In January 2020, the COVID-19 pandemic was an abstract concept to most of us. By March, we started experiencing the overwhelming impact caused by COVID-19 in the U.S., affecting every aspect of our lives. Since that time, many social sector organizations have endured challenges for which they had no time to plan and without necessary resources. Some observers predicted that nearly a third of the world’s nonprofits would go out of business within a year.
Despite those difficulties, there are reasons for us to now feel hopeful. The focus is shifting to recovery, thanks to medical advancements, inspired funders, flexible staffs, and understanding boards.
The Center for Effective Philanthropy’s (CEP) recent survey on the state of nonprofits outlines how the potentially catastrophic impact to the sector was curtailed. We benefited from a series of wide-ranging federal relief programs and a strong collaborative effort among funders, foundations, and philanthropists around the world. This remarkable collective effort stemmed a potentially disastrous outcome to organizations who otherwise may have closed their doors. Critical support flowed faster and had fewer restrictions than before. Funders responded more quickly and creatively than we ever could have imagined.
Donor-advised fund (DAF) donors responded in the same way, with great speed and flexibility. Most grants that donors recommended were unrestricted to the recipient charities. Those unrestricted funds allowed organizations to spend where they had the greatest need. Additional compelling statistics:
- In the U.S., charitable giving increased by almost 7.5 percent in the first six months of 2020, compared to the same period in 2019.
- DAF donors played a major role: charitable dollars from DAFs increased 30 percent during that time in seven of the eight IRS-defined charitable subsectors.
- Every charitable subsector, from education to human services to the environment, received a higher number of DAF grants than in 2019.
In my experience, DAF donors are reliable and loyal philanthropists. CEP’s report found that 86 percent of DAF donors either increased or matched their previous grants in 2020. We know from 2008 that DAF donors offer “counter-cyclical” support, meaning that during an economic downturn, donors will recommend the same amount of grants or more when other critical sources of income disappear. Throughout challenging times, we have witnessed how individual donors and institutional funders support causes that need critical capital to operate, or, in terms of the past year, survive.
Necessity is the Mother of Invention
A crisis can be a time for funders to reflect on the status quo. In the last year, we witnessed how funders re-examined endowment management traditions and grantmaking strategies. To echo CEP’s survey, much work remains.
Arts and culture organizations, among the hardest hit in the social sector, will need increased support to return to pre-pandemic levels of operation. Human Services organizations will play a key role as federal pandemic support programs end funding to individuals and businesses.
Data from 2020 indicates that DAF donors both sustained support for their favorite nonprofit organizations and added new causes. National Philanthropic Trust’s (NPT) donors recommended grants to 29,000 unique charities, a 22 percent increase compared with 2019. Over the past year, I have personally observed:
- Donors who historically granted to local organizations elected to support charities located in other places.
- Donors who support women’s and girls’ causes directed support to racial and economic justice.
- Donors made grants to new causes that did not exist even months before, such as supplying personal protective equipment for frontline workers or funding for vaccine-related activities.
Taking Steps Towards Equity
CEP’s findings tell us the following:
- Nonprofits led by women and serving minorities experienced more difficulty in both communicating with funders and receiving flexible terms around the grants their organizations received.
- Racial justice movements around the world brought long overdue attention to inequities in funding and support for BIPOC (Black, Indigenous, and people of color) communities.
- Donors will need to intentionally engage with those who have historically been excluded from larger institutional funding opportunities.
- We must spotlight positive examples, including Black Philanthropy Month and the recently created Asian American Foundation, which exist to bring attention to and support for long underserved communities.
Unprecedented. Historic. Disruptive. All these words have been used to describe 2020. They are all accurate. The “new normal” in the philanthropic sector may continue to shift. Funders need to regularly analyze, question, and challenge past practices. With our philanthropic ecosystem in a state of intense change, and still responding to a global health crisis, flexibility will be key. We can use the lessons of the last eighteen months to create a more inclusive, thoughtful future.
Eileen R. Heisman, ACFRE, is the President and CEO of National Philanthropic Trust, the largest national independent sponsor of donor-advised funds. Follow her on Twitter at @ERHeismanNPT and National Philanthropic Trust at @NPTrust.