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Challenge: Declining Number of Donors - While total global giving increased slightly in 2018, there were fewer donors that year, according to the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute. Total donations to the nonprofit sector grew 1.6% over 2017, a rate significantly less than the 8.8% increase during the prior year, according to the 2018 Fourth Quarter Report from the groups' Fundraising Effectiveness Project (FEP). The FEP report, which draws on data from more than 4,500 charities, also found that the total number of donors fell by more than 4%, while the donor retention rate fell by more than 6%. The gain in donations was driven by donors who gave $1,000 or more. Total giving from gifts of $1,000 or more increased by 2.6%, but revenue from smaller gifts decreased; gifts in the $250 to $999 range dropped by 4%, and gifts of under $250 dropped by 4.4%. Some attribute the decline to changes in the tax law enacted in 2017 that doubled the standard deduction while eliminating others. Under the new law, 8% of households claimed the charitable deduction in 2018, down from 21% under previous rules, according to data from the Tax Policy Center cited by the Wall Street Journal.
Industry Impact - The decline in number of donors is increasing the pressure for nonprofit institutions to obtain larger gifts and find new donors.
Dependence on Economic Conditions - Charitable contributions typically shrink in difficult economic times. Donations from individuals, estates, foundations, and corporations in the US reached an all-time high of more than $410 billion in 2017, the fourth year to exceed the previous peak set before the late-2000s recession. Even nonprofits with large endowment funds suffer in down economies, because their investment income depends on the state of the financial markets.
Dependence on Big Donors - Many nonprofits depend on a few major donors for a large share of revenue. Big donors may declare an intent to continue contributions, but few nonprofits have binding contractual assurances. In down economies, some donors who previously had made multi-year promises may be unable to fulfill them when the value of their financial assets declines.
Recruiting and Retaining Qualified Staff - Barriers to securing key nonprofit leaders include work-life balance concerns, insufficient lifelong earning potential, lack of mentorship and training, and overwhelming fundraising responsibilities. During periods of economic prosperity, nonprofits are likely to experience increased staff turnover.
Competition for Resources - The number of US nonprofit organizations continues to grow as charities respond to a variety of needs caused by humanitarian crises, natural disasters, and disease outbreaks. This proliferation of charities, especially among smaller organizations at the grassroots level, can result in the duplication of services, a drain on individual nonprofits' funding resources, and an increased demand for experienced nonprofit managers and staff.
Seasonal Cash Flow - Many nonprofits raise a majority of their income during the last quarter of the year, when donors are often in a more charitable mood and large donations may be made for tax reasons. Organizations can mitigate this seasonality by boosting fundraising efforts at other times of year.
Public Confidence and Transparency - More nonprofits aim to build public trust by drawing up stiff codes of conduct and appointing ethics officers. Others are creating donors' bills of rights that assure contributors access to information about their finances. Nonprofits are being encouraged to conduct annual ethics audits and are beginning to require CEOs to certify their organizations' annual financial statements.
Purchased Fund-raising Lists - Letter, email, and telephone fundraising campaigns increasingly rely on donor lists bought from other organizations. Large national nonprofits often sell access to their donor lists to smaller nonprofits. Additionally, many nonprofit organizations exchange donor lists with other nonprofits. Brokers and list managers have become sophisticated at building lists that target potential donors according to desirable demographic characteristics.
Charity Gaming - Most states in the US allow nonprofits and charities to raise donations through some form of gambling. Rules can vary from state to state, but in jurisdictions where it is legal charities can run bingo games, pull-tabs, raffles, or even casino-style games such as blackjack and roulette. Success can depend on how well the games are organized and run. Competition from casinos, state lotteries, and other forms of legal gambling can have a negative impact on charitable gaming.
Favorable Demographics - Older people and their estates represent a significant portion of the donor base for many nonprofits. Americans 65 and over are the fastest-growing segment of the population, projected to increase by nearly 50% between 2016 and 2030. Many older Americans have both the inclination and the means to make larger charitable contributions.
Internet Donations - Many nonprofits have made it easy for donors to contribute over secure websites. Consequently, online giving has joined more traditional channels as a mission-critical part of the fundraising mix. Donating online is often more efficient than offline and can help charities reduce administrative costs. Nonprofits seem to have the most success when they combine traditional appeals, such as direct mail, with the option to give electronically.
Social Networking - Some nonprofits are creating and maintaining profiles on online social networking sites to recruit new staff members and volunteers, engage audiences interested in their cause, build supporter lists, and raise money. Some of the most popular social networking sites include Facebook and Twitter. Nonprofits may also use professional online networks, such as LinkedIn, and issues-focused networks, like Change.org.
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Demand: Tied to special interest and social service need
Need strong fundraising skills and name recognition
Risk: Economic health affects donation levels
Domestic demand for nonprofit institutions is forecast to grow at an annual compounded rate of 4 percent between 2019 and 2023. Data Published: January 2019
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