The drop in charitable giving has nonprofits in crisis mode. In this post, we explore how funders can step in strategically to support nonprofits and ensure their long-term sustainability.
The figures are staggering.
The number of donors dropped by 20 million between 2000 and 2016. Then the 2018 tax cuts meant that most people stopped itemizing tax deductions, resulting in another plunge in donations. The decline is only getting worse. In 2022, total giving by corporations, foundations and individuals dropped 10.5% from 2021. Among individuals donors, who make up 67% of all nonprofit support, donations dropped by a shocking 13.4% in 2022.
Government grants are also seeing across-the-board reductions, with far more drastic cuts expected at the federal level.
The situation is dire, and without immediate action, the nonprofit sector could face a future of decline. But here’s the good news: funders have the power to make a difference.
“Strategic funders need to view fundraising programs and development staff as an investment in an organization’s sustainability.“
How Funders Can Strategically Support Nonprofits
Let’s get one thing straight: the solution isn’t just about throwing money at the problem. Sure, foundations should consider giving out a higher percentage of their endowments to meet the funding crisis, but for long-term sustainability we also need to invest in the fundraising capacity of our nonprofit partners. It’s about strategic investments that bolster the core capacity of nonprofits to sustain themselves.
Here’s what funders can do:
Fund Development as an Investment, Not Overhead
Many donors hesitate to fund anything that looks like “overhead” with fundraising held in especially low regard. They think fundraising takes away from the charitable work of the nonprofit, whereas it actually makes more of that work possible. Strategic funders need to view fundraising programs and development staff as an investment in an organization’s sustainability. Treating these areas as core investments ensures nonprofits can continue to grow and thrive.
Implement Sector-Wide Fundraising Training
Funders can sponsor comprehensive training programs that include program staff and board members. These programs can equip organizations with the skills to attract and retain donors, especially in challenging times.
Consider partnering with professional bodies like the Association of Fundraising Professionals (AFP) to create impactful training initiatives.
Establish Endowments for Development Roles
Smaller nonprofits often lack the budget to hire experienced development professionals. By establishing endowments dedicated to funding development positions, funders can empower these organizations to build long-term fundraising capacity.
Offer Multi-Year Funding Packages
Instead of one-off grants, consider committing to multi-year funding for nonprofit development teams. This not only supports job stability but also ensures organizations have the time to build sustainable fundraising strategies.
Why This Matters Now
The urgency of this situation can’t be overstated. As funding continues to decline, nonprofits are being asked to do more with less. By stepping up with strategic, long-term investments, funders can play a crucial role in reversing the trend and ensuring that charitable organizations continue to serve their communities.
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