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Leadership, Governance and Giving

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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.

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An Overview of the Sector

Dr. Elizabeth T. Boris, DirectorCenter on Nonprofits and Philanthropy

The Urban Institute

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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

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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

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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”

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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

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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

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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

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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

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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]

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A Snapshot of the Nonprofit Sector

Total Nonprofits (n=328,690)

Environment and Animal

related4%

Health13%

International and Foreign

Affairs2%

Other18%

Human Services

34%

Arts, cultures, and humanities

11%

Education18%

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

The Number of U.S. Nonprofits [501(c)(3) public charities] by Subsector, 2006

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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

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Characteristics of Nonprofits (2)

• Different structures: federated, membership, etc.

• Varied organization: staffing, revenue generation

• Innovative: new program and outreach models

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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

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A Snapshot of the Nonprofit Sector

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

44.8%

28.9%

8.5%

11.4%

2.6%

3.8%

0.5%

1.9%

1.6%

6.9%

5.0%

84.1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Under $100,000

$100,000 to $499,999

$500,000 to $999,999

$1 million to $4.99 million

$5 million to $9.99 million

$10 million or more

Exp

ense

s

Percentage

Public charities Expenses

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A Snapshot of the Nonprofit Sector

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

11.0%

18.0%

4.2%

12.8%

33.7%

1.9%

18.5%

2.1%

16.7%

0.8%

58.8%

13.2%

2.2%

6.2%

0% 10% 20% 30% 40% 50% 60% 70%

Arts, cultures, and humanities

Education

Environment & Animal related

Health

Human Services

International & Foreign Affairs

Other

Type

Percentage

Public Charities Expenses

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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

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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 %

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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

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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

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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

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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%

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Government Regulation of Nonprofits

• Contracts with government result in oversight related to:– Performance measurement– Overhead costs– Charitable contributions (especially for hospitals)

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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

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Trends in Accountability

• Codes of ethics, professional standards, accreditation

• Governance standards• Financial efficiency• Outcome and impact measurement

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New Demands: Be Prepared

• Contingency planning for crises • Coordination and collaboration with

nonprofits, government, businesses• Creation of regional, local and national

networks

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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

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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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Questions and Comments

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