A nudge in the wrong direction: Why DONATION TRENDS matter to your nonprofit.

INTEGRALTrends is a series that looks at the trends and dynamics that impact how we plan, lead, and operate our nonprofits and charities. As the environment that nonprofits work within continues to shift, leaders need to keep a finger on the pulse of external trends – what’s happening in politics, economics, funding, and the nonprofit sector as a whole – to understand how to best prepare and adapt.?

For the first time in a couple of years, spring actually feels somewhat spring-like this year. As the season fully emerges, we can look outside our windows to see sunshine, blue skies?the world around us turning green and see new life is emerging from the land. Within the nonprofit sector, we can see things brightening up after a very challenging two years.

Over the last two years, donations have been challenging for many organizations, with CanadaHelps predicting a 12% decline in charitable giving between 2019 and 2021.

Last month, CanadaHelps released the 2022 version of the Giving Report entitled Giving at a Crossroads. This annual report uses a number of public and proprietary data sets to understand trends in giving in Canada over the short and long term. This year’s report details both the impact of the pandemic on charities and the long-term trends in giving.

The pandemic has exacerbated the weakening world of charitable donations

Over the last two years, donations have been challenging for many organizations, with CanadaHelps predicting a 12% decline in charitable giving between 2019 and 2021. However, even in the years before the pandemic, during the recession, there were some emerging trends in donations and the overall funding environment that we need to be aware of.?

Donation trends have been shifting for years

Over the last 15 years or so there have been major shifts in how people engage with donations in Canada. Tax filer data shows that participation rates in donations have declined substantially over the past 15 years, with fewer people across all age demographics declaring charitable contributions on their returns. Additionally, over the last 15 years we are seeing about 5% less given overall

So, while a decline in donations through the pandemic and early recovery stages is not surprise, the significance of over a billion dollars per year being withdrawn from the sector provides a serious nudge to the momentum of the long-term trend we've been seeing across the last few decades.

These are not new trends or something that we're seeing just in the COVID era, but rather multi-decade trends that don’t appear to be abating. If these trends continue, they will become quite significant issues for the sector.

Currently the overall level of donations remains fairly flat at around roughly $11 billion per year in Canada, with the majority of funds coming from the 55-year-old and up cohort. As this demographic moves into retirement, their level of giving will decline significantly and it does not appear as if the generations that follow will be able or willing to give at that level.

Civic engagement is shifting

While it has always be the case that older generations tend to have higher participation rates and give in larger amounts than those just starting out in their careers, there are indications that the style and values around civic engagement are shifting as well. Limited financial ability, especially in an era of increasing costs, plays into this dynamic, as do the ways that younger cohorts choose to participate in community, which may be expressed through more active and time-based undertakings, such as working for a charity or going to a protest rather than donating funds.???

As we continue to understand and work through this longer-term trend, it is important to keep in mind the motivations of donors and the experiences of charities will be extremely varied. This is not a “one size fits all” dynamic for either group. Each of the 89,000 charities in Canada has their own experience with donations both pre and post COVID – some will thrive and some will struggle, but this has always been the case.?

For the entire sector, the trends in donations we are seeing are worrisome not only for the reduction in finances, but also, and perhaps more importantly, for the suggestion of a weakening in community support for the work of charitable organizations.

Takeaways from this report

1.??????Donations remain a major part of this sector. ?Charitable donations have been, and will remain, a significant source of funding for some organizations. Every year, donors give more than $10 billion to a wide variety of causes and groups and will very likely continue to do so into the future. Even though the level of donations is not keeping pace with growing demand, there is a tremendous amount of work that is enabled through donations.?

2.??????The causes that receive support will continue to shift. Charitable donations are affected by a number of factors, but arguably the largest driver is a connection to the affinity of individual donors. One of the bright spots we are seeing is that that organizations that perhaps haven’t been top of mind in the past, such as racial equity and indigenous causes, are seeing greater levels of support, especially from younger donors.

?3.??????The way that people give will continue to shift. The mechanisms that donors utilize to give to organizations and the causes they support will continue to evolve with changes in community values, income levels, and technology, amongst other factors. However, the long-term direction in giving is one that, absent of a significant cultural or policy nudge to turn the trend, will increasingly limit the capacity of charities moving forward.

View a?video of Mike Grogan discussing this trend in more detail.

Mike Grogan is President and CEO of IntegralOrg, a capacity building nonprofit that provides governance and management support and resources for Alberta nonprofits and charities. IntegralOrg is grateful for the support of the Calgary Foundation to undertake this work.