Anxiety in Times of Plenty

When Don Herring talks about fundraising at the American Red Cross, he describes two kinds of money: “gray sky” dollars that donors give in the wake of large, heart-rending disasters and “blue sky” dollars to support the charity’s basic operations, often when the landscape feels slightly calmer. Last year, skies were largely gray.

Donations to the Red Cross shot up by nearly 158 percent as donors gave generously to aid the victims of Hurricanes Harvey, Irma, and Maria, which struck during the group’s 2018 fiscal year.

“When large, visible disasters happen, the American public continues to step up with generosity,” says Herring, the Red Cross’s chief development officer. That largess continued with the devastating California wildfires later in 2018. All the while, contributions to support the organization’s nondisaster work — that “blue sky” giving — remained steady.

It would be understandable for a fundraising official to be confident, maybe even a little brash, coming off a year when giving more than doubled. But that’s not how Herring feels. He wonders whether the outpouring of support the Red Cross experienced can continue in an era of bigger and ever more frequent crises.

“Is there a point where there’s just so many disasters that people just become immune to them?” he wonders. He fears people may become overwhelmed and start pulling back — deciding that someone else will have to take care of this one.

“We haven’t seen that happen as of yet,” he says, “but we do worry about it in the future.”

Herring isn’t alone.

Donations rose significantly at many of the nation’s largest nonprofits, outpacing giving to the nonprofit world as a whole by a significant margin. But storm clouds are on the horizon. Fundraisers are monitoring potential threats to the economy and political uncertainty that they worry could depress future giving.

The 100 organizations on America’s Favorite Charities, our annual ranking of the organizations that raise the most in cash support, chalked up an 11.3 percent increase in donations last year.

IRC

In Afghanistan, Fatima, 50, received cash assistance from the IRC to help support her family. She lives with her son, his wife, and their four children. Her own husband died many years ago. (IRC)
But the growth has been uneven among the nation’s biggest recipients of cash and stock gifts. Some organizations recorded drops while others surged ahead. Despite the millions and even billions these groups raise, fundraisers are anxious.

Josh Birkholz, CEO of the fundraising consultancy Bentz Whaley Flessner, whose clients include many groups on this list, says he hears this common refrain: “The numbers have been good for so long that it can’t possibly keep going.”

It’s not that the numbers aren’t good, he says, but fundraisers are afraid they won’t last.

The wealthiest organizations in the nonprofit world claim an outsize portion of total charitable donations. The $49.2 billion raised by these 100 groups represents about 8.7 percent of all giving last year, as tracked by the annual “Giving USA” report — even though they’re only a sliver of the 1.5 million nonprofits in the United States.

The strong showing by the nation’s biggest fundraising groups underscores the growing gap between big charities and all others. Total giving dropped by 1.7 percent after inflation last year, according to “Giving USA,” just the 13th drop in overall giving in the past four decades.

But even the largest charities have formidable competition in the race for contributions: commercial donor-advised funds. Four years ago, Fidelity Charitable brought in more money than United Way Worldwide for the first time. But what was then a gap between the two organizations has become a chasm.

Fidelity Charitable took in $9 billion last year, triple the $3.0 billion United Way Worldwide raised. In fact, the donor-advised fund giant brought in more contributions in 2018 than the top five nonprofits on the America’s Favorite Charities list combined. Donations to the top five DAFs grew more than 28 percent last year. (America’s Favorite Charities counts only money given to nonprofits devoted to a cause. Donor-advised funds are just a giving vehicle so in calculating cash support, we excluded gifts to DAFs, even for community foundations.)

Donor-Advised Funds Raise More Than Charities

DAFs have grown sharply in recent years. Consider that United Way, which tops our cash-support ranking, reported total private support of $3.0 billion last year. As you can see below, both Fidelity’s and Schwab’s charitable gift funds exceeded that amount.

TOP 5 DONOR-ADVISED FUNDS

Donor Advised Fund, 2018 Private Support, Percent Stock

• _{Fidelity Charitable Gift Fund ..$9 billion.. (70.3%)}
• _{Schwab Charitable Fund ..$3.3 billion.. (70.3%)}
• _{National Philanthropic Trust ..$2.7 billion.. (61.7%)}
• _{Vanguard Charitable Endowment ..$1.8 billion.. (43.8%)}
• _{National Christian Foundation ..$1.8 billion.. (26.2%)}

Focus on the Ultrawealthy

One reason the largest nonprofits are doing so well is that they have focused their efforts on the biggest donors — those who have gained the most as wealth inequality has grown. In recent years, big donors have made up for large losses in giving from middle-class people, whose household income has been largely flat, leaving them with less discretionary income. While higher education and health-care organizations have long focused on winning big gifts, groups such as Unicef USA (No. 36) and the Boys & Girls Clubs of America (No. 10) that are devoted to other causes are also increasingly turning to the ultrawealthy to meet their bottom-line goals.

“Since the last recession, the wealthy keep getting wealthier,” Birkholz says. “The organizations whose business models are tuned towards high-net-worth philanthropy are the ones that are doing the best.”

Boys & Girls Clubs of America

Impact of Tax Changes

One reason that the very wealthy are still good prospects is that they were less likely to face the loss of charitable deductions as an incentive to give because of the tax law enacted at the end of 2017. Though the figures in our rankings are the first to reflect the impact of the new tax law, nonprofits are still not sure how much difference it made. The most significant change came from the drop in the number of people who itemized and therefore had access to the deduction. Last year the share of individuals who claimed charitable deductions on their taxes fell to 8.5 percent, compared with 24 percent in 2017.

Some organizations that raise money from middle- and upper-middle-class donors say they’re feeling the bite of the policy change while others believe the impact has been modest and hard to measure. A good number of groups are reserving judgment. They say they haven’t seen an impact yet — and plan to wait and see.

By the Numbers

A breakdown of America’s Favorite Charities by type of group

Some fundraising experts say they think concern about the tax law has caused some donors to take a longer time to decide how much to give — and when to make a contribution, says Phil Hills, CEO of Marts & Lundy, a fundraising-consulting firm that conducts feasibility studies of donors’ capacity to give for charities considering major campaigns.

The cause might be confusion about the tax changes, “maybe there’s so much disruption that they just want to sit out for a year until they figure it out” — or it might be economic uncertainty. Either way, he says, “it’s just taking people a lot longer to make a decision.”

Another possible impact of tax changes: bundling. Many charities report an increase in donors making larger-than-usual donations one year and none in the next 12 months or so to maximize tax benefits for their giving. This may leave some charities in the lurch, unclear about whether they can rely on donors to provide operating expenses.

Some fundraisers see the laws as a major headwind.

“The tax legislation is a problem for any organization that relies on middle-class and upper-middle-class donors,” says United Way Worldwide CEO Brian Gallagher.

While United Way held on to the top spot in our rankings, the charity took in 6.9 percent less in cash support than it did in 2017. That continues a downward trend over many years for the organization as a whole.

The number of people who give United Way $1,000 or more annually went up each year for more than a decade before plateauing in 2018. Gallagher attributes that and some of his group’s overall fundraising decline to the tax-policy changes. In 2014, the charity created a giving society for individuals who contribute at least $10 million within a 10-year period, an effort he sees as indicative of the widening inequality in philanthropy. That group already has 37 members.

“We didn’t need more incentives for wealthy people,” Gallagher says of the tax law changes passed in 2017. “We love rich people, but it’s forcing us and all nonprofits to continue to narrow our targeting.”

But Gallagher is optimistic about the increasing number of local United Way affiliates that have raised more year over year. United Way continues to see growth in campaigns focused on specific causes and those that reach out to certain groups like women donors or young professionals.

While workplace giving campaigns have declined steadily, the organization has identified promising ways to reinvigorate that central part of its work, including a technology partnership with Salesforce.org to help people support causes and organizations regardless of where they work or how much they can give.

Top 5 Recipients of Donated Stock

Of all the groups we surveyed, these raised the most in stock donations in 2018. Some of these groups didn’t have enough cash support to make our list of America’s Favorite Charities.

STOCK GIFTS BY ORGANIZATION (share of total support)

• _{Greater Kansas City Community Foundation..$284,127,222...(49%)}
• _{Stanford U. ..$127,756,291..(12%)}
• _{Columbia U. ..$112,936,130..(11%)}
• _{U. Of California of San Francisco..$95,965,462..(13%)}
• _{Massachusetts Institute of Technology..$89,557,564..(19%)%}

A Good Year for Education

Some charities that net big gifts can come to see them as a double-edged sword.

“They risk people saying, ‘Well, my measly gift doesn’t matter,’” says Dave Kennedy, vice president for alumni affairs and development at Duke University (No. 30).

That’s not to say Duke fundraisers no longer pursue big gifts. But they’re also engaging young alumni who primarily contribute small sums to inspire them to get into the habit of giving. Duke last year allowed seniors to direct their class-gift donation to a campus service or activity of their choice, such as the athletics program or the Black Student Alliance, a response to young donors’ desire to have input into how institutions use their money. Previously, those donations all went to the annual fund.

The result was striking: Sixty-one percent of seniors gave last year, up from 43 percent the previous year.

Like Duke, other colleges and universities saw growth in 2018. This year’s ranking includes 39, split almost evenly between public and private institutions. Cash giving to the 19 public universities rose 21.4 percent, while the 20 private institutions saw a more modest 4.1 percent rise as a group.

Ambitious multiyear drives shape much of higher-education fundraising. Many of the universities on this list have recently finished a campaign, are in the midst of one, or plan to start one soon.

The University of Southern California (No. 21), for example, wrapped up a $7.1 billion campaign in December, surpassing its $6 billion goal. USC’s campaign total was second only to Harvard’s (No. 5) five-year, $9.6 billion campaign that ended in 2018. Much of the money raised during the more than eight-year campaign came from major gifts, including $1.8 billion from university trustees alone. Some 20 percent of the campaign total came in the form of planned-gift pledges.

World Vision

Ambitious Goals

Other types of charities are getting in on the action. Some are setting campaign goals that until a few years ago would have been unheard of outside higher education.

The Nature Conservancy’s (No. 15) Our World campaign, launched in 2013, aims to raise $4 billion from individuals, companies, and foundations. At the end of September, the organization was 97 percent of the way to that goal. The ACLU (No. 100) is nearing the end of its six-year, $2.6 billion campaign, which includes gifts to both its advocacy and charitable arms. And World Vision (No. 37) is planning for a multibillion-dollar campaign.

Collectively, the 14 health nonprofits on the list raised $5.4 billion, a 12.3 percent increase over 2017. Groups like the American Cancer Society (No. 19) and the American Heart Association (No. 22) depend on large athletic events like walkathons and races to raise money. Giving to the largest of these events has declined each of the past six years.

Organizations devoted to other causes have different concerns. Charities that focus on disaster relief or hot-button political issues are anxious about potential donor fatigue. Fundraisers worry that donors, inundated with news about hurricanes or human-rights abuses, will start tuning out their appeals, although that doesn’t seem to be happening yet.

International and social-services organizations both saw cash support increase last year, by 2.1 percent and 12.8 percent, respectively. Meanwhile, cash support to public-affairs organizations decreased by 11 percent.

Some of those groups benefited from so-called rage donations after President Trump was elected, but they say maintaining that heightened level of giving has been a slog, especially because of the dramatic news cycle.

“We put out ads about Yemen, and no one’s paying attention because the news is just flooded with ‘Who left the Trump administration today? Who’s coming in tomorrow?’ ” says Andrea Carricato Weyhing, associate director of marketing and campaigns at the International Rescue Committee (No. 65).

To shore up support, the international aid group is rolling out a new fundraising strategy for its midlevel donors. Most are longtime supporters who increased their donations to the $1,000 to $10,000 range after the presidential election, according to Carricato Weyhing. Mail appeals tailored specifically to those donors started to go out last December.

A new midlevel-giving officer now manages relationships with these donors, which the charity dubs the Compass Collective, and collaborates with major-gift officers to encourage supporters to give more. The group hopes some will eventually become major donors. The Planned Parenthood Federation of America (No. 24) saw a 23.1 percent increase.

“Our number of donors more than doubled after the 2016 elections — and remained steady through 2018 and 2019,” Jethro Miller, the organization’s chief development officer, wrote in a statement. The charity and its advocacy arm have invested in digital marketing and fundraising. And peer-to-peer fundraising — in which donors raise money for the group from relatives and friends — is on the rise.

A growing number of charities are turning to technology to bolster traditional channels like direct mail. They’re using digital tools to target their marketing messages to narrower and narrower audiences, according to Birkholz, the fundraising consultant.

Rather than trying to market to the world, he says, charities are borrowing techniques from corporate and political campaigns. They’re working hard to identify small, highly motivated niches of supporters and appeal to their interests directly. For example, if a charity has identified that high-net-worth donors who care about medical research are strong prospects for giving, it may run targeted ads to reach them.

Annalise Kaylor/Habitat for Humanity International

Nonprofits are turning to companies for more than just financial support. Habitat for Humanity (No. 20) builds corporate partnerships that often result in donated goods, such as home-improvement items for its ReStores, and marketing campaigns that benefit the charity.

“A lot of companies come to us first and foremost as a volunteer organization and then over time we see that relationship deepen and grow,” says Colleen Finn Ridenhour, the group’s senior vice president for development.

Nissan, for example, first gave to Habitat after Hurricane Katrina. Since then, the company has expanded its support to include sponsoring the annual Jimmy & Rosalynn Carter Work Project, pledging $250,000 in support of Habitat’s 2019 Home Is the Key fundraising campaign, and even featuring a Habitat build site in 2019 commercials for its Titan truck.

“Our brand can never afford to pay for a national TV spot like that,” Finn Ridenhour says. “It really was a win for both of us.”

Top 5 Recipients of Donated Goods

Of all the groups we surveyed, these raised the most in donated goods in 2018. Some of these groups didn’t have enough cash support to make our list of America’s Favorite Charities.

DONATED GOODS BY TOP GROUPS (share of total revenue)

• _{Feeding America ..$2,636,379,502.. (93%)}
• _{Americares Foundation ..$975,991,109 ..(93%)}
• _{Food for the Poor ..$802,004,114 ..(85%)}
• _{Salvation Army ..$557,900,346 ..(15%)}
• _{Habitat for Humanity International ..$470,000,000.. (23%)}

More Than Cash

Unicef USA also builds multifaceted corporate partnerships. The charity holds what it calls “co-creation workshops” that bring together staff members from Unicef and corporate partners to brainstorm ways they can collaborate for greater impact on childrens’ lives.

Such meetings with Microsoft took place over the course of a year and a half, resulting in a contribution in 2018 that included both cash and technology products. A Unicef spokeswoman declined to share the dollar amount. With a record number of child refugees displaced due to conflict and natural disasters, Unicef had been seeking a way to reliably store students’ educational records. Microsoft, along with the University of Cambridge, is helping the charity develop a “learning passport,” a digital platform to help educational systems in host countries help children build on what they’ve already learned. This was just one gift in a promising year for corporate donations to the charity.

“When we approach a company at Unicef USA, it’s not all just about the cash value,” says Barron Segar, chief development officer.

Watching the Markets

As nonprofits look ahead to year’s end, many are focused on the stock market and whether it will take the same kind of nosedive that roiled giving for many nonprofits last year.

To prepare for future swings in the market or even a possible recession, many charities are trying to diversify their sources of revenue — and staying close to their biggest donors.

Finn Ridenhour, of Habitat for Humanity, says she hopes a diverse portfolio of funding sources will help cushion her organization from any impending financial crises. “We plan for that,” she says, “regardless of whatever the economic conditions are in a given year.”

At the Red Cross, Don Herring says his priority is to help the organization stand out and find ways to deliver services more efficiently, no matter the economic climate.

One approach that will help, he says, is to demonstrate that the group is using its donations carefully.

“Disasters don’t discriminate,” he says, “They are going to happen whether there’s a recession or not. We hope that we’ve earned the trust of the American people and that the spirit of generosity continues.”

Why Mayo Clinic Is an Outlier

As part of the Chronicle’s efforts to produce the most complete and accurate ranking possible for America’s Favorite Charities, we contacted every nonprofit that made the list last year. All of them provided the requested data except the Mayo Clinic.

Karl Oestreich, director of media relations, pointed the Chronicle to data from Mayo’s 2018 financial statements. However, those figures are not compatible with the Chronicle’s methodology. We use data from the IRS Form 990 that nonprofits must file because it produces numbers that are comparable for all the charities on our list.

Oestreich said the Mayo Clinic would file its 2018 Form 990 in November, which was too late for our deadline. Other organizations on our list provided draft or estimated figures from their 2018 Form 990, but the Mayo Clinic declined to do so. “We don’t release estimated numbers — only numbers that have been finalized and audited,” Oestreich said in an emailed statement, citing the advice of the Mayo Clinic’s financial and tax experts. As a result, our ranking shows Mayo figures for fiscal 2017. The data for all other charities on our list is for fiscal 2018.