While fundraising levels are improving slightly, charities continue to lose more donors than they gain and have a long way to go to recover from the impact of the 2007-9 recession; this according to a new report from the Association of Fundraising Professionals (AFP) and the Urban Institute indicates.

The 2012 Fundraising Effectiveness Survey Report, part of the Fundraising Effectiveness Project (FEP), shows that the “net gain in giving” for charities responding to the survey in 2011 was $0. That is, for every $100 a nonprofit gained in 2011 from new donors, ramped-up giving by current donors, and the return of former donors, it lost $100 through smaller gifts from current donors and the departure of those who gave in 2010.

The return to a flat level of giving is actually a significant year-over-year improvement from 2010, when the “net gain in giving” was $-5 (for every $100 gained, $105 was lost) and from 2009, when the “net gain in giving” was $-19 (for every $100 gained, $119 was lost).

The last time the net gain in giving was positive was in 2007, when for every $100 charity gained, they lost just $86, for a net gain of $+14.

The report’s authors cautioned that growth in giving isn’t keeping pace with growth in the gross domestic product and inflation. While the sector has seen donations rising annually by single digits, in part because more nonprofits are being created, the researchers said an individual organization needs $100 in gains for every $94 in losses (a “net gain in giving” of $+6) just to keep up with today’s GDP and outdo inflation.

Losing Donors

Despite the improvement in gifts versus losses, nonprofits continue to “churn” through donors – losing them because of economic turbulence, other external causes, or the lack of effective relationship building (a problem nonprofits can try to tackle on their own). For every 100 new and returning donors added to an organization’s donor list in 2011, an even greater number – 107 – departed, for a “net gain in donors” of -7.

“The widespread turnover in donors needs to be understood and addressed,” said Elizabeth Boris, the director of the Urban Institute’s Center on Nonprofits and Philanthropy. “Nonprofits have to be more strategic in how they use their fundraising resources by focusing, for instance, on retaining new and existing donors.”

This is a “discouraging performance,” the report’s authors said, charities did better in keeping donors in 2010, when the net gain in donors was +3 (for every 100 new and returning donors, charities lost 97). Until recently, charities were much better at retaining donors. For example, in 2007, the net gain in donors was + 13 (for every 100 new and returning donors, charities lost just 87).

The FEP survey also looks at retention in terms of how many donors in one year didn’t give the next year. “New donor churning” is especially troublesome, the authors stressed. On average, 75 percent of a nonprofit’s 2010 first-time donors did not make a second gift in 2011.

At the same time, 60 percent of all donors to a particular charity in 2010 did not contribute again in 2011. This donor attrition rate was also 60 percent in 2010 and 59 percent in 2009. Donor attrition was somewhat better in 2007 at 55 percent.

“While we’ve seen some positive movement in the FEP survey numbers compared to previous years, the sector cannot become complacent when it comes to donor retention,” said Andrew Watt, president and CEO of AFP. “We’re still losing more donors than we gain, and that puts such a financial strain on our organizations because of inflation and the fact that it’s more expensive to find new donors than keep existing ones.”

The 2012 Fundraising Effectiveness Survey received data from 3,184 respondents covering year-to-year fundraising results for 2010-2011. Respondents raised over $2 billion from 2,327,000 donors for an average fundraising per respondent of nearly $700,000 and an average giving per donor of $881.

The full study, as well as a fact sheet, is available here.