Posted October 1st, 2004

Improving Economy Brings Increased Optimism

Fundraisers have long known that the health of the economy can have a direct impact on charitable giving. Now, thanks in large part to the economic recovery that began in the latter part of 2003, fund raising is reportedly on the upswing as the number of large gifts, the ranks of the superwealthy, and the confidence among America’s fundraisers have enjoyed a noticeable lift.

The million-dollar club

One of the more effective barometers for the overall health of fund raising is the number of large gifts received in a given period of time. As part of its extensive research on philanthropy in America, the Center on Philanthropy at Indiana University maintains the “Million Dollar List,” a list of gifts of at least $1 million received by American nonprofits each quarter as reported in various publications or forwarded to the Center. The compilation is a continuation of the original Million Dollar List begun by veteran fundraiser Arthur C. Frantzreb, who estimated that the quarterly compilation identified only 25% to 50% of such gifts. Nevertheless, as the list has maintained the same criteria and compilation methods since its inception, it can be a useful way to compare the number of large gifts received from year to year or quarter to quarter. See www.philanthropy.iupui.edu for more details.

For instance, the number of gifts reported for the second quarter of 2004 totaled 351, a 35% increase from the first quarter of 2004 (260 gifts) and an increase of 33% from one year ago (264 gifts). Over 50% of these gifts were directed to higher education, with colleges and universities receiving 191 of the 351 gifts reported.

Gifts from all sectors (individual, corporate, and foundation grants) increased over the first quarter of 2004 and from one year ago. Of particular interest is the fact that gifts from individual donors rose 13.8% from earlier this year and a remarkable 30.7% from the second quarter of 2003.

The number of very large gifts has increased as well. In the first half of 2004 alone, 23 charitable gifts in the $50 million and up range have been received, compared with a total of 30 in the entire year of 2003, hinting at a growth in confidence among the superwealthy.

Impact of wealth concentration

Fund development executives may wish to pay particular attention to the increasing concentration of the nation’s wealth among a smaller number of individuals. In World Wealth 2004, a study commissioned by Merrill Lynch and Capegemini, it is reported that the number of those whose financial assets (excluding home equity) exceed $1 million has increased by 14% since last year. In a similar vein, Forbes magazine’s recently published list of the 400 wealthiest Americans reveals that the total net worth of these individuals has increased by $41 billion in one year (see page 4 for more in this topic).

Those charged with raising funds may want to rethink their marketing strategies in light of this growing demographic change among their donors and potential donors. As much of this wealth is held in the form of real estate and securities, it may be wise to step up efforts to encourage gifts of non-cash property. Donors should be reminded that it may be best from a tax planning standpoint to make gifts in this manner as well.

Rise in confidence

It would appear that the increase in major gift activity reported above is in response to the ongoing economic recovery, and fundraisers have noticed the change. The Center on Philanthropy’s recently released Philanthropic Giving Index (PGI) reveals a rise in confidence among fundraisers of over 25% from one year ago. In fact, the current PGI is at its highest level since before the September 11, 2001, terrorist attacks.

Fundraisers are optimistic about the near term as well, with almost two-thirds reporting that they expect the economy to have a positive impact on their efforts in the next six months. See the Center on Philanthropy’s Web site at www.philanthropy.iupui.edu/pgi-summer2004.pdf for the complete report.

How it works

The Center on Philanthropy has been conducting these periodic surveys of the nation’s fundraisers since 1998. Intended to gauge confidence among those engaged in nonprofit fund development, the survey samples a cross-section of the nation’s fund-raising executives and consultants representing a broad range of charities of various sizes, geographical locations, and levels of revenue.

The survey asks respondents not only to comment on the present fund-raising environment but also to predict the climate for fund-raising success in the upcoming six months. The average of these two is then reported as the overall PGI. Higher numbers indicate increased confidence. As was mentioned previously, the Summer 2004 survey reported notable improvements in fundraisers’ opinions about the present fund-raising situation, their expectations for the next six months, and the overall PGI. These most recent results revealed especially significant increases from the Summer 2003 report: a 25.3% increase in the overall PGI, a 38.7% increase in the Present Situation Index, and an 15% increase in the Expectations Index.

What a difference a year makes

The Center on Philanthropy attributes this in-crease in confidence to the continually improving economy. The S&P 500 Index has risen about 17% in the last year. Additionally, the nation saw an increase of about 3.5% in the level of personal income.

While only 7.5% of respondents one year ago felt that the current economy was having a positive or very positive effect on fund raising, now almost half (45%) believe that it is. And while the Summer 2003 survey showed that 85.2% of those surveyed held a negative opinion about the impact of the economy on fund raising, the Summer 2004 survey shows that only 35.7% currently hold that opinion.

In looking to the near future, 42.5% of respondents one year ago saw a negative outlook for the next six months. Now that number has fallen to just 18.5%. Well over half of those surveyed in the Summer 2004 report (62%) predict that the economy over the next six months will have a positive or very positive impact on the future of fund raising.

With no indication of an imminent decline, non-profits have good reason to feel confident that a solid economy will translate into increased gifts, both current and deferred, in the near future.

How planned giving fared

As has been the case in the past, fundraisers once again listed planned giving among the most successful fund-raising techniques, along with major gifts. Almost 60% of respondents currently listed planned giving as a successful or somewhat successful way to raise funds, and 76.7% feel that it will continue to be so in the next six months.

New to the Summer 2004 survey were several questions aimed at determining the success of different planned giving methods, such as trusts, annuities, and bequest commitments. Bequests and annuities were seen as the most successful, with trusts following close behind.

Organizations with annual revenues exceeding $10 million found the most success with planned giving, as did those with either a regional or a national donor base.

What does it all mean?

The Summer 2004 Philanthropic Giving Index bodes well for the immediate future of fund raising in general and planned and major gifts in particular. The dramatic increase from the Summer 2003 report and the number of large gifts received to date in 2004 indicate that fundraisers have good reason to feel increased confidence—both now and for the future.

All indicators point to increased success in the next six months. Almost two-thirds of those surveyed feel that the economy will encourage donors to give, and present economic indicators point to a stable economy in the near future.

Wise fundraisers will see an opportunity this year-end to take advantage of a favorable economy and the general optimism to help ensure their organization’s future stability. Sharpe offers a wide range of consulting, training, and creative services that can help fundraisers capture the unique fund-raising opportunities presented this year. Visit www.sharpenet.com for details.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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