By Drew Lindsay, Peter Olsen-Phillips, and Eden Stiffman
Fidelity Charitable Gift Fund, the nonprofit spinoff of big asset-management company Fidelity Investments, knocked United Way Worldwide out of the No. 1 spot in this year’s Philanthropy 400, The Chronicle’s annual ranking of charities that raise the most from private sources.
This changing of the guard in American philanthropy is a sign of how the competitive landscape and donor interests are evolving, marking the first time an organization that primarily raises money for donor-advised funds has held this top spot. United Way, a mainstay of American charity since its founding in 1887, was pushed from the top rung for only the second time since the Philanthropy 400’s 1991 debut.
For years, the two organizations had been neck and neck in the rankings. In 2015 Fidelity bolted far out front, collecting $4.6 billion, a 20 percent increase from 2014. United Way saw donations drop by 4 percent to $3.7 billion.
Fidelity, only 25 years old, has rapidly ascended over legacy organizations like the Salvation Army (No. 6), the American Red Cross (No. 31), and Harvard University (No. 14).
Rounding out this year’s top five are Feeding America, an organization that supplies most of the nation’s food banks; Schwab Charitable, another donor-advised fund created by a commercial investment house; and Catholic Charities USA.
Bigger Does Better
The shake-up in the rankings comes as many of the nation’s largest nonprofits continue to outperform smaller ones. The charities on the Philanthropy 400 raised 7 percent more last year than in 2014, compared to the 4 percent increase for all charities tabulated by “Giving USA,” a highly regarded annual report on the state of U.S. philanthropy.
This disparity in growth rates is unsurprising, says Una Osili, director of research at Indiana University’s Lilly Family School of Philanthropy, which does the research for “Giving USA.” Large charities have bigger fundraising staffs and more resources to help them pursue gifts, she says.
The Philanthropy 400 rankings are based on money charities raise from foundations, corporations, and individuals. Altogether, donations to groups on the list topped $104 billion, a new high, and represented $1 of every $4 donated to charity.
Just 119 groups on this year’s list reported a decline in giving in 2015.
United Way’s drop is the latest in a string of disappointments for the venerable charity. When adjusted for inflation, its fundraising is less than two-thirds what it was in 1990.
Brian Gallagher, president of United Way Worldwide, says the decline reflects fundamental economic shifts — including corporate consolidation and wage stagnation — that undercut the charity’s bedrock workplace-giving programs.
“Middle-class Americans haven’t seen an increase in income over 30 years and that affects us directly,” says Mr. Gallagher, who notes that United Way’s average contribution is $365. The minimum a donor must give to contribute to Fidelity Charitable is $5,000.
Fidelity has boomed in large part because it has invested heavily in making online-giving transactions painless for the donors, says its president, Pamela Norley.
“A lot of what [donor-advised funds] have brought to charities and our donors is really technology,” she says. “It’s an intermediary between the donor and charity that allows the process of giving to be simpler and more transparent and easier for record-keeping.”
A donor-advised fund operates almost like a charitable savings account; donors get the same tax benefit they would receive with a gift to a food bank or homeless shelter, but the money is often held in the fund for many years and invested. Though the nonprofit managing the fund technically controls the money, donors recommend which charities should get gifts and when.
Donor-advised funds could soon account for 10 percent of all giving from individuals, according to an analysis of data from “Giving USA” and the National Philanthropic Trust, itself a donor-advised-fund provider that ranked No. 17 on this year’s Philanthropy 400.
Unlike foundations, donor-advised funds are not subject to any payout requirements. Critics of the vehicles worry that donor dollars can sit in the accounts indefinitely, steering management fees to for-profit parent companies but not benefiting individual charities.
But substantial amounts are making their way to nonprofits’ coffers. With $15 billion in assets under management, Fidelity Charitable awarded more than $3 billion in grants to nonprofits last year, more than double the total from just four years ago. If this trajectory continues, it could soon eclipse the Gates Foundation as America’s biggest grant maker.
Winners and Losers
Social-service organizations still capture more donor dollars than any other cause. However, a 15-year analysis of the largest social-service charities shows several perennial giants declining or flattening while smaller organizations — often bolstered by donations of food, medicine, and other goods — are faring better. While United Way’s drop was most jarring, the Red Cross, Goodwill Industries International (No. 18), and the Salvation Army also faltered. Only four of the top 10 social-service groups increased giving in 2015 — the Y (No. 12), Feeding America, Habitat for Humanity International (No. 20), and the Wounded Warrior Project (No. 56).
Over all, the social-service organizations on this year’s list chalked up just a 2 percent increase in contributions since last year’s report.
Other trends in the Philanthropy 400:
The three top international groups on the Philanthropy 400 receive at least half of their contributions in the form of medicines and other in-kind donations.