Trends Reflected in 20 Years of American Charities Receiving the

Most Donations

Bill ClevelandOctober 29, 2013WIMPS Seminar

2

Today’s Presentation

• Interesting findings as starting point• Define fundamental terms and issues• Explore 3 questions• Is this a phenomenon of concern?

3

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

0%

5%

10%

15%

20%

25%

30%

Trends of Concentration for Philanthropy 400

400th Spot 2011 $ % $ P400 of total USA $ giving

Amou

nt R

aise

d by

400

th-R

anke

d O

rgan

izati

on

% o

f P40

0 of

Tot

al U

S Gi

ving

4

Number of 501(c)(3)s doubles ~ 20 years

1943

1946

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Number of 501(c)(3) Public CharitiesIRS data from in Hall and Burke (2006) and

Giving USA (2012)

5

Persistence in the Philanthropy 400

1-4 years 5-8 years 9-13 years 14-18 years 19-22 years0

50

100

150

200

250

300

350

400

Organizations Ranked: Philanthropy 400

# O

rgan

izati

ons R

anke

d

6

What is the Philanthropy 400?• Chronicle of Philanthropy ranks annually since 1991• Ranks public charities with most private support

– Individuals: Gifts and bequests– Corporate gifts: Cash and in-kind– Foundation Grants– NOT fees for service or government funds

• Stable method: most recent fiscal year data available• Does not exclude any category of organization• Includes consolidated financial information• 900 entities ranked, upwards of 50,000 locations• Completely unstudied: “Unexploited data set”

7

Why Private Support?• Fundraising distinctive to the nonprofit sector

– 87% of public charities receive donations • Solicitations educate public about organizations• Branding important to attract donors• Significant source of income for some organizations

– >50% of revenue for 20% of organizations– >75% of revenue for 12% of organizations

All figures from Horne, C. S. (2005). Toward an understanding of the revenue of nonprofit organizations. Georgia Institute of Technology.

8

Is Private Support a Good Measure?

• Distinctive of public charities• Indication of an organization’s ability to convince

people to make donations• Minority of cumulative income for public charities• Intermediate outcome

– Does not evaluate effectiveness of service delivery– Allows comparable measure of many types of

organizations

9

If not financial results, then what?

10

Compile Rankings to One Data Set• Distill 8,800 entries into single list of names

– Name variations, changes, and mergers• Include all variables year-by-year

– Income, expense, and fiscal year accounting data– EIN, Category, and headquarters location– Notations: affiliates, in-kind giving, capital campaign– Ranking number and age

• Some published data outdated– Carried over from year to year or outdated by a year– Cumulative impact of updates <1%

11

Is Philanthropy 400 Data any Good?• Data voluntarily submitted by organizations• Most organizations use Form 990 data

– Most studied 990 data flaws for expense allocation– Less incentive to lie about revenue

• Council for Aid to Education for public universities– Allows fairly direct comparison– Difference in accounting rule application

• Include some, but not all religious organizations• Published with factual and typographical errors

12

Other Data Issues• Attempts to include entirety of affiliated

organizations– United Way included as entire organization in 2005– Jewish Federations report individually

• For commercial firms, Wal-Mart reports consolidated for entire corporation and McDonald’s excludes independently-owned franchises– Including all franchise revenue would ~double

McDonald’s total revenue

13

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20120

5

10

15

20

25

30

35

40

45

# of New Entrants Annually to Philanthropy 400

New Entrants Affiliated

14

Question 1: What ages of organizations drove the concentration of private support for ranked organizations?

• Hypothesis: New Entrants will surpass incumbents in overall private support because they are better suited to the current environment than persisting organizations.

• Theoretical Backing:– Organizational Inertia– Organizational Legitimacy– Organizational Ecology: Senescence

15

1607 1771 1801 1823 1837 1852 1865 1878 1890 1902 1914 1926 1939 1951 1963 1975 1987 19990

2

4

6

8

10

12

14

16

18

20

Year Founded, All Ranked OrganizationsN

umbe

r of O

rgan

izati

ons

16

Pre-1740

1750s1770s

1790s1810s

1830s1850s

1870s1890s

1910s1930s

1950s1970s

1990s0

10

20

30

40

50

60

70

80

Founding Year of All Ranked Organizations, by DecadeN

umbe

r of O

rgan

izati

ons

17

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20110

10

20

30

40

50

60

70

80

90

100

Age of Ranked Organizations in Philanthropy 400

Average Age Median Age

Org

aniz

ation

Age

18

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20110

10

20

30

40

50

60

70

80

90

100

Age at First Ranking for Philanthropy 400 Organizations

Average Median

Org

aniz

ation

Age

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Question 2: Do ranked organizations change dependence on private support?• Hypothesis: Organizations are more likely to

diversify income streams as they get more mature, relying less on private support

• Theoretical Backing:– Resource dependence– Organizational Isomorphism– Risk and rewards of revenue source diversification

20

Encountering Data Problems

• Around 70 organizations with no total income reported each ranking– Majority are colleges and universities– May be able to replace with 990 data

• Many Universities report total income for fundraising entity and not entire organization

• Several organizations each year with private support exceeding total income

21

Question 3: Do certain categories drive increased private support, or does

growth mirror all categories?• Hypothesis: Ranked organizations will collectively

track changes seen with public charities overall in number of organizations and private support received.

• Theoretical Backing:– Organizational Ecology: resource partitioning and

density dependence– Organizational Legitimacy

221991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

5%

10%

15%

20%

25%

30%

35%

40%

Categories with Decreasing Number of Organizations

Colleges and UniversitiesJewish Federations

Perc

ent o

f Ran

ked

Org

aniz

ation

s in

Cate

gory

2319911993

19951997

19992001

20032005

20072009

20110%

5%

10%

15%

20%

25%

30%

35%

40%

Categories with Decreasing Cumulative Share of Private Support

Colleges and UniversitiesJewish FederationsPublic BroadcastingUnited WaysYouth Groups

Perc

ent o

f tot

al P

400

givi

ng to

cate

gory

24

Categories Declining

• Not strong growth categories– Expect a declining percentage of organizations– Not closely tied with giving

• Declining popularity of federated giving• Giving decreases tied to aging organizations• Youth as an exception

251991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

2%

4%

6%

8%

10%

12%

14%

16%

Categories with Increasing Number of Organizations

Community FoundationsCommercial FundsEducationEnvironmental & Animal-RelatedHealth CharitiesHospitals and Medical CentersHuman Services GroupsInternational

Perc

ent o

f Ran

ked

Org

aniz

ation

s in

Cate

gory

261991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

5%

10%

15%

20%

25%

Categories Increasing Share of Private Support

Community FoundationsCommercial FundsEnvironmental & Animal-RelatedHospitals and Medical CentersHuman Services GroupsInternational

Perc

ent o

f tot

al P

400

givi

ng to

cate

gory

27

Categories Increasing

• International growing in number & private support – Accounting Issues– At least 3 organizations with restated financials

• Commercial Funds with a strong impact• Number of hospitals outpacing increase in their

private support• Private support to Human Services group more

volatile than number of organizations ranked

28

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

1%

2%

3%

4%

5%

6%

7%

8%

Categories with Stable Number of Organizations

Arts & CultureMuseums and LibrariesPublic AffairsPublic BroadcastingReligious GroupsYouth Groups

Perc

ent o

f Ran

ked

Org

aniz

ation

s in

Cate

gory

291991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Categories with Stable Share of Private Support

Arts & CultureEducationHealth CharitiesMuseums and LibrariesPublic AffairsReligious Groups

Perc

ent o

f tot

al P

400

givi

ng to

Cat

egor

y

30

Should Concentration be a Concern?YES!!!

• Creates barrier to entry & growth• Inhibits innovation• Stasis in sector more likely• Corporatization of sector• Donors increasingly set agenda• More power to the influential• Marginal voices at greater

disadvantage• Big bet philanthropy can fail

NO!!!• Economies of scale allow effective

groups to scale up• Specialization improves efficiency• Resources shared between orgs

– Donations: Federateds, In-Kind– Contracts: Komen to Planned Parent.

• Professionalization & bureaucratic inertia for consistency

• Weeds out marginally effective• New organizations have grown• Groups representing minority

interests have flourished

31

Recurrence of Concentration?• United Way steadily dropped in percentage of

receipt of overall private support– 5% in 1950s– 1% today

• Other organizations with huge market shares– Red Cross >1% in 1950s– March of Dimes ~1% in 1950s

• Reliable statistics likely unavailable prior to 1990