Leadership, Governance and Giving

The following material was prepared for the AFP Research Council Think Tank held October 7-8, 2008. The event was co-sponsored by the Philanthropy and Nonprofit Leadership Center at Rollins College. The Research Council is indebted to a generous grant from the Edyth Bush Charitable Foundation to the AFP Foundation that made it possible to convene nationally recognized presenters for the 2008 AFP Think Tank.

An Overview of the Sector Dr. Elizabeth T. Boris, Director Center on Nonprofits and Philanthropy The Urban Institute

Environmental Trends National economic status Financial meltdown/sub-prime mortgage crisis Federal and state budget deficits Growing income inequality Health care crisis Status of U.S. democracy: trust, engagement Changing demographics: aging, diversity Global warming/environmental degradation Globalization

Political Trends Intense partisanship Financial crisis and the war dominate political agenda and resources Limited discretionary dollars for other programs Search for revenues leads to the nonprofit sector Malfeasance in the nonprofit sector leads to stronger government oversight

Major Trends in the Nonprofit Sector Fast growing part of the U.S. economy More transparent than ever before Increasingly visible via electronic media Heightened Congressional interest Declining government grants and direct support Growing fee for service revenues leading to fears of “blurring boundaries with business sector”

Nonprofit Policy Trends Congressional hearings on nonprofits Threats to charitable status Demands for . . . Enhanced accountability and disclosure Governance standards Documented efficiency (reasonable costs) Effectiveness metrics Evidence of diverse beneficiaries

Nonprofit Responses to Trends Burnout/turnover/financial stress/shut down Entrepreneurial activities Innovative communications, fundraising, program delivery, volunteering—via the internet Mergers, partnerships, infrastructure creation Advocacy, policy development, lobbying and political activities

Attributes of Nonprofit Organizations Values Base: trust, integrity, commitment Mission: promote and enhance common good Governance: oversight for public purposes Finances: donations, volunteer labor, government grants, contracts, fees for services, events, member dues Accountability: transparency, performance

Major Roles of U.S. Nonprofit Sector Social, cultural, religious, economic Service providers Values guardians Employers Advocates Individual and community engagement Civic and political participation

Scope of the U.S. Nonprofit Sector 1.9 million nonprofits in mid 2008 [NCCS] 1.5 million registered with the IRS [Nonprofit 501(c)(3) and other orgs] 0.4 million religious congregations 1 million registered charitable 501(c)(3) nonprofits [including public charities & private foundations]

A Snapshot of the Nonprofit Sector The Number of U.S. Nonprofits [501(c)(3) public charities] by Subsector, 2006 Growth Over Ten Years, 1996-2006 Total % Change, 1996-2006 Arts, cultures, and humanities 72.1 Education 81.6 Environment and Animal related 119.8 Health 28.0 Human Services 56.8 International and Foreign Affairs 103.4 Other 79.6

Characteristics of Nonprofits (1) Diverse types: hospitals, shelters, museums, rights advocates, research institutes and more Varied sizes: financial giants like Harvard University and small-budget agencies like PTAs

Characteristics of Nonprofits (2) Different structures: federated, membership, etc. Varied organization: staffing, revenue generation Innovative: new program and outreach models

Economic Impact Contributed $666.1 billion (5%) to GDP Paid $489.4 billion in wages and salaries Employed an estimated 12.9 million (9.7%) of U.S. employment Spent $840.5 billion and gave away another $74.7 billion for total outlays of $915.2 billion The 38% of nonprofits that report to the IRS held assets of about $3.4 trillion

A Snapshot of the Nonprofit Sector Distribution of the Total Expenses of U.S. 501(c)(3) Public Charities by Expenses, 2006

A Snapshot of the Nonprofit Sector Distribution of the Number of U.S. 501(c)(3) Public Charities by Type, 2006

2008 Private Contributions (1) Estimated $307.65 billion in 2008, a 2 percent drop in current dollars from 2007 The first decline in giving in current dollars since 1987 Adjusted for inflation, total giving declined 5.7 percent, the largest drop recorded since Giving USA has been keeping track of America’s charitable donations Tax itemizers account for about 4/5 of individual contributions in dollar terms

2008 Private Contributions (2) SOURCE AMOUNT % OF TOTAL Individual giving $229.28 billion 75% Charitable bequests $22.66 billion 7% Corporate giving $14.5 billion 5% Foundation grants $41.21 billion 13 %

Fundraising Effectiveness Giving has been at about 2 percent of GDP for the last 40 years What would it take to move that percentage upward? Research suggests a greater focus on retaining past givers might yield benefits

Administrative Expenses Research on overhead and fundraising costs of nonprofits shows underinvestment in the infrastructure of nonprofits Research suggests that a focus on efficiency, (i.e., the least amount spent) results in below optimal investment in organizational effectiveness

Volunteering 26.7 % of the population volunteered in 2006, or 61.2 million volunteers 6.5 % of the population volunteers each day, or over 15 million volunteers per day 12.9 billion hours were volunteered, equivalent to 7.6 million full time employees earning $215.6 billion

Nonprofit Governance National Survey of Nonprofit Governance shows boards are very active in: Financial oversight and policy 52% Planning 44% Monitoring programs and services 32% Fundraising 29% Community relations 27%

Government Regulation of Nonprofits Contracts with government result in oversight related to: Performance measurement Overhead costs Charitable contributions (especially for hospitals)

Regulation Shapes Structures Recent research reveals that regulation of nonprofit political activities results in complex multi-organizational structures of environmental, business, and social action nonprofits: 501(c)(3) charitable activities 501(c)(4) lobbying activities PAC political activities 527 electioneering

Trends in Accountability Codes of ethics, professional standards, accreditation Governance standards Financial efficiency Outcome and impact measurement

New Demands: Be Prepared Contingency planning for crises Coordination and collaboration with nonprofits, government, businesses Creation of regional, local and national networks

Summary of the U.S. Nonprofit Sector The U.S. nonprofit sector is large and visible Demands on the sector are urgent and growing Resources to meet these needs are often inadequate Efficiency and effectiveness are key, but are not sufficient

Summary of the U.S. Nonprofit Sector Transparency and accountability must be improved Leadership by board and staff is necessary A nonprofit voice at the policy table is critical Greater coordination and collaboration are required

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