Federal Funding, Donor Perceptions, and the Rise of Crowdfunding

This quarter’s Giving Sciences Barometer explores new research on consumers and donors, the rise of crowdfunding, and key insights from this week’s ANA Nonprofit Conference.

Quantifying the Federal Funding Crisis

This week’s ANA Nonprofit Conference in D.C. provided the perfect opportunity for some in-field research on the impact of federal funding cuts. I spoke with leaders from a wide range of charitable organizations—some that receive no federal grant funding at all, and others that rely on it for a staggering 60% of their revenue.

According to Chris Oswald, ANA’s EVP of Government Relations, among the subset of U.S. nonprofits that file IRS Form 990, about 30% receive government grants, totaling about $303B annually.

Donor Perceptions of Need

New research from Giving Sciences fielded mid-February reveals that 77% of charitable donors believe that charities have a greater need for donations to support their work compared to one year ago.

Donors respond to need, whether in the form of natural disasters, international conflicts, or funding changes. Since donors can’t support what they don’t know about, clear and transparent communication about funding shortfalls is critical. Some nonprofit leaders I spoke with at the ANA conference emphasized the delicate balance of informing donors without sounding partisan. Sticking with the facts about program impact and strengthening public relations efforts—a weak spot for many charities—can help navigate this challenge.

The Rise of Crowdfunding

Donors responded to the need from the devastating LA fires in January, which triggered a massive outpouring of support, much of it through crowdfunding. GoFundMe reported raising over $250M for LA fire relief and recovery efforts—more than the total raised for all disasters combined on the platform last year.

The shift toward crowdfunding is notable, and skews younger. Giving Sciences’ research found that 25% of charitable donors have given to GoFundMe in the past 12 months, with 82% saying their donation was for the benefit of individuals, families, or groups, rather than a charity.

Crowdfunding has a lot in its favor, including campaigns linked to individual stories, with urgent and tangible needs. It provides a direct giving vehicle in our age of declining trust in institutions. It’s also a gatekeeper for the donor data and relationship. Charities with a presence on GoFundMe through their Nonprofit Pages may gain an incremental revenue stream. However, like social media platforms, donor stewardship opportunities are limited unless the donor expressly opts into email communications with the charity.

The Economic Climate for Charitable Giving

Understanding today’s economy requires looking at multiple indicators such as inflation and the Consumer Price Index, unemployment and job growth, consumer spending and sentiment, plus stock market trends. Layering research insights from consumers and charitable donors to these macroeconomic indicators provides a more nuanced view. After all, it’s not uncommon for consumers and donors to have a different perspective from the economists.  

Currently, inflation hovers around 3%—above the Fed’s 2% target but well below recent highs. However, wage growth hasn’t kept pace in key areas, particularly housing (including insurance) and groceries (looking at you, eggs). Higher costs of course mean fewer discretionary dollars for charitable giving, which increases sharply with income. Encouragingly, Giving Sciences’ mid-February research found that the percentage of donors who say inflation has reduced their giving in the past 12 months dropped 3 percentage points since last quarter, to 55%.

Meanwhile, economic uncertainty is weighing on consumer sentiment. Recent federal worker layoffs and uncertainty related to import tariffs are contributing to a drop in consumer sentiment, as well as lower projected spending. With consumer spending driving the majority of U.S. GDP, slower growth is expected—though most economists see the risk of recession as low.

Despite this, consumer and donor sentiment remains cautious. About half of consumers (53%) and donors (52%) believe the risk of a recession in the next 12 months remains high. Notably, this concern declines as household income rises, reinforcing that wealthier households will continue to drive giving growth.

While stock market volatility is up, one-year gains for the S&P 500 are also up 15%, fueling giving vehicles like donor-advised funds (DAFs). DAFs plus other relational giving methods are going to continue to be the growth areas in a challenging individual giving environment.

Charities that focus on relational approaches for engaging high-value donors, growing their monthly and digital giving programs, and delivering tailored donor experiences will be best positioned to thrive amidst the evolving giving landscape.