Signs of a healthier economy may mean some good news for the giving sector, a new report says.
With equity markets showing gains as the economy seems to have moved from a recession to recovery, “it is quite possible to see gifts of appreciated securities this year-end,” says the report by Marts & Lundy.
Because capital gifts tend to track the New York Stock Exchange composite index, while unrestricted current operating gifts track personal income on a national level, the report says, capital gifts are far more volatile than current operating gifts.
“In good times and bad times, the annual fund tends to increase at a steady but not dramatic rate,” the report says.
Capital gifts have taken a “much deeper plunge when compared to current operating gifts,” it says.
Now, as capital markets show signs of recovery, it says, capital gifts look like they are starting to follow the historical trend.
Still, capital commitments in fiscal 2009 “reflected the uncertainty donors were feeling at that time,” the report says.
The percentage decline in realized capital gifts — 26 percent for capital projects and 19 percent for endowment — represents roughly half the drop in new pledge commitments, or 54 percent in capital projects and 37 percent in endowment.
The cash numbers include pledge payments from commitments made in previous years and thus “reflected the uncertainly donors were feeling at that time,” the report says.
“Although confidence appears to be returning as the capital markets show signs of resurgence, the full recovery process will most likely take a few years,” the report says. “Donors’ reluctance to make long-term commitments may linger.”
In the current economy, the report says, some fundraising strategies seem to be working.
If a donor voices concern about making a multi-year capital commitment, for example, the nonprofit could ask the donor instead to consider making annual payments equivalent to the annual income the capital commitment would have generated from an endowment, and later consider capitalizing the commitment.
The report also says that, while most educational institutions have seen a decline in alumni participation over the past 14 years, a decline that affects those institutions to build prospect pools for future major gifts, the economy is “not having a dramatic impact on alumni participation.”
In fiscal 2009, alumni participation in annual-fund giving fell 4 percent from the previous year, for example, compared to a 2 percent drop in annual-fund income and a 1 percent drop in the number of annual fund-donors.
In non-educational sectors, the report says, organizations may be seeing fewer members or subscribers, but those donors are making larger annual-fund gifts.
So the organizations “have not seen dramatic drops in annual giving levels,” it says.