Last week saw publication of the 66th edition of “Giving USA,” the annual report on philanthropy published by the Giving USA Foundation. Scholars, journalists, fundraisers, and other nonprofit executives generally regard it as the definitive account of how much Americans give to charity and where the money goes each year. But it’s important to recognize that like other economic statistics, it is only a sophisticated estimate — not an exact measure.
Despite complaints that philanthropy lacks transparency, more information about the field is available and readily accessible today than a generation ago. In addition, the growth of professional education programs focused on nonprofits has equipped more people with the skills to obtain and use that information. Yet getting an accurate picture of the philanthropic world remains a challenge, let alone drawing conclusions from it.
“Giving USA,” for example, draws its conclusions by applying economic models to a large number of databases. (The report is produced by the Indiana University Lilly Family School of Philanthropy, where I am a professor emeritus, but I have never been involved in its development.) To estimate giving by individuals, the researchers analyze historic changes between factors such as consumption expenditures or personal income and changes in donations to project how much philanthropy grew or declined in the most recent year.
While the methods are regularly reviewed by expert advisers, the accuracy of the information produced can be altered by unexpected events, including policy changes like those made to itemized deductions by the Tax Cut and Jobs Act of 2017, mega-gifts such as MacKenzie Scott’s multi-billion-dollar donations, and natural disasters. Undoubtedly, the pandemic made projecting what happened to giving in 2020 especially difficult.
Consequently, the staff that produces “Giving USA” must make a variety of adjustments each year and revise their estimates as new data becomes available. For instance, this year Internal Revenue Service figures on the amount claimed for charitable deductions were delayed since the deadline for 2020 tax returns was postponed until mid-May. These adjustments are explained in a lengthy book that presents the findings, as well as in technical papers issued periodically.
However, those who look at or report on only the top-line results may not appreciate that they are approximations, refined over a number of years to be as accurate as possible but still imperfect.
Better Than Informational Returns
Despite these limitations, the “Giving USA” estimates are more comprehensive than other sources of data on philanthropy, including the informational tax forms nonprofits submit annually to the IRS. The form includes information about contributions nonprofits receive, but only organizations with revenue exceeding $200,000 or assets above $500,000 have to complete the longer version. Small groups file shorter versions with fewer financial details or are exempt from filing altogether, as is the case with religious congregations. About one-third of charities registered with the IRS are required to complete 990s, according to the National Center for Charitable Statistics, which means estimates of donations charities receive may be off by a substantial amount.
Even so, the longer version of the informational tax form gives a more complete picture of the finances of organizations required to submit the form. In particular, it includes information about government grants and earned income (or what the IRS calls program service fees), both of which exceed donations to charities in total and are especially important for some groups.
For example, the new “Giving USA” reports that contributions to health-care providers fell by 4.2 percent in 2020, but payments for medical services, including reimbursements from insurance programs, might well have offset this loss as illness and hospitalizations soared during the pandemic.
On the other hand, gifts to arts organizations are estimated to have dropped 8.6 percent and were almost certainly not made up by ticket fees, gift-store sales, and other types of earned income since most of these organizations were shuttered almost all year. Even additional Covid-19 relief aid provided by the federal government seems unlikely to have erased the shortfall.
Disagreement on Trends
The ready availability of data on philanthropy can also make agreement on trends more difficult. For example, many believe that the American tradition of giving is under stress because ordinary individuals are giving less and wealthy ones — as well as grant-making entities like foundations and donor-advised funds — are giving more. The latest “Giving USA” seems to bear this out since, as the Chronicle of Philanthropy reported, donations by “living individuals … shrank to its smallest share of overall giving in ‘Giving USA’ history.”
That is statistically true: Philanthropy from individuals dropped to 69 percent of the total, far lower than a decade ago. But in a year in which the economy fluctuated wildly, the actual amount is estimated to have risen — or stayed about the same if MacKenzie Scott’s enormous gifts are excluded. Gifts made by people in their bequests and grants from foundations, most of which are family-run affairs, also rose — substantially in the latter case. Facts may be “stubborn things,” as President John Adams once said while defending British soldiers after the Boston Massacre, but a profusion of facts can often lead to a variety of interpretations.
This is especially true when information about philanthropy comes from groups trying to back up their views with research and data they produce. “Giving USA” tries to minimize such potential conflicts. Although a coalition of fundraising consultants publishes the report, independent scholars conduct the research and report their methods and findings publicly, minimizing the benefits to its sponsors beyond publication sales. But other studies often originate with groups or people advocating policy changes, seeking to call attention to problems affecting their portion of the nonprofit world or promoting particular approaches, such as online giving. As a result, their research may not be as objective as they claim and should be examined closely.
To be sure, if increased knowledge about philanthropy has its difficulties, greater ignorance is far worse. Seeking more accuracy about what we know is desirable, but so too is learning how to ask questions about supposedly evidence-based assertions. We need to be especially cautious about studies, or reports on studies, that do not account for differing conclusions or indicate what remains unknown. It’s also worth remembering that not all disputes are due to conflicts over evidence. Some may reflect disagreements over the principles that should guide philanthropy.
As the latest edition of “Giving USA” demonstrates, we now know a great deal about philanthropy. But recognizing the limitations of that knowledge is crucial as well.
