Challenging A Sacred Cow
Our recent post Stop it. Fix It on barriers to growth was triggered by Jay Love’s prediction that when Giving USA 2015 was released it would show that once again charitable giving in the U.S. would not exceed 2% of the nation’s Gross Domestic Product (GDP).
Sure enough, two weeks later on June 15th Giving USA 2015 was released and once again reported that charitable giving remained at the 2% level. The same 2% of GDP that Giving USA has reported year after year after year.
In reality, is this year after year stagnant benchmark of 2% reported by Giving USA really believable?
Rob Mitchell, the founder and publisher of the fundraising forecasting service Atlas of Giving thinks not. More importantly, he argues that Giving USA is not only inaccurate, but their methodology may be masking significant changes in giving.
In a post on the Atlas of Giving website, Rob claims that “it is impossible to believe that despite the innovation, the growing number of nonprofits, the annual changes in the economy and reductions in government assistance that charitable giving is always 2% of US GDP.”
He continues: “The real fact is that charitable giving has grown to 2.8% to 3% of real GDP and continues to increase. America is becoming more charitable. That is great news.”
Here are the innovations and trends Rob cites by way of challenging Giving USA’s findings:
- The number of nonprofits has grown more than 50% since 2000.
- Assets in Donor Advised Funds have grown from $32 billion to $54 billion in the past six years.
- There have been 6 record years of giving to higher education.
- According to the Economic Development Corporation ‘even at the height of the Great Recession from 2007 through 2009, nonprofit organizations added jobs at an average rate of 1.9% per year, while the private sector lost jobs at a rate of 3.7%.’ This could not have happened without significant charitable growth.
- Innovation of online and web-based giving has skyrocketed in the last 15 years. Witness the rise of crowd funding…online special event support….workplace giving…email solicitation and social networking solicitation.
To many Agitator readers perhaps Rob’s challenge to Giving USA may seem a tempest in a teapot. One methodology aimed at reporting the past vs. a competing methodology aimed at forecasting the future.
Why bother? Why bother challenging the orthodoxy of Giving USA? Because understanding the strengths and weaknesses of major benchmarks in any industry is important.
When you address your board and report that you’ve exceeded (or fallen short) of a recognized benchmark, you want that benchmark to be accurate. When you hire a consulting firm or renew their contract based partly on their claim that they significantly beat the benchmark, you want that benchmark to be accurate.
Rob challenges Giving USA on several important grounds:
- That its data is outdated (for example, it uses 2012 IRS data to determine 2014 giving).
- Giving USA does not reveal the sources of its data for churches. (Churches account for 1/3 of US charitable giving and yet they do not report data to the IRS nor does Giving USA use survey data.)
- Why does Giving USA data differ dramatically from other sector data? (Council for Aid to Education reports far higher giving to higher ed than does Giving USA.)
Rob also wonders out loud if the funding base for Giving USA should raise questions. “All the funding supporters of Giving USA are companies and consultants who make or made their profits from working with nonprofits. There is no support from any donor who does not or has not derived revenue from working with nonprofits. You have to ask “Why?”
“Are all these firms ‘investing’ in Giving USA because the annual results make them look good to their clients? As in … ‘Giving USA shows that giving to education was up 4.9% in 2014, but because of our work with your university, your giving was up 11.5%. We did a great job for you! Let’s talk about a new contract.”
Finally, Rob questions the practical, applied value of Giving USA in helping nonprofits raise more money and build more accurate budgets and forecasts. He answers his own question: “There isn’t one. Their basis is IRS data that is 2 years old — this year they are using 2012 IRS data to determine what happened in 2014. It’s similar to using the June 16 issue of the Dallas Morning News from 2012 to not only tell us what happened in 2014, but to help us make decisions about what to do in the last half of 2015. Giving USA’s biggest problem is that it has no utility.”
Of course Giving USA holds a different view of its own value. You’ll find its take on the value of its analysis and how to apply it here.
The accuracy of key benchmarks is essential. And while The Agitator is in no position to weigh complex methodologies and reach a judgment as to who’s correct and who’s wrong, it is important that draw your attention to this matter.
All too often our sector fails to challenge — and prove or disprove — the validity of sacred cows. Consequently we pay an enormous price for blind acceptance.
Even worse, in the words of management guru Peter Drucker, “when a subject becomes totally obsolete we make it a required course.”
Is Giving USA on your “required” reading list?
Roger
6 responses to “Challenging A Sacred Cow”
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Very interesting. Making me think. But it’s a sunny day. And already 7:08 a.m. EST. So my brain can think.
I’ll be curious to see Giving USA’s response.
However… while one might think about the possibility of a conflict of interest with firms supporting giving USA. I believe that our field is more ethical than that. I think that the firms got together to support a necessary piece of research some 45 years ago. Not to justify their own existence. (And I’m very rarely a Pollyanna. But I do believe that this was / is a gift. And I have made a small contribution to Giving USA for several years.)
So the question is the methodology. And a review of the methodology. And and….
Very interesting. Thank you.
Good for you, Roger, for turning off the heat under the teapot.
The only one of the 5 reasons cited for having a chance of moving the needle on individual as a % of the GDP is the increase in door advised fund giving. But even that is dubious…a very serious development but dubious mover of the needle.
Yes, the # or organizations has increased, but that’s not because there’s been more charitable money available. One of the annoying things about the GivingUSA and trade press cheerleading about increased giving is that its rate of increase has been lagging the increase in the number of 501(c)(3) for a long time.
So the increase in the number of nonprofit employees may more likely have to do with the increase in the number of nonprofits compounded during the Great Recession by the number of people willing or eager to get jobs even if the pay wasn’t equal to their qualifications.
Record giving to higher education could very well be displacement; consider the record decreases, for example, in giving to religious institutions.
And “skyrocketed” giving via online and web? Pshaw. First, these are media, not destinations, and giving is not being substantially driven by the web or online, its being driven to the web and online by other media. Second, they’re simply new doors through which donors can enter and they are displacing giving through other media, principally mail and (given the disruptive expansion of cell phones) telephone.
So your cautions are well stated.
Chris
Roger and Tom, Thanks for taking the issue of fundraising success or failure on again. We are preparing a report that indicates that each of our clients (over 5000 individual engagements) during their contractual relationship with Hartsook exceeded Giving USA reported benchmarks. We are proud of our success as a firm because it means our clients raise the funds necessary to achieve new and lofty goals. If this analysis revealed we met or barely exceeded the Giving USA Reported philanthropic annual achievement, I would be embarrassed and our clients would fail. Unfortunately, the Giving USA report discourages philanthropy and quality fundraising for some.
As you know the firm, Hartsook, and I have invested now $18 million in fundraising research and education. In August we will begin the first on line accredited Hartsook Masters in Fundraising Management through Avila University. (see information at http://www.hartsookcompanies.com) It is being developed by the former Lilly School Hartsook Chair and now Avila Hartsook Visiting Professor–our mutual friend, Adrian Sargeant. This is a successor to the last five years of this program on site in KC as we worked out our plan. We believe that a better educated fundraising talent base that expects and is expected to greatly exceed the GUSA bench marked numbers is a key to Growing Philanthropy in our country.
Thanks for your leadership.
Bob
I would certainly agree that thirty years worth of growth in the sector and professionalization of development staff should have created more positive impact on giving than it has. In fact, the idea that giving has risen to near 3% of GDP (assuming it was at one point 2%) seems intuitively correct.
But I don’t see any evidence that Giving USA’s numbers are wrong. The increase in assets in donor-advised fund is being offset by smaller draws. Given that church giving has fallen from 1% of GDP to .67% of GDP (by Giving USA’s numbers), that would easily offset the gains made in other sectors.
Giving USA’s sponsor list includes a lot of consulting firms, but the report itself is a joint production with the Lilly School of Philanthropy, which is funded by Indiana University and, in the past, large grants including endowment funding from Lilly Endowment. I don’t see why those funders would want to perpetuate a methodology that under-defines success.
The comments made in response to this article only underscore Mr. Mitchell’s questions and concerns regarding the validity (or lack thereof) of Giving USA’s motivations and methodology. Consider the following:
1. Mr. Hartsook’s comment is compelling evidence that something doesn’t pass the smell test. 5,000 clients over several decades and under a variety of economic conditions (including Sept. 11, 2001) and every single one has “surpassed” the Giving USA benchmark? Is that really believable?
2. Every commentator (following the post) is part of the consulting cabal which benefits from persistent underestimating of giving by Giving USA.
3. No one has yet dared to attempt to answer the compelling questions posed by Mr. Mitchell regarding Giving USA’s methodology: First, how do they use data from two years prior to estimate giving for the year in question? Second, how exactly is Giving USA estimating church giving, which makes up 1/3 of the charitable giving economy?
4. What exactly is the utility of Giving USA for the nonprofit practitioner?
5. Will Giving USA allow a published “peer review” of it’s methodologies from leading academic and commercial economists?
6. Given advances in technology and data reporting, why can’t Giving USA produce an annual report more quickly than June of the following year?
Clearly, the time has finally come to put this “Sacred Cow” out to pasture.
There are some things about Roger’s post (and mine) and the reactions that are validating and encourage my position.
1. There has been no official response from Giving USA about the significant issues with their methodology and their conflict of interest with the consulting community or the Chronicle of Philanthropy.
2. No outrage about the obvious conflict of interest with the fund raising counsels’ sustaining financial support for Giving USA’s annual report which I strongly believe in under-reporting and self serving for the financial supporters. (See Bob Hartsook’s comments above). Why is there no financial support of NPOs, Grant making foundations, individual (non consultant) practitioners, and corporations?
3. All the commenting defenders of Giving USA are those consultants who benefit from Giving USA annual under-reporting – except Lou Tate – whoever he is. Thanks Lou!
4. No reaction from the Chronicle of Philanthropy or the NonProfit Times about some very serious questions of integrity and conflicts of interest. Seems like the Wall St. Journal, The New York Times, NPR and the Washington Post should be interested.
5. No one has advocated for a serious contemporary review of Giving USA methodology after more than 40 years.
6. How is it possible that after more than 4 decades, Giving USA continues to arrive at the the same conclusion every year – US charitable Giving is 2% of GDP every year?
7. When is the Nonprofit community going to give their World Book Encyclopedia to Goodwill and switch to Google technology (Atlas of Giving)?
8. Inside Edition called me today – unfortunately this story is not made for good TV. Maybe 60 minutes or 48 hours is next – I will even settle for a print piece in the NYT.
I truly don’t know if anyone cares, but I do. Our sector needs a reliable, contemporary benchmark and forecast. I certainly did when I was a practitioner (and one did not exist) and am confident that the Atlas of Giving now gives us what we need. I hope that we are adult enough to hold ourselves accountable to a bonafide benchmark and make plans using a reliable forecast. For some, this is just too threatening.