Fewer give––and Congress may scrutinize advocacy

From ANIMAL PEOPLE, November 1996:

WASHINGTON D.C.––Donations to environmental
causes, including animal protection, grew 12.5% from
1993 through 1995, reports a Gallup Organization poll of
2,617 adults with household incomes of under $200,000,
done for the charity umbrella group Independent Sector.
The growth was significant, as a fundraising slump
after Earth Day 1990 and the 1990 March for the Animals
brought an overall decline of 0.6% during the eight years
from 1987 through 1995, as sharp gains before 1990 were
quickly lost. Environmental and animal causes were more
successful at fundraising relative to past performance than
education, religion, international aid, and public and social
benefit charities, but lagged well behind health and youth
causes––and donations to the arts, culture, and humanities,
despite a 29% overall loss of support 1987-1995, enjoyed a
42% rebound during the last three years of the study.

The most meaningful and alarming number for most
fundraisers, however, was the finding that the U.S. charitable
base fell by 3.8 million households from 1993 to 1995, the
sharpest drop since Independent Sector began commissioning
similar surveys in 1988. About 73% of all surveyed households
gave to charity in 1993, but only 69% did in 1995, as
disagreement with the statement, “Charities are honest and
ethical in their use of donated funds” rose from 20% in 1988
to a record 31% in 1995. On the other hand, 58% of respondents
agreed that charities are more effective now than five
years ago, up from 48% in 1988––a hint that donors still
active are more likely to remain active than were those who
have already quit. Those donors who still give tend to give
more, as the average donating household gave $1,017 in
1995, up $89 in inflation-adjusted dollars since 1993.
Donor confidence crisis
Charity revenues are expected to soar during the next
decade through wills, bequests, and planned giving, an
effect of an aging population. But the donor base could be
further eroded through failure to recruit and keep younger
donors to replace those who pass on, and that trend may be
exascerbated by scandals rattling donor confidence. While
the 104th Congress passed legislation increasing the accountability
of charities to donors and media, mandating the distribution
of copies of nonprofit tax returns (IRS Form 990), and
giving the IRS the ability to fine employees and officers of
charities who improperly enrich themselves with donated
money, Congress also cut the IRS budget.
Reported Jennifer Moore and Grant Williams in the
October 17 edition of The Chronicle of Philanthropy, “The
cuts have forced significant staff reductions at the revenue
service, which many believe was already too small to keep
tabs on the nation’s 1.1 million nonprofits, nearly 200,000 of
which were incorporated since 1988, including 20,000-plus
in 1995 alone.
“I’m very concerned that the system is heading for
total collapse,” warned former top IRS charities regulator
James McGovern, now an executive for KPMG Peat
Marwick.
But Representative Nancy L. Johnson (RConnecticut),
head of the House subcommittee that oversees
the IRS, told Moore that if the Republicans keep control of
Congress, she will hold hearings into why the nonprofit sector
is growing so rapidly, with an eye toward stripping advocacy
groups that don’t do hands-on work of their tax-exempt
status––or at least some of their privileges.
Charities incorporated as educational organizations
under 501(c)(3) of the IRS code would be most scrutinized.
That includes the majority of animal protection groups that
don’t actually rescue and shelter animals as their primary
function.
“The problem,” Johnson said, “is that it is very
hard to define the difference between education and advocacy
or education and politics.”
Johnson apparently did not add that it is also difficult
to distinguish direct mail fundraising from public education
under current IRS rules, enabling a growing number of
charities including many of the most prominent animal advocacy
groups to claim direct mailing expenses as program
costs. In some cases, notably that of the Doris Day Animal
League, whose direct mailing costs have never absorbed less
than two-thirds of its revenue in the seven years A N I M A L
PEOPLE has monitored animal protection groups’ Form 990
filings, sending mailings including fundraising appeals is
almost the organizations’ entire program.
But Bob Smucker, an Independent Sector senior
vice president, seemed ready to defend direct mail as program.
“What Ms. Johnson is likely to find,” he said, “is that
it’s impossible to draw distinctions between education, advocacy,
and service delivery. It is sort of a seamless web.”
Certainly, if Johnson’s move to restrict charitable
exemptions for advocacy gains momentum, advocacy groups
and the direct mail industry can be expected to inundate her
with cards, letters, and petitions, drawn from donors along
with money by intimating that her objective is not reform so
much as it is muzzling particular causes.