Sluggish First Quarter Raises Concerns for Year-Long Giving Outlook
May 31, 2018
While relatively little giving occurs in the first three months of the year, data from the Fundraising Effectiveness Project’s (FEP) 2018 First Quarter Report shows some early warning signs for charities and giving.
The Report, which looks at giving data from January to March 2018 and compares it to the same time period in 2017, reveals that every metric the FEP analyzes is on the decline—with the exception of revenue produced by donors giving $250 or less.
Key metrics in the study include the total number of donors (down 6.3% compared to first quarter 2017); total revenue (down 2.4%); and overall donor retention rate (the percentage of donors who continue to give to the same organization from one year to the next, down 4.6%). The number of new donors fell significantly (down 12%), as did the number of newly retained donors (new donors last year who have made a second gift this year, down 18 percent).
“The reason we’re so concerned with these first quarter numbers for 2018 is because of what we saw in 2017,” said Jon Biedermann, vice president of DonorPerfect CRM Fundraising Software. “For the first three quarters of 2017, giving was way behind the pace of 2016. Only a record-breaking 4th quarter increase is why giving increased overall by the end of the year. So far, giving is off to an even worse start in 2018, so we’re concerned about what charities may experience in their fundraising throughout the year.”
Elizabeth Boris, founding director of the Center on Nonprofits and Philanthropy at the Urban Institute, cautioned that there were two major caveats to the findings. First, previous studies by other organizations have found that a large majority of giving occurs in the final three months of the year, October through December. Declines in giving in the first quarter and beyond do not necessarily portend a year of decreased giving.
Second, the new federal tax law, passed late last year, significantly changed giving incentives and may have been a key factor in the extraordinary level of giving that occurred in the last quarter of 2017 (a 47% increase for donors donating $1,000 or more compared to the last quarter of 2016). While it is too early to conclusively state what the exact impact of the new tax law was on giving, it is very possible that the higher levels of giving in the fourth quarter of 2017 created a sense of donor fatigue and led to lower-than-usual levels in the first quarter of 2018.
“The bottom line is that we are now in a very different charitable landscape than we were 12 months ago,” said Jay Love, chairman and chief relationship officer of Bloomerang. “The work of the FEP and the use of the Growth in Giving database—the world’s largest database of actual nonprofit donation history available for public and private research—is going to be critical as we help charities navigate this new environment and inspire donors to support their causes.”
Another concern that the latest data underscores is the continuing trend of fewer donors giving more money. With the number of donors down more than six percent, but giving revenue decreasing by just 2.4 percent, the charitable sector continues to see fewer, typically wealthier donors accounting for more and more of giving totals. “This situation simply isn’t financially sustainable for the 1.5 million organizations that make up the charitable sector,” said Mike Geiger, MBA, CPA, president and CEO of the Association of Fundraising Professionals. “Donors who give $50 - $250 annually are the mainstay of many charities that don’t have major gift programs. The slow, long-term drop in the number of these donors is jeopardizing the work and impact of many charities.”
Data from the FEP’s First Quarter 2018 Report is based on a panel of charities selected from the Growth in Giving database of 154 million transactions from 17,597 organizations and $68 billion in donations since 20015. Organizations included in the panel have raised $5,000 or more from 25 or more donors in each of the last six years. Revenue figures have been adjusted for inflation.
Jeff Gordy, CEO of NeonCRM, which contributes data, notes that charities should be very concerned by the decrease in recurring giving, as well as the decrease in major gifts. “Not only are nonprofits attracting fewer major donors, but they are not retaining the donors they already have,” said Gordy. “Nonprofits will need to do a better job of promoting their work and staying in touch with their donors to reverse this trend. This report covers the averages, but there are many nonprofits that are breaking this mold and doing much better.”
To download the Fundraising Effectiveness Quarterly Report and learn about other tools to help measure fundraising effectiveness, please visit afpfep.org.
About the Fundraising Effectiveness Project
The Fundraising Effectiveness Project was created in 2006 and includes the collaboration of the Association of Fundraising Professionals and the Urban Institute. The Growth in Giving database, with more than 125 million donation transactions, is continuously updated by leading fundraising software thought leaders (in alphabetical order) Bloomerang, DonorPerfect, and NeonCRM. New partners include Blackbaud and Softrek. Additional partners include the 7th Day Adventists, the YMCA of the USA, DonorTrends, and DataLake. For more information and how to have your fundraising software provider participate, please visit afpfep.org.