Hilda Vega

Many of us in philanthropy are looking to 2012 as a year of recovery, but a series of reports issued this past year have continued to raise questions about just what kind of a recovery we’ll actually see. While giving in general has been steadily increasing since 2008, with stable giving levels maintained between 2009 and 2010, giving data reveal that the recession and its subsequent impact on philanthropy have shifted giving patterns in ways that are not favourable for every sector. By looking at recent giving patterns of foundations, corporations and individuals separately, we can begin to see that some non-profit sectors have reason for optimism, while others may need to wait a few years to fully fund their long-term goals.

Private foundations

The Foundation Center’s September publication Highlights on Foundation Giving Trends, indicated that in 2009 eight of the 10 giving sectors it tracks ‘showed declines in funding, with the steepest declines reported for the environment and animals and the social sciences’. Sectors that saw an increase in giving include education and public affairs/social benefit. (This sector includes civil rights and social action, community improvement and development, philanthropy and voluntarism, and public affairs.)

However, this last note about increases in two sectors necessitates further analysis. Social justice philanthropy – technically included under public affairs/social benefit giving – is one of the giving approaches that could be in most jeopardy due to the economy and other factors. Defined by the Foundation Center as ‘the granting of philanthropic contributions to non-profit organizations based in the United States and other countries that work for structural change in order to increase the opportunity of those who are the least well off politically, economically, and socially’, social justice philanthropy was disproportionately impacted by the recession and is predicted to struggle the most to return to pre-2007 giving levels. Additionally, the sector has been further impacted by the closure of progressive foundations that lost their assets in the Madoff scandal and by the planned spend-down of anchor donors such as The Atlantic Philanthropies.

The intended use of foundation gifts also shifted, with international giving decreasing a bit and capital campaign support dropping by more than 10%, but general support increasing (always a good thing!). Though 2010 numbers on foundation giving by sector are not yet available, one can guess that the purpose, geographic scope and size of donations have continued to shift as donors adjust their giving priorities to their capacity to give. Such changes are common among donors, but could permanently impact the financial stability of hundreds of organizations.

Changes in philanthropic practice also leave many of us guessing. For example, we know that many foundations cut back on giving as well as on their own administrative expenses. What will this mean over the long term? Will foundations decide to keep a tight focus on core grantees and move into a mode of leaner operations for the long term? Will those that do see a strong rebound in assets be hesitant about returning to more flexible and responsive considerations of potential new grantees?

Corporate philanthropy

In corporate philanthropy, giving continues to hold steady. The Foundation Center notes that many ‘… corporate foundations build up their endowments during more prosperous years so that they can draw on those resources to stabilize giving during downturns. Productivity gains have also helped the corporate sector to return to profitability more quickly than could have been anticipated at the outset of the financial crisis.’

Increases have occurred in international giving by corporations, with several responding to ‘natural disasters’ with significant one-time donations. It’s important to remember, however, that corporations tend to include non-cash donations in their valuations. The Committee Encouraging Corporate Philanthropy’s 2011 Giving in Numbers report notes that ‘more than half of the companies surveyed gave less cash in 2010 than they did in 2007’. Businesses are increasingly assessing their ability to donate time, skills and products to offset decreases in cash donations.  However, corporations are refining their giving as well, focusing increasingly on donations that help advance their business objectives and enhance their image. This may increase support for place-based giving, but also harm newer or smaller organizations lacking the capacity to present a formal ‘business case’ to this group of donors.

Individual donors

The final (and largest) group to consider in understanding giving trends is individual donors. Fidelity Charitable commissioned a study earlier this year which indicated that, of those donors surveyed, 72% planed to give the same amount or more this year. This figure is up from 63% of surveyed donors who intended to engage in charitable giving in 2010. Donors with funds held by Fidelity Charitable also recommended 12% more grant dollars in 2011 than they did in 2010, while transferring nearly 23% more into their Fidelity Charitable funds than they did last year (although transferred amounts need not be granted in the year of transfer).

Non-profits continue to revise their approach to donors in order to support their activities, with a new focus on specific, short-term campaigns that allow donors to understand goals and outcomes. Nancy Raybin, on behalf of Giving USA Foundation, notes that by ‘…setting discrete fundraising goals for specific activities, non-profits find they can break through the uncertainty about the economy and help donors connect their gifts to community needs’.

Nonetheless, it’s difficult to imagine that individual donors will or even can make up for the financial losses suffered since 2007. Both in my own discussions with non-profits, and in the data gathered by Giving USA Foundation, it’s clear that the strongest push for recovery will be made through requests to individual donors. But with so many organizations competing for dollars that are now more closely guarded, it remains to be seen if individual donations will continue to be focused on existing relationships, or if the most affected organizations will actually succeed in opening new doors.

More than ever, it’s critical for donors to assess their short- and long-term philanthropic goals, while still keeping an open mind towards taking measured risks to help organizations adapt to the new economic reality.

Hilda Vega is senior advisor at Strategic Philanthropy, Ltd.