By Dr. Alicia Schatteman
It’s hard to underestimate the importance of the holiday season for most nonprofit organizations, especially during COVID19. About 70 percent of Americans donate money to charitable causes. And according to Giving USA, individuals account for 81 percent of all revenue to nonprofit organizations, the largest source by far.
For many nonprofits, the bulk of their individual donations come during the holiday season. December is by far the most generous month of the year. It’s a time when people are feeling more charitable and are looking at what they have left in terms of discretionary spending. It’s also at the end of the income-tax year, so people are thinking about tax deductions before Dec. 31.
Why do people give?
First and foremost, it’s recognition of a need. Either the mission of the organization resonates with the donor, or the donor has a relationship with the cause or the organization. The challenge for nonprofits is to build on that recognition over time. The nonprofit has to know who in their community recognizes the need and solicit their support. It also has to know when to ask for support. Many nonprofits are actually seeing an increase in demand for their services as a result of COVID19, such as those organizations that provide food or housing.
What types of organizations are most reliant on individual donations?
The percentage of income from donations changes depending on the type of nonprofit. For instance, human service organizations get a substantial portion of their income from government contracts. On the other hand, individual donations are the bread and butter for many arts groups and smaller community-based organizations.
Has COVID19 affected annual giving?
Absolutely. COVID19 upended the finances of individuals and nonprofits. Many people have lost jobs or have had their hours reduced so some individuals may not be able to give as they did in previous years. Furthermore, there have been relief efforts that have redirected foundation giving to COVID19 responses and possibly away from giving to other nonprofit organizations.
Charitable giving is cyclical, contracting during hard times, and expanding as incomes rise. Overall, total charitable giving adjusted for inflation has risen since the 1960s, but we have also seen large increases in the number of nonprofit organizations, now about 1.5 million. However, giving as a percent of gross domestic product (GDP) has remained relatively flat over the same time period, about 2 percent.
According to those who claim charitable deductions in their IRS tax returns, 27.3 percent of households donate to charity. The median contribution is $2,564. Overall, Americans give about 4.7 percent of their income to charity. Middle-class Americans give a far bigger share of their discretionary income to charities than the rich. Households that earn $50,000 to $75,000 give an average of 7.6 percent of their discretionary income to charity, compared with an average of 4.2 percent for people who make $100,000 or more. Also, regions of the country that are more religious are more generous than other regions. However, if giving to religion is removed, other regions then become more generous.
This data, however, only captures giving that is reported to the IRS through tax returns. A lot of giving takes place outside of this reporting, especially because many taxpayers do not need to itemize their taxes and use short tax forms where giving is not captured. One example of giving that isn’t captured by the IRS is giving circles, groups of individuals who gather and decide to pool their philanthropic giving over the year. This type of giving that goes back in history is not well studied and cuts across all demographic characteristics unlike giving captured through tax returns.
Women often want to engage with an organization, so they are more likely to be volunteers, as well as donors. Both men and women are interested in outcomes and the performance of an organization, but women really want to know what’s behind the numbers—or how a nonprofit is impacting real people and real lives. Men tend to use a rational efficiency-based model when giving. Women are more charitable in the sense that a higher percentage of women make charitable contributions, but gifts from men tend to be larger.
How can you ensure that your donation is going to a good organization?
The more information that an organization discloses about its financial operations—and the easier it is to access that information—the better. Most nonprofits must fill out an IRS Form 990 for federally tax-exempt organizations, and the form contains information about programs and finances. Some nonprofits make this information available online, or it should be easily available to donors who request the information. All IRS Form 990s are available for free at GuideStar.org. Donors can also look at an organization’s annual report, and it should be easy to understand. Good nonprofits will tell you what they do; great nonprofits will show you what kind of impact they have on their community.
COVID19 has upended nonprofit organizations at all levels. They need your support this year so, if you are able, continue to support the missions of the organizations you believe in. Staff are stretched thin so some data and information may not be as up to date as you would like. Giving is a long-term relationship so reach out to an organization you are interested in supporting if you have any questions.
Volunteers are very important to provide the services and programs to our communities. COVID19 has affected volunteering since most volunteers are women over 65. If you or your family members are able to do it safely, consider donating your time and become a philanthropist of time.
Giving USA https://givingusa.org/