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Trends in Charitable Giving

August 15, 2011

Marcus R. Harwood, CPA
Partner
BlumShapiro

There’s no question that the fundraising environment, while improving, remains extremely challenging.  Understanding the nature of the challenges is complicated by the fact that actual data are sometimes only available two years in arrears.  In the meantime, estimates based on models and surveys of various constituents can help fill the void.

The IRS recently released data based on itemized deductions reported by individuals on their tax returns.  While these figures do not capture non-itemized deductions, they indicate an alarming trend.  The IRS data indicate that individual charitable contributions dropped about 10 percent during 2008 and a further 14 percent during 2009.  Giving was over 20 percent lower in 2009 when compared to the pre-recession highs of 2007.  This decline was much steeper than many experts had predicted.

Surveys of colleges and universities indicate that, while they are experiencing a rebound, they were far from immune to the broader trend and that levels of giving have not yet returned to pre-recession levels. 

Based on a survey by the Council for Aid to Education, which includes responses from 996 institutions, charitable giving in 2010 to higher education increased by .5 percent in 2010 after dropping almost 12 percent In 2009.  To put those results in perspective, giving to higher education in 2010 was roughly equivalent to 2006 levels, but, once adjusted for inflation, 2010 results were actually 8 percent below 2006.  These survey results are consistent with the experience of many of our clients who report that, while they are feeling that levels of giving have at least stabilized, the level of effort required to maintain that stability has increased.

The Council for Aid to Education’s survey also contains other interesting results.  While pre-inflation adjusted numbers in 2010 are similar to those of 2006, the components of the total have changed.  There has been a shift away from individual, alumni gifts – which actually declined slightly during 2010 – towards corporate and foundation giving, which increased during the same period.  Furthermore, the average gift per alumnus was reported as $1,080 during 2010 compared to $1,195 in 2006.

In the broader context of endowment management, most endowments were up about 10 percent in 2010 after a decline of over 20 percent the previous year.  Average endowment levels have still not regained their 2006 levels, according to the survey. 

All of this points to an improving but still difficult environment for advancement and for investment officers.  Many higher education institutions have deep and emotional ties to their alumni base.  Maintaining and strengthening those ties will be critical as institutions strive to maintain and re-energize that crucial base of support.

Marcus Harwood, CPA, is a partner at BlumShapiro,the largest regional accounting, tax and business consulting firm based in New England, with offices in West Hartford and Shelton, CT and Rockland, MA.  The firm serves as business advisors for today’s leading companies, non-profit organizations and government entities, working to strategically tailor and consistently deliver tested solutions for unlocking an organization’s full potential.  For more information about BlumShapiro, visit blumshapiro.com.

 

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