Tracking Charitable Giving in Real-Time

This is my newest column for the Chronicle of Philanthropy. You can find an archive of past columns here.

An Alternative to ‘Giving USA’ Could Give Charities More Timely Data
By Sean Stannard-Stockton | Chronicle of Philanthropy

The report “Giving USA” is widely considered the official source on how much Americans give and which causes they support. Such data are important: They help nonprofits plan their budgets, fund raisers judge their performance, researchers track giving trends, and everyone understand the current state of philanthropy. However, “Giving USA” data are released only once a year and not until six months after year’s end.

So might it be possible to track philanthropy in real time?

A little-known fund-raising consulting firm called Philanthromax thinks it can and is now releasing monthly charitable-giving statistics just two weeks after each month ends in its “Atlas of Giving” report.

According to the most recent report, covering February 2011, charitable giving grew 8.8 percent over February 2010. That followed an 8.2-percent increase in January for a year-to-date increase of 8.5 percent. However, the “Atlas” forecasts that while growth in charitable giving will remain strong for the next couple of months, the strength will dissipate later in the year with October, November, and December all showing declines. The projection for the entire year is that giving will rise 3.4 percent.

Just like “Giving USA” data, and most major economic numbers like the gross domestic product or the nation’s employment report, the “Atlas” creates estimates of total giving. It isn’t actually possible to literally count every donation, since many taxpayers don’t itemize deductions, and even itemized-deduction statistics are not released by the Internal Revenue Service in a timely manner.

However, the “Atlas,” whose historical estimates largely mirror the historical results from “Giving USA,” is unique in that its estimation process relies exclusively on economic data and forecasts that are updated monthly, such as income, stock market, and employment measures. That means that the “Atlas” can calculate estimated giving levels every month and create giving estimates for future months that will be accurate to the degree that the underlying economic estimates are accurate.

If the “Atlas” estimates and forecasts are correct, this real-time information could be extremely valuable for nonprofits. It would be easy for nonprofit executives to view strong early fund-raising results and feel confident that they can pay for their growth plans. Or if early results were slow, they would know to be wary of a weak end to the year and plan accordingly.

I’ve reviewed the data that drive the “Atlas” in some depth and interviewed Philanthromax chief executive, Rob Mitchell, to better understand how “Atlas” develops its estimates and forecasts.

I’m not a statistics expert by any stretch, but my sense is that the “Atlas” estimates over long time frames are consistent with “Giving USA” findings. However, in any given year, “Atlas” estimates have often shown significantly different magnitudes of change than “Giving USA.”

For example, in a typical year, Philanthromax will generate a result that is within 3.8 percent of “Giving USA” figures.

That sounds close, except that when you measure the year-over-year change, it means that if “Giving USA” says donations grew by 3 percent, Philanthromax could show anywhere from a drop of nearly 1 percent to a gain of nearly 7 percent. But over time, the variance cancels itself out and Philanthromax ends up posting numbers that on average are within slightly more than half of 1 percent of “Giving USA” figures.

Since both groups use estimates, it isn’t possible to determine which is more accurate. Unfortunately, the “Atlas,” citing the proprietary nature of its work, will not make the details of their process public the way that “Giving USA” does. As more organizations seek to devise new ways to measure giving, I hope that researchers will gain access to the methods used so that they can be rigorously tested.

That is important because Philanthromax isn’t the only organization trying to devise better ways to track charitable giving. The Center on Wealth and Philanthropy at Boston College, has built a system that estimates and forecasts the charitable giving of households on a quarterly basis. Its approach differs from “Giving USA” because it includes a calculation of how much the level of joblessness in the country affects giving.

In addition, the rise of online and mobile giving means that donations contributed electronically can be tracked directly and quickly.

However, nobody collects all that information in one place; it’s up to the organizations that handle donation processing to offer estimates, and that means we never get a full picture of what is happening.

In my mind, the jury is still out on the validity of the “Atlas of Giving” and many of the other measures showing how much Americans give.

However, all these efforts to offer better and more timely measures of giving are important because they can help nonprofits run more efficiently. And improved data about the state of giving can influence the behavior of foundations, philanthropists, and government agencies.

While one can only hope that philanthropy never succumbs to a Wall Street-style, manic-depressive obsession with short-term data, the arrival of new real-time estimates are a major step forward for nonprofits and donors alike.