Giving Philanthropic Index December 2001
Philanthropic Giving Index December 2001 In the second half of 2001, fundraisers became less hopeful about the climate for philanthropy in the United States, although the opinions expressed in the December 2001 Philanthropic Giving Index (PGI) survey still remain generally optimistic. All three indexes (which represent fundraisers views of the current, future, and overall situation) are at or near their lowest levels, and also experienced the largest six-month and one-year drops that have been recorded since the Center on Philanthropy at Indiana University initiated the PGI in Summer 1998. It should be noted, however, that the PGI was initiated during a boom in both philanthropy and the economy, so we do not know how the latest findings would compare to fundraisers opinions in previous or less prosperous periods. It is likely that fundraisers current impressions have been shaped by both the downturn in the general U.S. economy and the events surrounding the terrorist attack on September 11, 2001. Fundraising in the Wake of the September 11 Tragedy Fundraisers responded to two new survey questions asking about the impact of the September 11, 2001, terrorist attacks on giving to causes not related to the tragedy. Panel members expressed a wide range of perceptions on these questions, mirroring previous conflicting anecdotal reports of how significantly nonprofit organizations have or have not been affected since September 11. The wide distribution of responses gives a more complete picture of the uneven effect the September 11 events are having on nonprofits than does the majority response alone (see Chart 1 below). While the majority of respondents (57.9 percent) agreed or strongly agreed that tragedy-related giving came at the expense of other charities in the short term, a sizeable group (28.2 percent) disagreed or strongly disagreed (see Figure 1). There were no statistically significant differences among survey respondents based on their organizations industry (health, human services, education, etc.), revenue size, or donor base (local, regional or national). On the other hand, most survey participants felt that the effect on other charities is likely to be short-lived. The majority (56.2 percent) of the respondents felt that the wave of giving from the September 11 tragedy will not be at the expense of other causes six months from now (see Figure 2). Consultants and panel members from religious organizations were statistically significantly more likely than other professional fundraisers to hold this opinion. Again, however, there was substantial disagreement on this question: 27.1 percent of all respondents believed that tragedyrelated giving will have a negative impact on giving to other causes six months from now (see Chart 2). Fundraisers from human services and health organizations were statistically significantly more likely to be in this group.
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Figure 1 Tragedy-Related Giving Has Come at the Expense of Giving to Other Causes 50 45 40 35 30 25 20 15 10 5 0 44.1
Percentage
24.8 13.8 3.4 Strongly Disagree Disagree Neutral Agree Strongly Agree 13.8
Figure 2 Six Months from Now, Tragedy-Related Giving Will Be at the Expense of Giving to Other Causes 60 50 Percentage 40 30 20 10 0 Strongly Disagree Disagree Neutral Agree Strongly Agree 6.9 16.7 2.8 24.3 49.3
Figure 3 shows the average ratings on the two tragedy questions by industry. For both questions, higher ratings (5=highest) indicate that fundraisers believe more strongly that the tragedy giving is or will be at the expense of other causes. This chart shows that each industry believed the impact of September 11-related giving on giving to other charities will lessen over time. (In this chart ArtCltrHum refers to Arts, Culture and Humanities organizations; PEAI refers to Public Benefit, Environment, Animal and International organizations.) 3
Figure 3 Responses to Tragedy-related Questions by Industry
5 4.5 4 3.5 3 2.5 2 1.5 1
Average Rating
3.48
3.54 3.45
3.76
3.5
2.82
2.69
3.05 2.52
3.22
3.19
3.4 2.87
Tragedy-related giving has come at the expense of giving to other causes Six months from now, tragedyrelated giving will be at the expense of giving to other causes
2.67
2.29
2.2
Key Findings for December 2001 PGI The Philanthropic Giving Index (PGI) is a semiannual study of the climate for philanthropic giving and fundraising in the United States. It is similar to a Consumer Confidence Index for charitable giving. The current round of the PGI survey was mailed in October 2001 to 261 development executives of nonprofit organizations and 25 fundraising consultants (286 total). Of these, 130 fundraisers and 15 consultants returned questionnaires. The overall response rate for this evaluation was 50.7 percent (49.8 percent for fundraisers and 60.0 percent for consultants.) The panel was chosen to represent a cross-section of the nonprofit sector in terms of subsectors (for example, health, education, human services), revenue size, and geographic region. As with the Consumer Confidence Index, several indexes are produced from the PGI survey. These indexes range from 0.0 to 100.0, with higher scores indicating more positive or optimistic attitudes about the climate for fundraising in the United States. Tables 1 and 2 and Figure 4 show the changes in the indexes over time. Table 1 lists the indexes for the current round of the survey and the percentage change from each of the previous two rounds. Figure 4 and Table 2 show the changes in the indexes since the Center on Philanthropy initiated the PGI in 1998. Table 1 Changes in Indexes Over Time Dec. 2001 83.6 79.0 88.2 Change from Change from Summer 2001 Dec. 2000 - 8.2 percent - 9.1 percent -12.1 percent -4.4 percent -12.7 percent -5.7 percent
Philanthropic Giving Index (overall assessment of climate for fundraising) Present Situation Index (assessment of current climate for fundraising) Expectations Index (assessment of fundraising climate in the next 6 months)
um PE Ed A uc I at H io um Hn a n ea S e lth rv R e ices Co lig ns ion ul ta nt To s ta l
A
rtC
ul
trH
4
Figure 4 Philanthropic Giving Index Over Time 100
90
80
Philanthropic Giving Index Present Situation Index Expectations Index
70
Su m m er 98 D ec -9 8 Su m m er 99 D ec -9 9 Su m m er 00 D ec -0 0 Su m m er 01 D ec -0 1
Table 2 Values of Philanthropic Giving Index Over Time
Report Date Summer 98 December 98 Summer 99 December 99 Summer 00 December 00 Summer 01 December 01 Philanthropic Giving Index 88.8 87.1 86.8 94.6 94.5 92.0 91.1 83.6 Present Situation Index 87.2 86.2 85.5 93.6 93.7 90.5 89.9 79.0 Expectations Index 90.4 87.9 88.0 95.6 95.3 93.5 92.3 88.2
The changes shown in Tables 1 and 2 and in Figure 4 indicate that fundraisers around the country are notably less optimistic in their attitudes about the climate for philanthropy in the U.S. than they were six months and one year ago. Most of the change in attitudes occurred in the second half of 2001, and most likely occurred in the wake of the September 11 attack. Of the three indexes, the largest change in attitudes is in the Present Situation Index, which measures the climate for fundraising at the time each survey is taken. Figure 5 shows the indexes separated by industry. This figure indicates that fundraisers for Public Benefit, Environmental, Animal and International (PEAI) organizations are less optimistic than their peers on all three indexes.
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Figure 5 Indexes by Industry December 2001
Total Consultants Religion Human Services Health Education PEAI ArtCltrHum 0 20 40 60 80
71.7 66.3 69 88.2 79 83.6 92.6 90.6 91.6 86.2 69.6 77.9 73.9 78.1 76 93.9 78.7 86.3 92.3 78 85.2 90.9 86.1 88.5
Expectations Index Present Situation Index Philanthropic Giving Index
100
Index Values
The National Bureau of Economic Research (NBER) has declared that the economy is officially in a recession and that it may have begun as early March of 2001. Even before this statement, there was ample evidence of recessionary indicators, from rising unemployment to falling consumer confidence. It is no surprise that a slowdown in the economy is associated with a worsening in the perceived environment for fundraising. Research done by the Center on Philanthropy for the AAFRC Trust on Philanthropy shows that, historically, giving has grown at an average annual rate of 7.6 percent over the past 40 years, but has grown only around 5 percent in recession years. This difference is even more pronounced if adjusted for inflation, with giving growing 3 percent per year over the past 40 years, but declining -0.7 percent during years of a recession. Given that this is the first recession since the Center on Philanthropy began tracking the PGI, we need to be cautious about over-reacting to this downturn in the PGI. At the same time, the slowdown in the economy will, in fact, make fundraising more challenging. Individuals account for over 80 percent of total giving (including bequests). Individuals can give from two sources: income and wealth. While both income and wealth measures are substantially higher than they were five years ago (and longer ago as well), they are down from their recent highs, so people feel they have less disposable income. Most economists forecast a relatively short and shallow recession, but this is obviously dependent on a number of factors, including what happens in the war on terrorism and related activities.
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The tragedies on September 11 have clearly affected the philanthropic community in two ways: fFirst, they stimulated a tremendous outpouring of generosity as Americans united to help those in need. Second, the additional uncertainty pushed an already teetering economy over the edge into recession. While NBER has back-dated the recessions start date to March, it is not at all clear that the economy would have gone into a recession absent the attack on America. These two forces move total giving in opposite directions. What actually happened to total giving is an empirical question, which we will not be able to answer definitively for a year or more (when IRS tax data for 2001 become available). However, the PGI and other survey research confirm what intuition and anecdotal evidence indicate: that it has become more difficult to raise money, but that these difficulties are expected to be fairly short-lived. Other Major Outcomes on Individual Questions Fundraising executives continue to have generally positive attitudes about the current and future climate for fundraising. However, responses to questions about the general external fundraising climate (outside their own organizations) were lower than they have ever been since the start of the PGI survey in the Summer of 1998. The panel of experts continues to express positive attitudes about current and future internal support within their own organizations for fundraising. Fundraisers continue to have moderately positive attitudes about current and future volunteer involvement in fundraising. All solicitation techniques saw decreases in effectiveness over the past six months, except e-mail and Internet fundraising, which remained about the same. Most of the decreases were statistically significant. (It should be noted that fundraisers were not particularly enthusiastic about either e-mail or Internet fundraising, despite the success of the Internet in generating gifts related to the September 11 tragedy.) Fundraising executives report major gifts to be the most successful solicitation technique at this time, continuing a three-year trend. Other successful techniques include (in descending order) planned giving, foundation grants, and direct mail. Telephone solicitation corporate and gifts continue to be less successful techniques for the group as a whole, as well as e-mail and Internet fundraising (see Figure 6). The panel predicts that six months from now major gifts and planned giving will continue to be the most successful techniques.
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Figure 6 Percentage of Respondents Who Rated Fundraising Techniques as Successful or Somewhat Successful--December 2001 Internet E-mail Foundation Grants Corporate Gifts Major Gifts Planned Giving Special Events Telephone Direct Mail 0 20 40 60 42 43 65 63 80 100 57 59 43 40 80 78 76 71 27 19 23 15 66 63
Future Current
Percentage
As shown in Figure 7, in the past six months the success of e-mail and Internet fundraising has remained stable, although there was a statistically significant increase in the success of both over one year ago. All other forms of solicitation decreased in reported success over the past six months. (The decreases in the success of direct mail, major gifts, corporate gifts, and foundation giving were all statistically significant.) Major giving continues to remain the most effective technique, followed by planned giving. Six months ago, fundraisers were not accurate in their predictions of what the effectiveness of most solicitation techniques would be in late 2001. This is not particularly surprising, given that no one could have predicted the events that transpired on September 11 and the effect they would have on fundraising. For example, six months ago fundraisers were forecasting that direct mail would be fairly successful, but today they report that direct mail is only modestly successful (see Figure 8). The differences between predicted and actual success of various techniques were all statistically significant with the exception of e-mail, telephone solicitation, and special events (that is, fundraisers were more accurate in their predictions on these three techniques).
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Figure 7 Comparison of Reported Current Success of Techniques: Dec. 1998 to Dec. 2001 16 10 18 19 15 7 15 15
Internet
E-mail
Foundation Grants 58 55 45 55 49 55 40
69 67 64 68 66 75 63
Corporate Gifts
Major Gifts 62 63 68 64 67 76 71
78 75 77 77 81 84 78
Dec 98 (top bars) Summer 1999 Dec-99 Summer 2000 Dec-00 Summer 2001 Dec-01 (bottom bars)
Planned Giving 57 61 59 60 59 65 59
Special Events 48 42 39 38 37 49 43
Telephone
Direct Mail
71 76 72 68 59 70 63 60 80 100
0
20
40
Percentage
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Figure 8 Predicted (Summer 2001) Versus Reported (December 2001) Success of Fundraising Techniques (for those who responded to both surveys)
Internet E-mail Foundation Grants Corporate Gifts Major Gifts Planned Giving Special Events Telephone Direct Mail 0 50 50.9 50 84.4 67.2 100 67.7 60.3 60.9 43 32.2 21.4 27.3 16.7 84.4 60 93.9 75.4 84.6 73 Predicted Summer 2001 Reported Dec 2001
Percentage
Results by Annual Revenue Size Fundraisers from the smallest nonprofits, those with annual revenues of less than $1 million, were statistically significantly more optimistic about major gifts than were other fundraisers. They were statistically significantly more pessimistic than were their peers about the current and future success of telephone solicitation, and were significantly less likely than others to have a capital campaign currently. This group reports that major gifts, foundation grants and planned giving are the most successful techniques for their organizations at this time. These fundraisers reported that right now soliciting gifts from corporations is one of the least successful techniques for their organizations, along with e-mail and Web pages. (We note that our sample size for this group of fundraisers was smaller than for other groups, so these results may not be as reliable as those for other groups.) Development professionals from small organizations, with revenues in the $1 million to $5 million range, were statistically significantly less optimistic than other fundraisers about the current success of planned gifts and the future success of major gifts. Current preferred techniques include direct mail and major gifts. Corporate gifts, e-mail, and Web pages are less favored techniques. 10
Fundraisers from organizations with revenues between $5 and $10 million report that special events and direct mail are the most successful techniques for their organizations at this time. Telephone, e-mail, and Web page fundraising are less successful. These fundraisers were statistically significantly more optimistic than the rest of the group about the current success of special events. They were statistically significantly less optimistic than their peers about the future general climate for fundraising and the current and future success of planned and major gifts. Fundraisers from medium-sized organizations ($10 to $50 million in annual revenue) did not differ significantly from the total sample in terms of preferences for solicitation technique. The most successful techniques for these organizations at this time are direct mail and special events. Less successful techniques include corporate gifts, and e-mail and Web page solicitation. Large nonprofits, with revenues in the $50 million to $100 million range, are statistically significantly more likely than other nonprofits to be involved in a capital campaign at this time. Their preferred strategies include major gifts and planned giving, while corporate gifts, e-mail, and Web pages are less preferred. Planned gifts, major gifts, and telephone solicitation currently are successful fundraising strategies for the largest nonprofit organizations (revenues over $100 million). These organizations report lower levels of success with special events, e-mail, Web page, and corporate gifts at this time. Despite this, these organizations are more likely than others to use the Internet or e-mail for fundraising purposes. Fundraisers from very large organizations were statistically significantly more optimistic than their peers about the current and future success of telephone solicitation, planned giving, and major gifts. They were also statistically significantly less optimistic than their peers about the current success of special events.
Results by Industry Group Development professionals from Arts, Culture, and Humanities organizations report that major gifts and special events are the most successful fundraising techniques for their organizations at this time. Corporate giving, and solicitation by e-mail and Web pages are less successful for them. Despite this, relative to their peers in other types of nonprofits, these panel members are statistically significantly more optimistic about the current success of corporate gifts and the future of e-mail fundraising. Fundraisers from Public Benefit, Environmental, Animal, and International (PEAI) nonprofits report that foundation grants and direct mail are effective fundraising tools for their organizations right now. Solicitation by telephone, e-mail, or Web page are less effective techniques currently, along with corporate ...