More Education for Donors On Fundraising - US Study

Wealthy Americans claim they would give more money to charity if less was spent on fundraising administration and more was spent on the ‘cause’ according to new US research.

The results came in a comprehensive survey of the philanthropic behaviour of high net- worth families conducted by the Centre on Philanthropy at Indiana University for the Bank of America.

In the survey, households were asked what factors would cause them to give more to charity. As many as 74% said that if charities spent more on helping the constituencies they serve and spent less on administrative and fundraising expenses, then they would give more to charity.

But the survey threw up an odd result when the donors were asked about who they took advice from when making their donation.

When asked about the type of advisors consulted when making charitable decision, a higher proportion of high net-worth households reported consulting fundraisers or other personnel from Not for Profit organisations than any other group of advisors.

Some 42% of these donors asked the fundraiser or a Not for Profit staff member about the charity before writing a cheque and only 7% asked a broker suggesting that there needs to be more education about how Not for Profits operate.

Experts suggesting that a campaign to educate donors that NFP’s have to spend money to make money should be a priority.

High net-worth households also said that they would give more to charity if they were able to determine the impact of their gifts, if they felt more financially secure, and if they received a better return on their financial investments.

Just over 40 percent of high net-worth households have a provision in their wills for charity. Almost 20 percent of high net-worth households have established a foundation and nearly 16 percent have established a donor-advised fund.

The survey included households where the income was greater than $US200,000 and/or net-worth of at least $1,000,000, and included over 30,000 households in high net-worth neighbourhoods across the US.

SURVEY HIGHLIGHTS:

• “Giving back” is more important than “leaving a legacy.” While leaving a legacy may spur some donors, this is not what motivates the majority of wealthy philanthropists, according to the survey. They are most driven in their donations by “meeting critical needs” (86.3%). The next most important motivators were “giving back to society” (82.6%) and a “feeling that those who have more should give to those with less” (81.5%). “Leaving a legacy” was cited by only 26.1% of the respondents, with a desire to “limit the funds available to my heirs” cited by the fewest participants (8.0%).
• There is a surprising correlation between donations of time and dollars. While a popular stereotype
holds that the wealthy simply “write a check” to discharge their moral obligations, the Bank of America study appears to
dispel that notion. Instead, those who write checks are also likely to volunteer their time, and, the more time volunteered, the bigger the check. Survey respondents who volunteered 1-50 hours annually gave an average of $31,092, while those volunteering 51-100 hours gave $92,717 and those over 201 hours gave $132,086.
• Even major tax policy changes would not impact their giving. Wealthy donors report that tax considerations are far less important to them than is commonly assumed. For example, more than half the respondents (56.1%) said their giving would stay the same even if the estate tax were repealed. Similarly, 51.7% said their giving would stay the same even if there were zero income tax deductions for gifts to charity.

• Entrepreneurs are especially generous donors. In comparing household donations by sources of net worth, entrepreneurs stand apart for giving, contributing an average of $232,206 annually. The next highest donors were those who inherited wealth, giving an average of $109,745, less than half the total of entrepreneurs. Yet that was still higher than those whose net worth came from savings ($84,882 donated), return on investment ($69,978) or real estate ($11,015).
• Charitable giving increased over the last five years When asked about the level of their charitable donations, nearly two thirds (65%) of wealthy donors somewhat or dramatically increased their charitable giving over the past 5 years. Less than 12% of high net worth households decreased their contributions.

The survey found that 98% of high net-worth households donate to charity – their donations providing a disproportionate share of the contributions that sustain the U.S. Not for Profit sector – an estimated $126 billion of a total of $260 billion in 2005 alone.