Rossi’s Roundup: Welcome 2024! Hey 2023 … don't let the door slam on your way out.

Rossi Roundup 11.21.23-1 I find it hard to believe we’ve crossed the threshold, but, hey, Happy New Year!

We’ve all made it through another roller coaster year of economic and fundraising ping pong but are feeling optimistic about 2024. The past several years have been rather unsettling, and our donors are changing their behavior and fine-tuning their list of charities as well as the vehicles they prefer to make their gifts.

We’ve seen the decline of donors’ trust in nonprofit organizations, as well as the decline in the number of mailed in checks and of credit card numbers. And we’ve seen the increase of online giving, donor advised fund gifts, IRA contributions and private foundations―with even more people giving to projects on GoFundMe.

What’s worth smiling about? Inflation around the globe is slowing way faster than expected. If economists are right, that gift will keep on giving next year, bringing inflation back to normal levels for the first time in three years.

Time to grab your favorite beverage and have fun scanning just some of what I’ve read in December.

1. Blackbaud Data Highlights Giving Trends: Luminate Online Benchmark and P2P Benchmark

Blackbaud released two reports, which include insights into online giving trends and an analysis of peer-to-peer fundraising based on data from previous years.

Trends include:

Sustainer revenue continues to grow, as well as their annual value.
The more fundraising emails you send, the more money you raise.
Nonprofits needs to invest in robust acquisition.
Event participation increased for walks/5Ks.
For a second straight year, peer-to-peer fundraising rebounded.

Luminate Online Benchmark Report
Peer-to-Peer Benchmark Report

2. FEP 2023 Q3 Quarterly Fundraising Report

Through Q3 2023, donors decreased moderately, and donor retention continued to slide, driving a slight decrease in fundraising dollars. While long-term repeat donors were the most stable group, a significant drop in new donor participation had a negative impact on overall trends for the ninth consecutive quarter.

The full Fundraising Effectiveness Project (FEP) Q3 2023 report is available here.

Some highlights:

Donors are down -7.6%, led by decreases in new and low-dollar donors.
New donors declined -17%; they make up 35% of the donor population and so continue to be one of the main drivers of the total decline.
Retained new donors acquired in the prior year also declined by -19%.
Giving is marginally down (-1%) and has not kept pace with inflation, which was up 3.7% from September 2022 to September 2023.
Donors giving more than $50,000 declined by -7.9%, which accounted for 52% of the overall decrease in dollars.
Donors giving less than $100 had the sharpest decline at -15.7%, and these donors account for 53.7% of the donor population.

FEP Q3 Key Takeaways:

Q3 data shows a continued steep decline in donor counts, with a Q3 YOY drop of 7.6% after late data adjustment. This continues a trend that began in 2021, after a large uptick in donations and donors in 2020. New Donors (down 16.9%) and newly retained donors (down 18.7%) were responsible for the majority of this decrease, whereas Repeat Retained donors, who represent 41.9% of all donors, dropped by 7.4%.
Despite this overall decline in donors, dollars saw only a marginal year-over-year decrease of 1.1% in Q3. This decline was largely caused by a decline in Small and Micro donors (those who donated less than $500), substantial donor groups that accounted for 83.6% of all donors.
There is still disparity in an organization’s performance based on their size. Smaller organizations seemed to perform relatively better this year compared to bigger ones.

As we look ahead into 2024, it’s clear that new strategies and approaches are needed to stabilize the sector and gather positive momentum.

3. For Much of the World, Inflation Will Be Normal in 2024—Finally

Call it a Christmas miracle: Inflation around the globe is slowing way faster than expected. If economists are right, that gift will keep on giving next year, bringing inflation back to normal levels for the first time in three years.

Goldman Sachs economists estimate that core inflation, which excludes food and energy, in the group of economies that experienced the post-COVID inflation surge—the U.S., Europe and several emerging markets—ran at a 2.2% annualized pace over the three months ending in November.

By the end of 2024, average inflation among that group should be at or near the inflation targets of most major central banks, the analysts found.

Falling inflation should cushion economic growth in two ways: by bolstering household purchasing power and enabling central banks to cut interest rates.

Fed 'dot plot' shows central bank will cut interest rates by 0.75% in 2024

The Federal Reserve kept interest rates unchanged in a range of 5.25%-5.5% at its final meeting of the year. Central bank officials also predicted rate cuts to come, with interest rates expected to tick down to 4.6% next year.

Along with its policy announcement, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future.

Fed officials see the fed funds rate peaking at 4.6% in 2024, down from the Fed's previous September projection of 5.1%. That suggests the Fed will cut rates by 0.75% next year.

The Fed has moved in 25-basis-point increments over the last year, indicating the central bank now expects to cut interest rates three times in 2024.

Seventeen officials predict a rate cut next year, with five officials seeing a decrease of more than 0.75% while just two see no cut. No officials see rates ticking higher in 2024. This month's expectations for rates next year were also less widely distributed compared to September's projections.

Investors absolutely love the Fed's soft landing

New forecasts from the central bank showing Fed officials penciling in a further decline in inflation, no sharp rise in unemployment, a moderation on economic growth and a 0.75% reduction in interest rates next year send a clear message.

Investors, unsurprisingly, loved this news.

The euphoria in markets was largely spurred by the final element of this outlook, with the Fed's latest "dot plot" suggesting three rate cuts of 0.25% each will be coming in the year ahead. All else equal, lower interest rates are positive for risk assets.

But these expected lower interest rates don't come with the baggage that often encourages a central bank to ease its policy stance, which is a downturn in the economy.

Rather, the Fed expects the coming year to be, for the most part, a repeat of what Powell called "quite a performance" by the U.S. economy.

How Can Spending Be Up When People Feel Down?

According to the Misery Index, Americans shouldn’t be all that miserable. But they might only recently have started to catch on.

Invented by the economist Arthur Okun, the Misery Index is the simple summing of the unemployment rate and the inflation rate.

The increase in unemployment caused by the COVID crisis sent the Misery Index to its highest levels in nearly four decades in April 2020. Unemployment fell, but then inflation picked up, so in the middle of last year it still looked lofty. Since then, with inflation cooling and unemployment low, the index has fallen sharply: In November, with Labor Department figures showing the unemployment rate at 3.7% and consumer prices up 3.1% from a year earlier, it was 6.8, versus 12.5 in June 2022.

Yet measures of consumer attitudes have only recently picked up and are still pretty down in the dumps. The University of Michigan, for example, reported on Dec. 22 that its index of consumer sentiment jumped to 69.7 in December from November’s 61.3. This was still a bit below its April 2020 level of 71.8. In February 2020, it was at 101.

How can Americans still be upping their spending, including during this year’s holiday shopping season, when they are so pessimistic? An important part of the answer is that a strong job market, coupled with cooling inflation, is delivering inflation-adjusted, or real, wage gains that are providing people with income to keep spending.

So, the bigger question isn’t, ‘Why are Americans spending despite being in such an apparent funk?’ but, ‘Why are sentiment measures low even when recent jobs and inflation figures suggest they shouldn’t be so miserable?’ Carroll says that increased political polarization is playing a role here.

It could also be that, even though inflation has been cooling, Americans’ recent inflation experiences have left a more lasting mark. The Labor Department’s measure of consumer prices was 19% higher in November than it was before the pandemic hit. An analysis conducted by economists Ryan Cummings and Neale Mahoney suggests that the impact of inflation shocks on sentiment have a sort of half-life, decaying over time.

The pandemic itself left a mark, too. Americans collectively went through one of the most wrenching periods the country has experienced in living memory. Expecting them to feel better just because the economy has been doing pretty well lately might be a bit much.

4. Year in Help 2023: GoFundMe Annual Report & Top Campaign Themes

GoFundMe is a disrupter and barely mentioned in the GivingUSA reports; possibly not looked into as deeply as it should be in our considerations of where donors are now providing contributions.

Since launching in 2010, GoFundMe has become a widely used crowdfunding platform where people can solicit donations for a variety of causes, from help paying for cancer treatment to recovering from natural disasters.

As GoFundMe's year-end report shows, the 30 million fundraising appeals on the platform this year reflect a range of everyday financial struggles that the usual yardsticks of how the U.S. economy is performing typically fail to capture.

GoFundMe Key Notes:

$39M+ donations
94k+ fundraisers were started for businesses on GoFundMe this year
$106 million raised for natural disaster relief in 2023
org granted $13.5M+ to individuals and nonprofits in FY 2023
30M people gave and received help this year

- 1/sec―a donation is made every second
- Jan 2―most generous day on GoFundMe this year
- $50―most common donation amount
- Ireland―most generous country for 5th year
- Vermont―most generous U.S. state for 2nd year
221k fundraisers were started for animal-related causes this year
$13 donations more than doubled this year, with a 14x surge in April (13 is Taylor Swift’s favorite number)
19M thank you notes were sent to donors on GoFundMe this year

5. Donor Trust Reports of 2023

We’ve seen numerous reports, articles and studies on waning donor trust this year, including:

The BBB (Better Business Bureau) Wise Giving Alliance has provided us with their updated fall winter 2023 Donor Participation Report edition.

They asked participants to identify whether, over the past 5 years, they had been engaged with charities and, if so, whether they had stopped, decreased, maintained or increased their donations to charities.

“Our findings show that 59% of people with household income above $70k who stopped giving to charities over the past five years agree with the statement “There are people out there with significantly more money who should give to charity instead of me.”

“Finances aside, participants say they stopped contributing because they preferred other ways of being generous, did not trust the soliciting charity, or did not feel like they had been asked. Notably, 77% of Boomers who stopped donating said they could not afford to, compared to only 27% of Gen Zers. On the other hand, 45% of Gen Zers who stopped contributing said they did not feel like they had been asked, compared to only 4% of Boomers.”

6. Donor, Nonprofit Data Security Lapse At DonorView

Hundreds of thousands of donors and an unknown number of charities and businesses might have had private information exposed as the result of a security lapse involving fundraising and donor management platform DonorView.

Exactly how long the security lapse went undetected is still unclear. A spokesperson for DonorView said it was quickly addressed, but the researcher who brought it to the company’s attention told The NonProfit Times the data was likely exposed for at least a week before the issue was fixed.

Nearly 950,000 donor records might potentially have been at risk, according to a published report by cybersecurity researcher Jeremiah Fowler recounting his discovery of the incident.

7. 4 Practical Ways Nonprofits Can Use AI To Drive Innovation and Increase Impact

Since late 2022, ChatGPT has changed our collective understanding and discourse about the potential uses of generative AI. Now we’re seeing AI tools created specifically for nonprofits becoming available in just months, and this opens up many possibilities.

Generative AI represents a seismic shift in the kinds of innovation that are possible, and it might even start to close the innovation gap that has persisted for decades between the nonprofit and private sectors.

To help you figure out how to get in on this trend, here are four practical ways organizations of any size or mission can use generative AI to stay at the forefront of innovation and drive greater impact:

AI Can Be a Demystifyer: AI can simplify the early process of winnowing down which technologies might help your organization solve specific problems by offering broad pros and cons and insights into the dialogue concerning particular tools.
AI Can Be a Product-Management Assistant: By asking a generative AI large-language model to “take on the role of a product manager” and produce requirements to solve a problem the organization is facing, AI can help you communicate more quickly with and more easily draft requirements for an IT team or a technology account manager in a language and style they’re familiar with.
AI Can Be a Guide for Developing Tech Solutions: Those with patience can learn to use generative AI as a tutor and guide to streamline the development of “no code app” kinds of solutions.
AI Can Be an Innovation Strategist: Take the time to think through innovations that could help your organization accomplish more and increase impact. Then, share these thoughts with a generative AI tool, and ask it to “take on the role” of an innovation strategist for your organization. For example, you could ask it to “provide an initial draft list of major funders known to support your cause,” or “create a series of social media posts for LinkedIn using the below text from our annual report.”

8. What Philanthropy and Nonprofits Lose as Religion Fades

The nonprofit world as a whole stands to lose a great deal as churches empty of people, money and energy. Not surprisingly, the 21st century has witnessed a significant decline in the number of people who open their wallets with religion in mind. Nearly 47 percent of American households gave to congregations or religious groups in 2000; by 2018, that number had slipped to 29 percent, according to analysis by the Lilly Family School of Philanthropy.

“Potentially, 30 percent of congregations won’t survive the next 20 years,” says Scott Thumma, director of the Hartford Institute. According to the institute, the median number of attendees at Christian churches is 60, down from 137 in 2000.

If the closure estimate proves even partially true, philanthropy will soon have to confront the question: What’s lost when a church closes?

Faith-inspired groups dominate services to the vulnerable. They represent four out of every 10 international-aid groups and account for 40 percent of spending on social services, according to an analysis by the consultancy Bridgespan. Nearly three-quarters of addiction-treatment programs are based, at least in part, on spirituality.

Secular nonprofits stand to lose support as well. People who are religiously affiliated are simply more charitable. Sixty-two percent of households in which members regularly attend worship give to charities of all kinds. That compares with 46 percent of households with no religious affiliation, according to research by the Giving USA Foundation and the Lilly School.

Compassion and kindness taught in sermons and worship also motivate volunteerism. “Congregations are very good—perhaps uniquely good in American society—at mobilizing small groups of volunteers,” says the National Congregations Study. Collectively, they are an army: The Salvation Army and Southern Baptist Disaster Relief—among the largest disaster-relief organizations in the United States—train and deploy some 125,000 volunteers altogether.

Nonprofits that serve the vulnerable can expect their workload will only grow: “The people who will fall through the cracks will be those we should be looking out for the most—the lonely, the addicted, the depressed, the poor, the marginalized, the sick. Those are the people who are going to be hurt the worst when religion goes away.”