There's Been a Decrease in Charitable Giving During the Recession (and what you can do about it)

While nonprofit giving increased between 2010 and 2011, donations still have not returned their 2007 levels. It's getting close, though. In 2007, donors gave $307 billion to US charities. In 2011, the amount was $298.42 billion.

Nearly 90% of that figure comes from individuals and families. Thirty-two percent of the money went to religious institutions, 13% went to education and 8% went to international affairs (no doubt increased by the devastating earthquake, tsunami and near-meltdown of the Fukushima nuclear power plant in Japan).

While the recession devastated millions of American families and business, the lower and middle classes were the most affected. Unfortunately, those families were also the ones that donated the most to nonprofits, with households earning less than $50,000 a year averaging 19% in donations.

How can a nonprofit make up the difference?

Option 1: Emphasize In-Kind Donations

Since those who would give no longer can, the nonprofit should encourage their former (and future) donors to give in-kind donations.

An in-kind donation is any donation that is not cash. This can be a donation of goods or services. Plus, in-kind donations can have a cash value assigned to it and be deducted from taxes like a cash donation.

For example, when the recession hit, nationwide unemployment hit ten percent. A family that previously could have given to their church needed other ways to help. This is where the church should encourage an in-kind donation. Previously, the church might have used donation money to hire workers to transport, pack or hand out food. Now, the church can skip the hired help and use the donor.

Asking for in-kind donations seems like an obvious step, but a donation doesn’t have to just be volunteer labor. For instance, a lawyer who works pro bono for her alma mater has just donated her time. A contractor that donates leftover lumber, wiring or cabinets to a homebuilding NPO can declare those as in-kind donations on his taxes.

In-kind donations are a great way for a nonprofit to get what it needs without spending limited funds.

Option 2: Instead of a Capital Campaign, offer an NPO IPO.

Capital campaigns are the literal and figurative cornerstone for NPOs. Originally associated with brick-and-mortar building funds, many nonprofits are in a constant state of campaigning. Universities especially end up planning the next campaign before the first is in stewardship.

Instead, an IPO, or initial public offering, is a great way to raise money. While a nonprofit cannot actually become a publicly traded company, figuratively offering shares of the nonprofit can engage donors in a way that the traditional capital campaign cannot.

One of the first NPO IPOs was launched in 2007 for a California-based homebuilding company. Each share was offered at $32, and the nonprofit ended up raising $700,000. Other NPOs followed suit, including Teach for America, College Summit, and VolunteerMatch.

In return for buying “shares” of the nonprofit, investors get what’s called “social capital”. For the homebuilding nonprofit, investors were encouraged to attend ribbon cutting ceremonies. Other NPOs offered quarterly reports, which included increases in volunteer hours or impact reports.

An NPO IPO is best marketed to potential donors with familiarity with stock and bond markets. While buying a “share” of the donations isn’t a new concept, the excitement of owning a piece of a nonprofit can extend to continued support and a legacy of donations.

Option 3: Philanthropreneurship

A portmanteau of “philanthropy” and “entrepreneurship”, philantropreneurship combines the mission of philanthropy with the entrepreneurship of business. While some of the most popular philanthropreneurships tend to be multinational, the basic strategies of these companies, whether they are for-profit or nonprofit, can work at any scale.

PlayPumps International is a for-profit philathropreneurship company. It installs merry-go-rounds on children’s playgrounds in African countries that are short on clean water. As the children play, water is drawn from underground and piped to wells. PlayPumps installs the pumps and trains the local people on how to run it. They receive donations from governments and people, but advertising raises most of the money for the pump. Ads are installed on the sides of the merry-go-rounds.

Most nonprofits have the opportunity to for similar advertising. Is there an event coming up with a t-shirt? Be sure to offer sponsorship for local businesses in exchange for their logo on the shirt. Does the nonprofit have a magazine or newsletter? Supporting businesses can easily be featured in an advertising.

While there are many ways to pull a bleeding NPO out of the red, these options could be a good first step to restoring the nonprofit’s vision.