$190 BILLION BONANZA FOR CHARITY
by Holly Hall and Nicole Lewis

reprinted from philanthropy.com

Donations grew by 7% but signs for 2000 are less encouraging

Americans gave $190 billion to charity last year, a rise of 6.7 percent from 1998 in inflation-adjusted dollars, according to a report released last week.

The pace of giving slowed slightly in comparison with 1998, when donations rose by 9 percent when adjusted for inflation, according to Giving USA.

The report was the second giving survey released in the past month to show that donations to charities are substantially outpacing inflation, but they are not increasing quite as fast as they had in previous years.

The Council for Aid to Education said in its most recent analysis of college giving that donations had risen by 9 percent, the smallest percentage gain in the past three years (The Chronicle, May 4).

	FACTS & FIGURES In 1999, Americans gave 1.8% of their personal incomes to charity, and that amount totaled 2.1% of the gross domestic product. The last time giving was that large a share of the GDP was in 1971. More Facts & Figures

Non-profit experts said that the slowdown last year was the natural result of the changes in America's economy, and that giving increases would be even smaller this year. "The gradual increase in interest rates is beginning to take effect, and people are beginning to realize that some stocks were overvalued, technology stocks in particular," said Russy Sumariwalla, former president of United Way International and an adviser to the Giving USA survey. "The market will continue as a bull market, but with less exuberance. And this will have an impact on giving."

Even with indications that giving rates are cooling down, 1999 was still a very strong fund-raising year for many charities. It was the fifth year in a row that contributions outstripped inflation in the survey, which is compiled by the American Association of Fund-Raising Counsel Trust for Philanthropy.

All told, charitable giving last year equaled 2.1 percent of the gross domestic product, up from 2 percent in 1998. The last time giving constituted that high a percentage was in 1971. And the percentage of personal income donated by Americans reached 1.8 percent in both 1998 and 1999; previously it had not been that high since 1989.

Giving USA researchers said the percentage gains were the result of the strong economy in recent years. In addition, they said, some giving last year may have been motivated by the publicity surrounding a string of multimillion-dollar donations by individuals, as well as high-profile events that sought to promote giving, such as the Clinton administration's Summit on Philanthropy in October.

Also contributing to a good fund-raising year were the efforts by many charities to improve the effectiveness and efficiency of their fund raising. Non-profit organizations said they had found ways to cut costs by consolidating special fund-raising events, curbing the use of expensive fund-raising methods like direct mail, and focusing on raising big gifts from individuals.

Almost all types of charities saw giving grow faster than last year's 2.1-percent inflation figure, according to Giving USA.

International groups were the biggest winners, with donations soaring by nearly 21 percent. The next-highest increase was achieved by environmental groups, which saw gifts rise by 8.7 percent. Contributions to arts organizations, after two years of decreases, posted the smallest gain of any type of organization, 2.8 percent.

The only category in which giving actually declined was a broad classification that includes United Ways, Jewish federations, consumer-protection groups, and other organizations classified as "public benefit" charities. They saw a 1.4-percent decline, according to Giving USA.

Among the report's other key findings:

• Individuals. Over all, individuals gave 83.8 percent of total donations, including bequests, and their giving increased by 5.5 percent in inflation-adjusted dollars.
  
  
• Companies. Companies and corporate foundations accounted for 5.8 percent of all donations. They increased their donations by 11.8 percent, to 1.3 percent of their pre-tax income last year, according to the survey. Those figures include only philanthropic donations and not marketing or other fees that companies pay to charities.
  
  
• Foundations. For the fourth year in a row, the rise in giving by foundations outstripped the growth of both individual and corporate donations. When adjusted for inflation, giving by foundations last year rose by nearly 14 percent and accounted for 10.4 percent of all donations.
  
  
• That type of giving was fueled largely by the rapid growth of foundation assets. More and more donors are starting or supplementing foundations, and the portfolios of many funds are expanding because of the robust stock market. Assets of private and community foundations increased by a total of 15.7 percent in 1998, the most recent year for which figures are available. Private foundations must give away at least 5 percent of their assets each year, on average, so growth in foundation endowments typically leads to an increase in the amount foundations award.

While Giving USA is thought to accurately mirror major trends like the growth in giving to and by foundations in recent years, experts have long questioned the approach it takes in calculating its estimates for giving.

Although some organizations have taken steps to develop more-reliable measures, differences in the way that data on charitable giving are compiled throughout the non-profit world have stymied researchers.

"If this had been easy to do, someone would be doing it," said Linda Lampkin, manager of the Urban Institute's National Center for Charitable Statistics, in Washington.

One problem with the data is that, for certain categories of charities, donations appear to sharply plunge or zoom upward from one year to the next. Researchers were at a loss to explain why such big changes occurred, although they speculated that big gifts to a few organizations in a particular category in any one year could account for the changes.

Giving USA says that gifts to international organizations increased by more than 20 percent last year, compared with the 7.6-percent growth they achieved in 1998. And giving to social-service groups increased by 1.8 percent in 1997, shot up by 25.1 percent in 1998, and climbed by just 5.6 percent last year, according to the report.

Gordon Raley, executive director of the National Assembly of Health and Human Service Organizations, which represents the country's largest social-service organizations, said he thought Giving USA's estimate was questionable because he had not heard that any of his member organizations had seen increases as high as 25 percent in 1998. He said he also did not know if this year's estimate of a 5.6-percent increase was a true reflection of how social-services groups had fared.

Mr. Raley said he was concerned about the accuracy of the fund-raising estimates offered by Giving USA. He said he believed a new survey is needed that not only would measure total giving but also would determine how much money is being donated to provide direct services to the poor rather than for building charity headquarters or for other programs that do not directly help the needy.

Here's how other categories of charities fared last year, according to Giving USA:

International. Giving to international-relief groups rose 20.9 percent, to $2.7-billion. Natural disasters and other catastrophes fueled increased giving to many charities.

"Kosovo and Hurricane Mitch" are how Matthew De Galan, chief development officer of Mercy Corps International, explained the spike in his charity's donations. "We more than tripled our fund raising in a single year," to $8.2-million, he said. "The challenge now is what are you going to do with that money and are you going to be able to sustain that growth?"

Other relief groups attributed their fund-raising success last year to improved marketing or cost-cutting strategies. Compassion International raised $56-million in the first three-quarters of 1999, compared with $48-million for the same period in 1998. Over 95 percent of contributions were from its regular donors, each of whom pays $24 a month to sponsor a child in one of 22 countries.

The charity does almost no advertising and is not well-known among the general public, said Thayer Allison, the group's associate director of development. But it has promoted its reputation among members of Christian groups by sending volunteers to make presentations at concerts, lectures, and other events that attract potential supporters.

One charity that saw its net donations rise only slightly, from $5.6-million to $5.8-million, would have lost money had it not cut back on its fund-raising expenses.

Christian Relief Services noticed that the money raised from new donors barely covered the cost of recruiting them. It decided to stop sending direct-mail appeals to many of those people and instead concentrate on increasing giving among its loyal donors. As a result, the charity was able to shave more than $2-million off its mailing costs, enabling it to post a slightly higher net gain last year. "People are more sophisticated and they are giving to charities they know," said Paul Krizek, the organization's vice president.

Environment. Donations to environmental groups increased 8.7 percent in 1999, to $5.8-billion. One of the largest groups, the Nature Conservancy, has already raised $476-million for a five-year, $1-billion campaign that will end in 2003. It has received 70 gifts of $1-million or more; in its previous campaign, which ended in 1995, the organization got only seven gifts that big.

In addition to the economy, David Whitehead, the charity's development director, attributed the Nature Conservancy's success to donors' perceptions that the environment is increasingly vulnerable. "It's very personal," he said. "People are seeing places where they used to fish disappearing."

Officials of the National Fish and Wildlife Foundation, which has seen contributions double in the last three years, to $6-million annually, expressed doubts that the upward trend in fund raising can continue.

A "boom time mentality" is behind the spiral in recent years, said John Fritts, a senior fund raiser for the charity, but he said he worries that it will end soon, especially as the stock market jumps up and down and interest rates rise.

Education. Donations to colleges and universities, libraries, trade schools, scholarship funds, and other educational organizations in the survey rose to $27.5-billion, a 6.1-percent increase.

Boston University saw its donations rise to nearly $74-million in 1999, double the amount raised as recently as 1996. Fifty to 60 percent of the gifts came from individuals, several in the range of $1-million to $5-million, said Christopher Reaske, vice president for development and alumni relations.

And, like many public universities, Kansas State reaped the returns from a recently created or enlarged development department.

Last year the university raised $24-million from individuals alone, up from $16.5-million the year before.

Human services. Donations to social-service groups grew by 5.6 percent, to $17.4-billion last year. Some groups said they feared that the continuing good economy could decrease the sense of urgency among donors who give to their organizations and mask the need for services among the poor, many of whom have stopped getting government aid because of the 1996 welfare-law overhaul.

But, even as welfare changes take hold and government aid continues to dwindle, many social-service organizations like Catholic Charities USA have seen impressive returns from beefing up their fund-raising operations. A 1991 survey of the charity's 180 chapters found that only 15 percent had a development director; by the mid-1990's, that figure had grown to 45 percent.

At the Honolulu chapter, David Earles became its first development director a year ago, and he helped increase donations by 25 percent. The charity has also just received $200,000 from a living donor, the first time it has ever received such a large donation. Giving increases are likely to continue as the charity seeks to reduce its reliance on government grants, which still account for the bulk of its $17-million budget. "We're trying to become as self-sufficient as possible," says Mr. Earles.

Health. Contributions to hospitals and other health charities increased to $18-billion, a 4-percent increase.

Health charities say that one reason for the rise is the growing success of special fund-raising events. The Leukemia & Lymphoma Society, where gifts have increased by more than 20 percent during each of the last four years, has relied on promoting its fund-raising walkathon at companies, especially those that employ large numbers of women of ages 35 to 45. Such women have proved to be the most reliable supporters of the charity, said Richard Geswell, senior vice president of revenue development.

Many women from those companies turned out for the inaugural "Light the Night" walk in September, which was held in 100 locations and raised $5-million of the $150-million the group expects to receive this fiscal year.

In the already-crowded field of health-related walks and runs, Mr. Geswell says the society did not worry about entering the fray. "We didn't have something everyone could participate in simply and easily," he says. The walk filled the gap. Next year the event will expand to another 70 locations.

Last year the American Heart Association received 12 percent more in donations than it had in 1998, mainly by cutting back on some events that had become too expensive, said Suzie Upton, vice president for development. The charity's American Heart Walk used to be held in 1,800 locations; now it's held only in 800 of the most populous areas of the country -- places where the charity can attract enough participants to offset costs and raise money. As a result, the event nets 71 percent more than it did when it was held at all 1,800 locales.

Religion. Donations to churches, synagogues, and other religious institutions grew to $81.8-billion, a rise of 3.3 percent. Those funds represent 43 percent of donations made by individuals in 1999, down from 48.5 percent in 1989. While the decline in the portion of gifts going to religious groups worries many charity leaders, some organizations have managed to keep their own donations increasing.

The 940 members of the Evangelical Council for Financial Accountability, an umbrella group that gives an accountability seal of approval to religious charities, raised $9-billion in contributions last year, a 13.6-percent increase over 1998.

Not all members of the council saw a double-digit increase in gifts last year, however. At the Moody Bible Institute, where donations have increased by just 5.8 percent from 1994 to1998, the challenge is to raise enough to pay for 1,500 students who are not charged tuition.

"I envision myself as keeping the plate spinning at a carnival side show," said Richard Epps, vice president for stewardship.

Arts. Arts and cultural groups saw a 2.8-percent increase, the first gain in donations in two years, to $11.1-billion. Following the same pattern as last year, large and small organizations fared better than mid-sized ones, whose contributions declined for the second year in a row.

At Washington's Dance Place contributions have stagnated for the past two years, said Carla Perlo, the organization's founder. Nevertheless, some larger-than-usual foundation grants have helped offset the flat giving by individuals.

The Metropolitan Opera, like many large cultural organizations, has found that much of its growth comes from people who can afford to make gifts of $25,000 to $1-million, said Lillian W. Silver, director of development. "We're blessed with having large donors in high categories, and an artistic program that is in great, great demand," she said.

United Ways and public-interest groups. Contributions declined slightly to United Ways, Jewish federations, consumer-protection groups, and others that are included in a catchall category in the survey called "public and society benefit." After a strong 1998, when such organizations boasted a 27.5-percent increase in the survey, there was a slight decline of 1.4 percent last year. The variety of charities in the category, said Ann E. Kaplan, the Giving USA editor, "makes understanding the results a bit tricky."

United Way of America has reported that donations increased by 5.1 percent last year among more than 1,400 local United Ways. And among Jewish federations, annual gifts increased by 3.8 percent last year, according to United Jewish Communities, which monitors giving to 189 federations.

The Austin, Tex., United Way did better than the average, with a 34-percent rise in donations last year, due to the bustling local economy sparked by high-technology companies like Dell Computer. Founder Michael Dell and his wife, Susan, gave the charity its first $1-million contribution.

After about a decade of flat donations, the Jewish Community Federation of Cleveland, which raises money to finance social-service groups and other charities, found a way to revitalize its fund raising by adopting new guidelines for its volunteer and paid fund raisers. The guidelines stipulated that fund raisers increase the amount of time spent with donors, keep the amount people donate confidential, and do a better job of educating donors about where their contributions go. As a result, the federation has raised 8.2-percent more over the last two years from its 15,000 members, who gave $27.8-million in 1999.

Copies of Giving USA are available on computer disk for $135 each, plus $6 postage and handling. Print copies will be available in September for $65 apiece, plus $6 postage and handling. To order a copy, contact the American Association of Fund-Raising Counsel Trust for Philanthropy, 10293 North Meridian Street, Suite 175, Indianapolis 46290; 888-544-8464. An order form is also available at the trust's Web site.