Year of the Unknown Donor
Anonymous giving hit a historic high in 2007. According to the Chronicle of Philanthropy, nearly $1.1 billion in contributions were anonymously donated last year. That amount exceeds 2006’s $672 million, and far outstrips 2005’s $196 million. Universities and colleges were the primary recipients of this anonymous windfall, taking in some $683 million in unnamed contributions.
One major beneficiary of anonymous gifts was the Erie Community Fund (ECF) of Erie, Pennsylvania. In the Fall of 2007, the ECF received an anonymous gift for $100 million. Michael L. Batchelor, president of the Fund, has known for years that the donor planned to make a gift—but has sworn not to disclose his or her identity.
The gift is unique in several respects. Eighty-five percent of the gift is to be distributed among 46 local and five out-of-town nonprofits as three-year grants of $1 million to $2 million. The grants are unrestricted, but the donor expressed a strong preference that charities use the money to create endowments within ECF that would give them a long-term financial base. The gift also includes grants of $11 million to both ECF and the United Way of Erie County.
The city of Erie has a population of 102,000, and the entire county numbers 280,000. Once an industrial center, Erie’s poverty rate today hovers at 19 percent—nearly twice the U.S. average. Its median household income is $31,196, compared with the national average of $48,451. “This will literally change our community forever,” Batchelor said. “It’s an unbelievable infusion of capital from the nonprofit sector.”
Yet the Erie donation was not quite the largest anonymous contribution of 2007. According to the Chronicle of Philanthropy, $150 million was donated to the Comprehensive Cancer Center at the University of California at San Francisco, in order to support experimental cancer research, personnel recruitment, and patient care.
Studies show donors give anonymously for a host of reasons. Some want to maintain their privacy, while others want to avoid solicitation from other groups. Some want to avoid publicly linking themselves to a particular grantee, often in the hopes of attention on the recipient group or cause. And, of course, there are those donors who find anonymous giving to be the purest and most selfless form of philanthropy.
Doing Due Diligence Online
As public charities continue adopting practices from the private sector, a number of websites are making it easier for donors to obtain performance measures by aggregating nonprofit information online.
The most established charity evaluation websites are Guidestar.org and CharityNavigator.org. Guidestar is the broader and more basic of the two. With the goal of increasing transparency among nonprofits, the site provides financial information on 1.7 million organizations, largely by posting some 3.1 million Form 990s. Charity Navigator has a narrower and deeper focus. It offers information on just 5,300 charities, but its profiles are more thorough and evaluative. Users can search Charity Navigator for individual organizations, or peruse its Tips & Resources section (with features like “10 Best Practices of Savvy Donors”) and its Top Ten Lists (with offerings like the “10 Charities Worth Watching”).
Other established organizations have begun offering similar online performance review information. The Better Business Bureau (BBB), for instance, recently added a “For Charities and Donors” section to its site. BBB grants accreditation to charities that meet its Standards for Charity Accountability. Those standards, along with other information, can be accessed at Give.org.
But a number of new entrants, with new ideas, have been coming online. One such site, GlobalGiving.org, takes a novel approach. GlobalGiving focuses on over 500 international grassroots charity projects. Leaders of these charities use the website as a platform to describe their programs and list their exact needs. GlobalGiving provides as a direct service for making donations, ensuring “that 85-90 percent of [the] donation is on-the-ground within 60 days and has an immediate impact.” The site provides feedback through updated field reports, so donors can track the use of their contributions as they are spent. If a donor is dissatisfied with a charity’s use of the donation, GlobalGiving will refund the money.
Finally, with support from the William and Flora Hewlett Foundation, the Greater Kansas City Community Foundation (GKCCF) created DonorEdge.org. Created in 2002, the website provides donors with information on local nonprofits. The site offers 360 reports, based on 45 key indicators of nonprofit effectiveness, and allows donors to give online. For foundations interested in replicating the site for other communities, Hewlett makes the DonorEdge software available without licensing fees, and GKCCF provides education and training services. Four successor sites are now up and running in Denver, Nashville, Houston, and Harrisburg, Pennsylvania, while a fifth site is under development in Columbus, Ohio.
The Magic of Matching Grants
Economists Dean Karlan and John A. List recently tested the effectiveness of matching grants on fundraising, as reported in the December 2007 issue of the American Economic Review. Their research confirmed the long-held conventional wisdom that matching grants lead to greater fundraising returns. Karlan and List further found that a match offer increases both the response rate and the revenue per solicitation. But, interestingly, relative to lower match ratios (e.g., $1:$1), higher match ratios (e.g., $2:$1 or even $3:$1) did not appreciably increase incoming contributions.
In their study, the authors sent out direct mail solicitations to over 50,000 past donors of a nonprofit organization. One-third of the letters made no mention of a matching grant, whereas the rest indicated that contributions would be matched—the amount of which was either unstated or listed at varying amounts and match ratios. The availability of match money increased the revenue per solicitation by 19 percent. The match offer also increased the probability that an individual would donate by 22 percent—but offering larger match ratios had no further effect.
Studies show that, for a variety of reasons, matching grants make people more likely to give. From a donor’s perspective, matching gifts are equivalent to lowering the cost of investment, thereby increasing the leverage of a donation. Matching has a time-signaling effect, creating a greater sense of immediate opportunity. Psychological dynamics like social proof and reciprocity seem also to play a role. As Karlan and List write, “manipulations that make salient the importance or effectiveness of a gift can generate further donations.”
Giving—and Getting—Wealth, Health, and Happiness
Giving leads to getting: that’s the conclusion of Arthur Brooks, a professor of economics at Syracuse University and a contributing editor to Philanthropy. In the Fall 2007 issue of the Journal of Economics and Finance, Brooks finds that philanthropy yields both financial and non-financial prosperity. He conducts a regression analysis to demonstrate that “a $1 increase in charitable contributions leads to a marginal increase of $3.75 in household income, on average.” This return, he observes, is “quite high, by any reasonable investment standard.”
According to Brooks, the explanation for this correlation likely has to do with the happiness and health rewards from charitable giving. “People who gave money charitably,” he writes, “were 43 percent more likely to say they were ‘very happy’ than nongivers, while nongivers were three and one-half times more likely than givers to say they were ‘not happy at all.’” In terms of health effects, givers in 2000 were 25 percent more likely than nongivers to say their health was excellent or good, while nongivers were about twice as likely as givers to say their health was poor or fair.
The study is consistent with past psychological research, which has found that volunteering leads to positive mental and physical health. For example, a 1999 experiment was conducted in which a group of multiple sclerosis patients provided a “sympathetic ear” to another group with the same disease. The listeners reported greater improvement in confidence, self-awareness, and depression than did the non-listener group.
Among the implications of these findings, Brooks suggests that nonprofit fundraising is “far more than a simple means to an end—it may be an engine of benefit in and of itself.”
“The available evidence on happiness, health, and income exhibit a virtuous cycle with behavior,” Brooks concludes. “Happy, healthy, successful people are most likely to give and volunteer. At the same time, charitable people are more likely to be happy, healthy, and financially prosperous.”
Lifestyles of the Rich
The Bill & Melinda Gates Foundation has joined Calibre, a division of Wachovia Wealth Management, to fund a study on “The Joys and Dilemmas of Wealth.” The study, to be conducted by the Boston College Center on Wealth and Philanthropy and released in the Fall of 2008, will poll individuals with a net worth of $25 million or more to gain insights into the attitudes, practices, and personal philosophy of the rich.
According to Robert Frank, author of “The Wealth Report” for the Wall Street Journal, “universities have been much better at studying the poor than the rich. And yet truly understanding the wealthy is just as critical for a healthy society and economy.”
The Center on Wealth and Philanthropy’s goals are three-fold:
- For the public at large, the report will offer accurate information that will counter misleading myths and promote fresh thinking about the activities and attitudes of wealth holders.
- For wealth holders, the report will be a valuable tool for self-reflection.
- For financial and philanthropic advisors, the report will provide insight into how they may offer a more appropriate array of financial and charitable options to the wealthy.
Speaking to the PR Newswire, Michael Deich of the Gates Foundation said, “We believe that the Center’s survey will make an extraordinary contribution toward helping us understand what drives donors to give and what they need in order to give effectively.”