Since Grand Valley State University’s Dorothy A. Johnson Center for Philanthropy was founded 30 years ago, the nonprofit industry has seen seismic shifts in the amount of charitable giving, nonprofits’ assets, and the overall number of nonprofit organizations.
As well, donors are increasingly leaning on alternative structures — such as donor advised funds (DAFs) — to manage their philanthropic contributions.
These are just a few of the takeaways from a recent Johnson Center report that serves as a 30-year retrospective on the industry since the research organization’s founding.
One of the report’s clearest findings is that charitable giving has increased substantially over the past 30 years.
Michael Moody, GVSU’s Frey Foundation Chair for Family Philanthropy and author of the report, cited data showing charitable giving has increased by roughly $360 billion over the past 20 years. This figure tracks with the growth in GDP during that time period.
During that time, foundations have played a growing role as a source of those contributions, while individuals have played a relatively smaller role since 1992. Causes such as climate change and social advocacy have seen sharp increases in funding and interest during that time, while the share of contributions to religious organizations has shrunk by nearly half since 1992.
The rise of foundations
Meanwhile, the sheer number of 501(c)(3) nonprofit organizations has increased substantially in the U.S. over the past 30 years. In 1995, an estimated 571,091 nonprofits — including public charities and private foundations — operated in the U.S. That number increased to nearly 1.4 million in 2020, according to the report, which cites Internal Revenue Service data.
Not only did the number of nonprofits increase, but the average nonprofit budget also grew substantially. According to the report, the assets of the top 100 public charities grew by 599 percent from 1995 to 2020. A good portion of this growth is based on the rise in foundations, which itself is also tied to the increased concentration of wealth in the U.S., according to the report.
“The growth in foundations tends to be connected to when people have significant wealth creation or concentration, or even transfer from one generation to the next,” Moody said. “They tend to end up using a foundation for their giving or create a foundation as the result of that.”
Diane Sieger, who has served as president of the Grand Rapids Community Foundation (GRCF) for the past 35 years, is closely familiar with foundations’ growth and evolution. The GRCF is no exception.
“When I started, the GRCF’s asset size was about $35 million,” Sieger said. “Now, depending on how the market does, we’re roughly at about $450 million.”
This tracks with the growth in philanthropic giving overall over the past 30 years. And while GRCF has seen an increase in large donations over the years, Sieger said that smaller donations are still just as important.
Mirroring national trends, the GRCF has also increased programming and giving to underserved demographics and communities of color. In 2014, the GRCF received funding from the W.K. Kellogg Foundation’s “Catalyzing Community Giving” initiative, which helped GRCF emphasize “identity-based funds,” which include the Black Legacy Fund and the Somos Comunidad Fund.
DAFs explode in popularity
Another shift in the way donors have given over the past 20 years involves the exponential growth of donor-advised funds (DAFs). DAFs are essentially accounts that allow donors to make contributions and then have a say in where the funds are distributed. GRCF, for example, created its first DAF in 1990. The organization now oversees more than 220 DAFs.
“The assets of those funds constitute about a fourth of our total assets,” Sieger said.
GRCF is certainly not alone. Not only have the number of DAFs ballooned over time, but their average size also has increased.
“It used to be that donor-advised funds were used by people who didn’t have enough money to give to justify having a foundation,” Moody said. “They were sort of like a charitable checking account or bank account for people who wanted to give and wanted to create an endowment to give from but just didn’t have enough to justify a foundation. And now there are some DAFs that are just huge. And it’s a much more common vehicle that’s being suggested by their financial advisers.”
Some of the benefits of using a DAF include receiving an immediate tax deduction, having a say in where the funds go, and pooling resources to maximize giving. According to Moody, DAFs will likely continue to rise if left unchecked, however pending legislation and talk among federal policymakers seems to indicate that additional regulation for DAFs may be on the way.
“In 1969, we had a big tax act that regulated foundations and essentially created the foundation rules that we go by today,” Moody said. “It looks like at some point we’re going to have a version of that for donor-advised funds because there are certain things about donor-advised funds that some policymakers and many critics and observers of philanthropy don’t like.”
Some of the criticisms include the fact that funds from DAFs are less transparent than other giving options, and that money may sit in funds for long periods of time without being distributed to charities.
The Johnson Center’s 30-year retrospective report concludes by discussing how the study of the nonprofit sector has grown significantly since 1992. Only 17 colleges or universities offered a graduate degree or concentration in nonprofit management 30 years ago. Now, nearly 275 universities and colleges offer graduate degrees, and many more than that offer courses in philanthropy.
GVSU currently offers various levels of education concerning nonprofits, including its Master of Philanthropy and Nonprofit Leadership (MNPL) program.
MNPL Director Raymond Higbea is well aware of the significant changes in nonprofit education over the past 30 years.
“The way this started out here is this department was originally a public administration department, and they had a nonprofit concentration,” Higbea said. “Over time, that evolved to … a master’s degree in Philanthropy and Nonprofit Leadership. Then the certificate came along.”
Since the MNPL program began in 2015, approximately 70 to 80 individuals have completed the program, according to Higbea.
While similar programs are on the rise across the country, Moody posits that the education and study of nonprofits still requires more funding to keep up with a changing landscape.
“The world of philanthropy, and philanthropy operating in even other sectors outside of nonprofits, has become so much more complicated that we have to be doing more in order to really understand it,” Moody said. “And that’s going to require more funding to try to do that analysis.”
News coverage in the nonprofit section of MiBiz is made possible by advertising support from the Grand Rapids Community Foundation. GRCF is a leader in funding, initiating and leading programs that benefit the greater Grand Rapids area in arts and social engagement, education, health, neighborhoods, economic prosperity and the environment. This advertisement has no effect on editorial consideration in MiBiz.