropic Solutions, LLC

Contact Ephy or William at http://www.donorfirst.org/ or 800-293-4061 x345