In June, Giving USA released The Annual Report on Philanthropy, the most influential publication on charitable giving in the United States. The big headline is that in 2019, charitable contributions rose across the board. Americans donated $449.64 billion to charities in 2019 and giving rose 4.2% (2.4% adjusted for inflation), up from $431.43 billion contributed in 2018. The increase reflects growth across three of the four identified charitable sources: individuals, foundations and corporations. Individuals continue to be the largest source of charitable contributions, representing 60% of total giving – 79% when combined with giving by bequest.
The Chicago Community Trust saw an increase in charitable giving in 2019, likely due to strong economic growth – as disposable income rose 4.2%, the GDP went up 4.1%, and the S&P rose 28.9%. Notably, community foundations and others who sponsor donor advised funds (DAFs) saw the largest increase in charitable contributions. While the top three recipients of charitable contributions remained religion, education, and human services, public-society benefit organizations—which includes donor advised funds at commercial charities—saw the largest increase from the prior year. DAFs are the fastest growing charitable vehicle in philanthropy and enable donors to earmark funds now for giving in the immediate or near future.
Community Foundations and the Power of DAFs in 2020
Charitable giving typically rises in a strong economy. Based on the 2019 data, it is possible that individuals whose financial resources were strengthened by the economy last year were in a strong position to quickly respond at the onset of the coronavirus pandemic. In response to the crisis in early 2020, DAF holders at community foundations were able to immediately and effectively mobilize charitable dollars to where they were most needed.
From March to June 2020, Trust donors made $151.3 million in grants from donor advised funds – a 53% increase compared to the same time last year. Generous contributions from our DAF holders have proven vital in helping to sustain nonprofit and community organizations and support vulnerable residents during these unprecedented times.
With the administrative and governance responsibilities in the hands of the sponsoring organization, DAF holders can focus on charitable goals and making grants to address the most pressing needs. Moreover, the Trust advises donors and maximizes charitable impact by creating and communicating timely philanthropic opportunities like the Chicago Community COVID-19 Response Fund.
The Giving USA report shows that grantmaking by community foundations was growing prior to COVID-19, increasing 5.6% in 2019. Giving by all foundations – including community, independent and private foundations – has tripled over the past fifteen years from 6% to 16%. This growth can be attributed to the economy, the creation of more foundations, as well as the rapid growth of donor advised funds over time.
In 2019, the Trust received $472 million in gifts and provided $369 million in grants. Gifts from donor advised funds represented 89% of total giving, with the remainder in the form of competitive grants from endowed and designated assets at the Trust.
The economic impact of COVID-19 in 2020 makes it hard to predict future giving trends. However, the flood of generosity in response to the pandemic and calls for racial equity nods to a shift in charitable giving. The increased level of civic engagement around social justice and equity issues indicates it is very likely that the percentage of funding going to human service organizations will increase over time.
Moreover, when it comes to activating resources quickly to address large-scale challenges, nonprofit leaders are hopeful that donor advised fund holders will continue to support the broad range of charities and initiatives providing vital services to our neighbors and communities in need.