what’s happening in the nonprofit sector...donations from america’s individuals, estates,...

Carol Rhine, Target Analytics

What’s Happening in the Nonprofit Sector

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Session Goals

• Sources for learning about industry trends• Outside influences on fundraising• Marketing for the future

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Industry Trends and Insights

• AFP Fundraising Effectiveness Report• Giving USA• Target Analytics donorCentrics™ Index of Direct

Marketing Fundraising

The 2016 Fundraising Effectiveness Project report summarizes data from 9,922 survey respondents.

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FEP Summary

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FEP Summary

• The greatest losses in gift dollars came from lapsed repeat and downgraded gifts.

• The greatest losses in donors came from lapsed new donors.

• The median donor retention rate in 2015 was 46 percent; The gift or dollar retention rate increased from 47 percent in 2014 to 48 percent in 2015.

• Over the last nine years, donor and gift or dollar retention rates have consistently been weak --averaging below 50 percent.

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FEP Net Performance

• The basic concept of the Fundraising Effectiveness Survey is that growth in giving from one year to the next is the net of gains minus losses.

• Gains consist of gifts by new donors and recaptured lapsed donors and increases in gift amounts by upgraded donors.

• Losses consist of decreases in gift amounts by downgraded donors and lost gifts from lapsed new and lapsed repeat donors.

The net increase (or decrease) is the net of gains minus losses.

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FEP Net Gift Amount

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FEP Net Donors

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Giving USA 2016The Annual Report on Philanthropy for the Year 2015

Researched and written by

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11

SOURCE: Giving USA Foundation | GIVING USA 2016

2015 contributions: $373.25 billion by source (in billions of dollars)

2014

12


2015 contributions: $373.25 Billion by type of recipient organization (in billions of dollars)

2014

13


Changes in giving by type of recipient organization, 20132014, 20142015, and 20132015 (in current dollars)

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Total giving, 19752015 (in billions of dollars)

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Giving by individuals, 19752015(in billions of dollars)

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Giving by source: Percentage of the total in five-year spans, 19762015 (in inflation-adjusted dollars, 2015 = $100)

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Total giving as a percentage of Gross Domestic Product, 19752015 (in inflation-adjusted dollars)

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Individual giving as a percentage of disposable personal income, 19752015 (in current dollars)

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Giving by type of recipient: Percentage of the total in five-year spans, 19762015* (adjusted for inflation, 2015 = $100)

Donations from America’s individuals, estates, foundations and corporations reached an estimated $373.25 billion in 2015, setting a record for the second year in a row.

That new peak in contributions is record-setting whether measured in current or inflation-adjusted dollars. In 2015, total giving grew 4.1 percent in current dollars (4.0 percent when adjusted for inflation) over 2014.

If you look at total giving by two-year time spans, the combined growth for 2014 and 2015 hit double digits, reaching 10.1 percent when calculated using inflation-adjusted dollars.

Charitable contributions from all four sources went up in 2015, with those from individuals once again leading the way in terms of total dollar amount, at $264.58 billion.

Giving USA

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The portion of the giving “pie” destined for the various subsectors has been largely consistent for the past two years suggests that giving among the broad destination categories may be stabilizing.

Very large charitable donations—categorized here as gifts of $100 million or more—have garnered an increasing amount of attention over the past 10 to 15 years. In 2015, the very large contributions that were publicly announced totaled at least $3.3 billion.

Individuals give the most; by upping their gifts 3.8 percent when measured in current dollars (and 3.7 percent when inflation-adjusted), in 2015 they were responsible for two-thirds of the year’s overall increase in total giving.

In 2015, the largest year-over-year percentage increase in contributions from sources however, came via grants made by the country’s independent, community and operating foundations -- up 6.5 percent in current dollars, and 6.3 percent adjusted for inflation. #Bridge16

Giving USA

Healthy growth among several key economic factors, including: personal consumption; personal income; disposable personal income; GDP; and, corporate pre-tax profits, influenced all four sources of giving when it came to 2015 charitable donations, and from individuals in particular.

One gauge of philanthropy’s impact on American society is the fact that charitable giving is at a level high enough for it to be part and parcel of GDP. In fact, charitable donations have hovered around 2 percent of GDP for many years. In 2015, the relevant figure was 2.1 percent, the same as in 2014 and slightly above the 40-year average of 1.9 percent.

Between 2010 and 2015, growth in charitable donations actually outperformed growth in GDP: inflation-adjusted total giving grew at an annualized average rate of 3.6 percent during that time frame; meanwhile, GDP growth grew at an average rate of 2 percent.

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Giving USACharitable Giving Levels Reflect Economic Conditions

• The recession hit philanthropy even harder than previously thought.

• Total giving dropped by 14 percent from 2007 to 2009, the report said, a steeper drop than "Giving USA" has reported in the past and the most serious decline in the 60 years it has recorded contributions.

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Giving USA

• The share of income Americans give is rising slowly.

• As the economy strengthened, Americans had more money in their pockets, gaining an increase of 3.8 percent in money left over after paying for essentials like housing and food. But the rise in giving was not commensurate with the gain in disposable income.

• The percentage Americans donated remained at 2 percent of disposable income in both 2013 and 2014, a slight increase from the 1.8-to-1.9-percent range, where it hovered from 2008 through 2012.

• The share Americans donated reached a high of 2.4 percent in 2000, as the tech industry was booming.

• Many philanthropic experts have expressed frustration that the percentage of income Americans give to charity changes little even when the economy is strong.

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Giving USA

Giving USA: Outlook for 2016

Among projections in the report, contributions from individuals/households, estates, corporations and foundations are all expected to increase in 2015 and 2016. Specifically:

Factors that could impact philanthropy:• Unpredictable events, including policy changes, national and international economic

recessions/depressions and disasters• Stability of underlying variables, with ranges of variability both narrow (US. GDP) and wide (S&P

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7/19/2016 Footer 26

Target Analytics donorCentrics™ Index of Direct Marketing Fundraising

Quarterly Presentation of Trends and Findings

2015 Fourth Quarter Results

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Offer:

• Donor

• Member

Technique:

• Traditional

• Premium

• Hybrid

Sectors

Mission:

Animal Welfare

Arts & Culture

Environmental

Health

Human Services

International Relief

Religion

Societal Benefit

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Economic Indicators

5.0%

0.0%

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2013Q1

2013Q2

2013Q3

2013Q4

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2014Q3

2014Q4

2015Q1

2015Q2

2015Q3

2015Q4

Unemployment Rate16,442.3

$14,800

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2015Q4

Annualized GDP (in billions)

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Index of Consumer Sentiment

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Q4 2015 results vary by industry sector.

Increases in revenue per donor generally compensated for donor declines.

Revenue increased a median 1.3% while donors declined 1.1%

• The relief sector experienced growth in both donors and revenue in 2015. As the result of giving for the Nepal earthquake and other emergencies, the relief sector experienced strong increases in almost all key measures of fundraising in 2015.

• The animal welfare, arts & culture, and societal benefit sectors experienced increases in revenue, donors, and new donor acquisition during the year.

• The environmental sector had modest revenue growth and modest donor declines in 2015. The sector was able to overcome donor declines due to an increase in revenue per donor.

• The health and human services sectors had declines in both revenue and donors in 2015. Both sectors were able to minimize revenue declines through increases in revenue per donor.

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1.3%

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3.7%

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0.4%

1.7%

0.4%

1.5%

Revenue

Donors

Rev / Donor

New Donors

Retention

First-Year Retention

Multi-Year Retention

Reactivation

Fig. 1: Overall Index Medians

2013 to 2014

2014 to 2015

Year-over-Year Changein Key Measures

58%

34%

85%

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46%

35%

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73%

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56%

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55%

% of Organizations with Positive Change

Q4 2015 results

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Q4 2015 results

Index Revenue0.0%

Index Donors-12.5%

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Fig. 3: Five-Year Overall Index Revenue and Donor TrendsCumulative Rolling 12-Month Median Change from Q4 2010

WinterStormJuno

JapanEarthquake

Hurricane Sandy

Typhoon Haiyan & Government Shutdown

NepalEarthquake

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Q4 2015 results

New Donors-17.6%

All Donors-12.5%

-25%

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Fig. 5: Five-Year Overall Index Donor and New Donor TrendsCumulative Rolling 12-Month Median Change from Q4 2010

Winter StormJuno

JapanEarthquake

Hurricane Sandy

Typhoon Haiyan &

Government Shutdown

NepalEarthquake

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Societal Benefit

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Q4 2015 results

Societal Benefit

Arts & Culture

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Q4 2015 results

7/19/2016 36donorCentrics™ Performance Benchmarking Confidential

Median Measures

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7/19/2016 37donorCentrics™ Performance Benchmarking Confidential

Fig. 2: 2015 Medians by Industry Sector

Revenue Donors Revenue per Donor Average Gift Gifts per Donor

Overall Index $22,506,381 269,336 $79 $41 1.77

Animal Welfare $31,751,622 278,902 $108 $30 2.02

Arts & Culture $11,833,432 102,863 $84 $55 1.53

Environmental $16,499,242 262,783 $71 $40 1.78

Health $21,963,063 643,942 $43 $29 1.01

Human Services $20,434,991 262,267 $56 $35 1.76

International Relief $48,226,991 230,416 $179 $63 2.02

Societal Benefit $19,085,298 212,613 $87 $43 2.29

% New Donors

Overall

Retention Rate

First-Year

Retention Rate

Multi-Year

Retention Rate

Reactivation Rate

(1-5 Yrs Lapsed)

Overall Index 25.9% 52.3% 29.0% 61.0% 8.4%

Animal Welfare 19.5% 56.6% 37.8% 61.7% 8.4%

Arts & Culture 17.5% 62.8% 32.3% 68.7% 10.9%

Environmental 25.6% 52.9% 27.8% 61.7% 8.7%

Health 25.3% 45.5% 25.4% 54.4% 7.1%

Human Services 25.3% 47.8% 30.6% 56.2% 8.1%

International Relief 27.9% 54.3% 29.6% 63.4% 7.8%

Societal Benefit 26.2% 54.8% 29.6% 64.4% 8.8%

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Median Measures

Long-term trends

Real index revenue declined by 7.5% over the past five years, when revenue dollar amounts are adjusted for inflation.

Fig. 4: Long-Term Index Revenue and Donor Trends

Five-Year Change Four-Year Change Three-Year Change Tw o-Year Change One-Year Change

2010 to 2015 2011 to 2015 2012 to 2015 2013 to 2015 2014 to 2015

Revenue

Median Change 0.0% 3.3% 7.0% 2.8% 1.3%

Effective Annual Change 0.0% 0.8% 2.4% 1.4% 1.3%

% Orgs w ith Positive Change 49% 61% 65% 59% 58%

Donors

Median Change -12.5% -6.9% -3.6% -3.1% -1.1%

Effective Annual Change -2.4% -1.7% -1.2% -1.5% -1.1%


Show s the cumulative median change from the tw elve-month period ending the f irst date to the tw elve-month period ending the second date

in each column. Effective Annual Change is the average yearly change over the stated time period, adjusted for compounding over that period.

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Fig. 6: Long-Term Index New Donor Trends

Five-Year Change Four-Year Change Three-Year Change Tw o-Year Change One-Year Change

2010 to 2015 2011 to 2015 2012 to 2015 2013 to 2015 2014 to 2015

Median Change -17.6% -12.8% -9.1% -3.1% -2.6%

Effective Annual Change -3.3% -3.0% -2.9% -1.6% -2.6%


Show s the cumulative median change from the tw elve-month period ending the f irst date to the tw elve-month period ending the second date

in each column. Effective Annual Change is the average yearly change over the stated time period, adjusted for compounding over that period.

Over the past five years new donor numbers have fallen a cumulative median 17.6%

This is an effective annual rate of decline of 3.3% per year.

Donor declines

-2.7%

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Fig. 40: Median Change in Donors from Previous Year (2002-2015)

Data from Target Analytics donorCentrics Index of Direct Marketing Performance, white paper analyses published Q4 2002 to Q4 2015.

The only index-wide annual increase came in 2005, a year which included unusually large disaster-related fundraising following the Indian Ocean tsunami in January and U.S. Gulf Coast hurricanes Katrina, Wilma, and Rita in the fall.

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New Donors-39.0%

All Donors-25.1%

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Fig. 41: Ten-Year Overall Index Donor and New Donor TrendsCumulative Rolling 12-Month Median Change from Q4 2005

HaitiEarthquake

End ofRecession

JapanEarthquake

Hurricane Sandy

Start ofRecession

Burma Cyclone / China Earthquake

Government Shutdown &

Typhoon Haiyan

Nepal Earthquake & Obergefell v.

Hodges Ruling

Winter Storm Juno

Michael Brown Shooting

From the twelve months ending Q4 2005 to the twelve months ending Q4 2015, new donor acquisition has declined a median 39.0%. This is an effective average annual decline of 4.7% per year.

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Donor declines

Increases in Revenue per Donor Do Not Compensate for Continuing Donor Declines

• The health and environmental sectors had significant declines. For both, revenue per donor increased as overall revenue and donor populations declined. Widespread declines are new for the environmental sector, but are a continuation of a longer-term pattern for the health sector.

• The animal welfare, arts and culture, and human services sectors experienced more moderate declines in most metrics, and were each able to offset those declines somewhat in different ways. Animal welfare organizations had modest increases in acquisition, arts and culture organizations were able to increase their revenue per donor, and human services organizations had some growth in both retention and reactivation.

• The societal benefit sector also had moderate declines in most metrics, but had by far the most significant increases in new donor acquisition of any sector in the index.

• The relief sector was the only sector to have donor growth in the first quarter of 2016, and the only one to have significant measurable growth in revenue as well. This sector also had the second-highest growth in new donor acquisition.

Results – Q1 2016 Summary

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The Macroeconomics of Fundraising

By Carol Rhine, Principal Fundraising Analyst, Target Analytics

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In recessionary periods, people not only spend a lower dollar amount on charities, but they also allocate to charities a smaller fraction of the money they do spend—thereby compounding the effects of an economic decline on fundraising.

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Giving as % of GDP

Index Revenue

44%

Start ofRecession

GDP$15,819

$12,000

$12,500

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GD

P (in

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donorCentrics Index Overall Revenue Change vs. Gross Domestic Product(2003-2013)

HaitiEarthquake

End ofRecession

Hurricane Katrina

Indian Ocean

Tsunami

China Earthquake &

Burma Cyclone

Hurricane Sandy

Japan Earthquake

Horn of Africa

FamineGulf Oil

Spill

Source for Index Revenue: Cumulative Rolling 12-Month Median Revenue Change from Q3 2003, Target Analytics donorCentrics Index of Direct Marketing Performance, 2013 Third Calendar Quarter Results, January 2014. Source for GDP: Gross Domestic Product (Seasonally adjusted quarter end, indexed to 2009 dollars),

U.S. Department of Commerce, Bureau of Economic Analysis , http://www.bea.gov/. Retrieved December 17, 2013.

At current rates of growth, the Giving USA Foundation says, national charitable giving will not reach its 2007 peak until at least 2016.

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Giving by Individuals (1972-2012)

Giving is in billions of current dollars. Lighter bars identify years with at least one month of recession. Source: Giving USA Foundation, Giving USA 2013.

Tax Reform Actof 1986

Takes Effect

The Pease Limitation essentially limits the total amount of most otherwise allowable itemized deductions, including the charitable deduction, for many upper-income taxpayers. Limiting the deductibility of charitable gifts and thereby reducing the incentive for high-net-worth individuals to give, potentially puts a very large amount of charitable revenue in jeopardy.

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Lower interest rates mean lower returns on savings vehicles such as treasury bills, certificates of deposit, and mutual funds. This disproportionately hurts older people, who are more likely to be retired and reliant on these more conservative, interest-bearing investments.

Five Year Treasuries

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2.8%

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< 35

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≥ 75

Annual Net Interest Impact for Average HouseholdChange in Available Income 2007-2012

Source: US Federal Reserve Survey of Consumer Finances and Flow of Funds; Bankrate; Federal DepositInsurance Corporation; US Treasury Department; Bloomberg; McKinsey Global Institute analysis.

Taken from QE and Ultra-Low Interest Rates: Distributional Effects and Risks , by Richard Dobbs, Susan Lund, Tim Koller, and Ari Shwayder, McKinsey Global Institute, November 2013, www.mckinsey.com/mgi.

$1,500

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$ Change inAnnual

Income

Age ofHead of

Household

% Change inAnnual

Income

According to a McKinsey Global Initiative study published in November 2013, donor-aged adults in the United States lost $2,000 or more compared with their 2007 income. Anecdotally, in our donorCentrics benchmarking groups, we have already started to see high-value older donors giving smaller gifts; if this continues, it could have a large negative effect on charitable giving in the U.S.

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The labor force participation rate has been steadily declining, along with index donor numbers, for the past five years. As of September 2013, it reached a 35-year low of 63.2%. As of May 2016 the rate is 62.6%.

Start ofRecession

Labor ForceParticipation Rate

63%

Index Donors-25%

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Fig. 43: donorCentrics Index Overall Donor Change vs. U.S. Labor Force Participation Rate (2005-2015)

HaitiEarthquake

End ofRecession

Source for Participation Rate: Seasonally adjusted quarter end Labor Force Participation Rate, U.S. Department of Labor Bureau of Labor Statistics,http://data.bls.gov/timeseries/LNS11300000. Retrieved March 24, 2016. A Pearson correlation coefficient (r) of +0.97 indicates an extremely strong positive relationshipbetween the two metrics.

Burma Cyclone &

China Earthquake Hurricane

SandyJapan

EarthquakeHorn

of AfricaFamine

Correlation (r) = +0.97

Winter Storm Juno

Government Shutdown &

Typhoon Haiyan

Nepal Earthquake

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Workforce Participation

At 62.6% as of May 2016

Percentage of Americans16-65 in the workforce, either working or looking for work.

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In our donorCentrics Index, donor counts last peaked in 2005. Part of the reason for that peak was the extraordinary giving in response to the Gulf Hurricanes and the Indian Ocean Tsunami, but it also happened at the time when the population of US-born people turning 50 was at its peak.

0.0 MM

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Fig. 44: Maximum Possible US-Born Population Aged 50 (1984-2064)(Number of Live Births Fifty Years before Date Shown)

BABYBUST

BABYBOOM

Maximum Number of People Turning 50 in 2025

Maximum Number of People Turning 50 in 2015

BABYBUST

BABYBOOM

Source: 12-Month Ending Number of Live Births in the United States, Centers for Disease Control and Prevention - National Center for Health Statistics, http://www.cdc.gov/nchs/data_access/Vitalstatsonline.htm. Retrieved March 24, 2016. Each original annual birth cohort is shown under the date that is fifty years after the original birth year. Does not take deaths into account.

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March 2016

Meeting structure

• Breakout meetings for highly interactive and confidential group

discussions

• Combined sessions to share trends and best practices across larger

group of industry leaders

Wealth of data

• 37 unique organizations

• Over 19 million donors and $2 billion in revenue combined

Target Analytics Sustainer Summit

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Trends in Active Giving by Gift Type

The percentage of

recurring donors

grew steadily over

the past five years

(composite).

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Source TrendsWeb / Digital and Face to Face sources grew steadily since 2011 as a

percentage of recurring revenue.

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Growing Sustainer Populations

Direct acquisition to recurring giving grew steadily since 2011 – 63% of first-

time recurring donors were direct acquired to recurring giving in 2015.

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Growing Sustainer Populations

The percentage of new

donors who were

recurring was 12% in

2015. Note that the

percentages ranged

from less than 1% to a

high of 86%.

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Retention by Gift Type

• Annual retention rates for recurring donors were about 69% higher than retention

rates for single gift donors. • After 13 months, 70% of recurring donors were still giving.

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USPS Mail Usage Forecast

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Payment Channels

The results indicated that different types of advertising mail were handled in different ways by all recipients. Credit card solicitations were most likely to be thrown away without being read.

Charitable solicitations were also discarded at a high rate, but not as high as credit card solicitations.

Both catalogs and advertising mail from companies with which the recipient has done business had relatively high read and respond rates.

Finally, mail with coupons included generated high response rates across-the-board. #Bridge16

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Blackbaud Index

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Philanthropy is a catalyst for positive change, but it can also be a powerful estate-planning tool. By leaving money to charities, donors get to align their personal values and interests with their financial goals—ensuring a portion of their wealth is used to support causes they care about even after they are gone.

Two thirds of Americans give to charities.10% with a will leave an estate gift54% have a will – leaving just over 5%making planned gifts

Done right, however, financial gifts to a nonprofit can also create an income stream during retirement, facilitate the transfer of wealth and provide valuable tax benefits for donors and their heirs. The recent CNBC Millionaire Survey found 40 percent of those with assets between $1 million and $4.9 million are planning to give between 1 percent and 10 percent of their personal wealth to charitable causes after they die.

Planned Giving

http://www.cnbc.com/millionaire-survey/

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Industry Trends and Insights

• Total Charitable giving has recovered to 2007

• Individual giving has not

• The number of new donors has been declining since 2005

• Mail is fast declining as a channel for payment

• Sustainer giving is growing fast in the US

• Online giving beyond emails is also growing

• Economic factors affect giving – watch labor market participation, GDP, and the S&P 500 – and the Fed.

Thank you [email protected]

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