Challenge and Opportunity for the Challenge and Opportunity for the Nonprofit Sector: Strategies for Nonprofit Sector: Strategies for Sustainability, Engagement and Sustainability, Engagement and

EffectivenessEffectiveness

Steven Rathgeb SmithSteven Rathgeb SmithGeorgetown University Georgetown University

University of WashingtonUniversity of Washington

March 22, 2010March 22, 2010

Outline of PresentationOutline of Presentation

Key trends in the nonprofit sector in the USKey trends in the nonprofit sector in the US Key Challenges Facing the SectorKey Challenges Facing the Sector Next steps for government, nonprofits, Next steps for government, nonprofits,

foundations, corporations and universities in foundations, corporations and universities in supporting the vital service and representative supporting the vital service and representative role of nonprofits.role of nonprofits.

Concluding thoughts Concluding thoughts

Growth in Nonprofit Organizations by Type, 1996 and Growth in Nonprofit Organizations by Type, 1996 and 20082008

Sources: IRS Business Master File 04/2009 (with modifications by the National Center for Charitable Statistics at the Urban Institute to exclude foreign and governmental organizations).

Public Charities in the United States, 2009Public Charities in the United States, 2009

Source: IRS Business Master File 04/2009 & The National Center for Charitable Statistics at the Urban Institute.

Number of Public Charities in the United States, 2009

NumberNumber Filing with the IRS

Total Revenue ($1000)

Total Assets ($1000)

Total U.S. 501 (c)(3) Public Charities 973,354 483,709

1,393,401,602

2,569,061,701

Economic Importance of the Economic Importance of the Nonprofit SectorNonprofit Sector

Contributed $751 billion to GDP in 2006, or Contributed $751 billion to GDP in 2006, or 5.2% of GDP5.2% of GDP

Paid $543.1 billion in wages and salaries in Paid $543.1 billion in wages and salaries in 2008, 9.4% of US Total2008, 9.4% of US Total

Employed an estimated 13.5 million people in Employed an estimated 13.5 million people in 2008 2008

D E L A W A R E ’ S N O N P R O F I T SB Y T H E N U M B E R S*

D E L A W A R E ’ S N O N P R O F I T SB Y T H E N U M B E R S

Mission Focus • 22% Human Services• 15% Education• 13% Arts & Culture• 11% Health• 8% Public Support &

Benefit• 5% Public Safety

• 4% Environment & Animal Welfare

• 4% Religion• 18% Other (includes youth sports

associations, parent-teacher organizations, booster clubs and trusts)

D E L A W A R E ’ S N O N P R O F I T SB Y T H E N U M B E R S*

Annual Operating Budgets741 of Delaware’s Nonprofits (80%) have annual

operating budgets of less than $1 million

AssetsMore than half the $8.2 billion total nonprofit sector assets are held by a small number of larger institutions, such as hospitals, colleges and universities and trusts.

*As of 2007

D E L A W A R E ’ S N O N P R O F I T SB Y T H E N U M B E R S

Delaware’s Nonprofit workforce – 43,365 – is significantly larger than many Delaware industries including:

• the 2,143 workers in the utilities industry, • the 14,845 employed in wholesale trade,• the 27,256 employed in construction.

D E L A W A R E ’ S N O N P R O F I T SB Y T H E N U M B E R S

Delaware Nonprofits Mobilize Volunteers • 178,000 Delawareans a year volunteer • 23 million Hours of service are contributed

annually by Delaware volunteers• $460 million Is the value of those volunteer

hours to the community

D E L A W A R E ’ S N O N P R O F I T SB Y T H E N U M B E R S

Sources: Delaware Nonprofit Working Group and KBT &

Associates; Corporation for National and Community Service – Volunteering in America; Urban Institute’s National Center for Charitable Statistics; Internal Revenue Service.

D E L A W A R E ’ S N O N P R O F I T SB Y T H E N U M B E R S

The Challenges Faced in Building a Membership- Based Nonprofit Association in a Small State…

Philanthropy Philanthropy in the in the First StateFirst StateDelaware’s Nonprofits, DonorsAnd Grantmaking Organizations

Nonprofit Organizations

Philanthropy, Donors & Nonprofits

Grantmaking Foundations

Corporate Donors &

Foundations

Individual Donors

State & Local Governments

1,000 active nonprofits70% in New Castle County

Mostly small (median revenues < $250,000)

Sources of RevenueEarned Income - 37%Contributions – 32%Government – 24%

FINANCIAL HEALTH

More than 1/3 of Delaware nonprofits are operating in the red.

Nonprofits that fail to cover expenses are less likely to sustain operations over time.

Delaware Nonprofits -- Percent Operating in Red

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

99 00 01 02 03 04 05 06 07

Private Funding Sources Private Grantmaking Foundations Community & ‘Public’ Foundations Corporate Donors and Foundations Individual Donors

Private Foundations(assets greater than $1 million)

390 private foundations.

Slightly more than half are located in Delaware for legal/financial reasons.

Foundation support of Delaware nonprofits is limited.

390Private independent

foundations based in Delaware (2007)

23Made significant investments

in Delaware.

$333 millionGrants awarded by private

Delaware foundations (2007)

$60 million Grants that went to support

Delaware-based organizations

DELAWARE’S MAJOR FUNDERS - 2007

Foundation Delaware Grants

Longwood Foundation, Inc.

$17,490,016

Mt. Cuba Center, Inc $10,933,500

Welfare Foundation $5,892,087

Laffey-McHugh Foundation

$2,990,091

Crystal Trust $2,693,155

Chichester duPont Foundation, Inc.

$1,702,000

Marmot Foundation $929,500

Crestlea Foundation $858,000

$43.5 million

THE DELAWARE COMMUNITY FOUNDATIONWilmington$15 million in grants awarded.

THE RODEL FOUNDATION OF DELAWARE Wilmington$4.7 million in program support.

UNITED WAY Of DELAWAREWilmington$20.9 million in funding awarded.

Community Foundations & ‘Public’ Foundations

How Corporations Give

Direct gifts from operating budgets

In-kind gifts of goods and services

Sponsorship of special events

Gifts of organized volunteer labor

Grants awarded through corporate foundations

Corporate Donors & Foundations

How Corporations Give

Direct gifts from operating budgets

In-kind gifts of goods and services

Sponsorship of special events

Gifts of organized volunteer labor

Grants awarded through corporate foundations

Corporate Donors & Foundations

AstraZenecaBank of AmericaBarclays Delmarva PowerDuPontING

Missing from that calculation….

JPMorgan ChasePNCVerizonWilmington Savings Fund Society (WSFS)Wilmington Trust

and others…….

Average Adjusted Gross Income 2006

$57,067 $59,045

$65,617

$46,592$50,360

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

US Delaw are NewCastleCounty

KentCounty

SussexCounty

Delaware donors as a whole are wealthier than their counterparts nationwide

Individual Donors

Participation Rate 2006

30%33%

37%

26% 26%

0%

5%

10%

15%

20%

25%

30%

35%

40%

US Delaw are NewCastleCounty

KentCounty

SussexCounty

A larger percentage of Delawareans make charitable contributions than the national average.

Participation rate: The percentage who report making charitable contributions

Average Charitable Gifts 2006

$4,403$4,011

$4,358

$3,125$3,342

$0

$1,000

$2,000

$3,000

$4,000

$5,000

US Delaw are NewCastleCounty

KentCounty

SussexCounty

Delaware donors’ charitable contributions are smaller than those made by their peers nationwide.

Recommendations: Build public understanding of the way nonprofits are funded. Grow a strong donors forum to encourage funder knowledge-building and collaboration. Broaden the universe of foundations providing significant support to Delaware-based nonprofits.

Recommendations: Increase the transparency of foundation giving. Document the role of corporate giving. Encourage more robust individual giving. Build strong - realistic - partnerships with public-dollar funders.

Forward Together Project Report Conference on the Future

of the Nonprofit Sector - 2010

The Nonprofit – State Government Working Relationship in Delaware

Deborah Auger, Forward Together Project Director

Based on Research conducted by :Deborah Auger, Kathryn Denhardt, Maria Aristigueta, Lauren Miltenberger

Forward Together Project

• Funded by – Jessie Ball duPont Fund, the University of Delaware’s

Center for Community Research & Service (CCRS), and Private Donations

• Project Partners: – DHSS, DSCYF, DANA, United Way

• Current Project Team:– Deborah Auger, John McNutt, Donald Unger

Project Aim and ActivitiesTo better understand and help improve the vital working

relationship between Delaware state agencies and nonprofits in the human services

• Phase I - Core Research – understand basics of contracting landscape– establish degree of participation/dependence – identify key sources of tension

• Phase II – Explore and Initiate Small Strides Ideas – pilot the notion of cross-sector working groups to identify

small scale innovations , build trust, and demonstrate possibilities for deeper reforms

Forward Together Project

Phase III – Forward Together Farther Initiative• Statewide Human Services Summit

- Held October 29, 2009

• State Budget Awareness /Support Human Service Budget- Legislative Forums, Budget Education Session at United

Way, DANA Budget Briefing with JFC Chairman

Phase I : Research on State & Nonprofit Agency Perspectives

• Nine Focus Groups• Fifty In-depth Interviews• Short Web surveys • Document analysis

Key Research Findingson System

• Strong and deepening mutual cross-sector interdependence

• Contracting system becoming more layered and complex; difficult to navigate for both sides

• Level of joint contracted service activity

unlikely to be reversed in near term

Findings of Strong and Rising Mutual Interdependence: State Side

• .

38%

62%

Contracted ServicesExpenditures

Adminstration andDirect Services

56%

44%Contracted Services

Administration andDirect Service

DHSS Expenditures for Contracted Services FY 07 (including Medicaid expenditures)

DSCYF Expenditures for Contracted Services FY 07

DSCYF 38% DHSS 56%

Findings of Strong and Rising Mutual Interdependence: Nonprofit Side

Operating Budgets of Delaware Human Services Nonprofits by Source

Nonprofit Dependence on State Contract Participation Rising

• Table 5: Is your nonprofit holding more or fewer state contracts than five years ago?”

More contracts 68%

Same or fewer 32%

State Says Dependence on Nonprofits Unlikely to be Reversed

31%

46%

11%

12%

Could Provide

Couldn't Provide

Plenty of Other providers

N/A

Consequences To The State If Nonprofits No Longer Able/Willing To Provide Services?

Some Key Sources of Tension Identified

Administrative Issues• Unrealized potentials for streamlining• Inconsistencies in reporting formats• Excessive paperwork forms “barrier to entry”• System has grown more complex over time,

posing navigation burdens on both sides (e.g. new funding streams, new contract instruments,

new payment approaches, new contract cycles)

Some Key Sources of Tension Identified

Cost and Fiscal Issues • Resource issues pose the most severe challenges • Both sides assert state does not always pay the

full cost of contracted services • Cost gap asserted ranged 0% to 45%; most

common pegged at ~ 25% • Resource inadequacies pose threats to system

sustainability

Some Key Sources of Tension Identified

Performance Measurement Issues• Both anticipate strong move toward performance-

based contracting • Nonprofits assert they lack adequate capacities to

effectively measure & report program outcomes (65%)• State managers express concern about their own

performance measurement understanding/capabilities • Contract managers receive very limited training for

their contract management role (68%)

Some Key Sources of Tension Identified

Strategic Partnership Issues • Mutual aspirations for more collaborative,

integrated service partnership; “In an ideal world…”

• But state perceives greater degree of partnership at present than nonprofits do

• Nonprofits desire better communication, opportunities for input on administrative practices/policies (60% say state seeks input “minimally” or “not at all”)

Divergent Perspectives on Current State of Partnership

• -

Forward Together Project

Phase III – Forward Together Farther InitiativeStatewide Human Services Summit Oct 2009Bring new state agency leaders/administration together

with nonprofits to– gain understanding of crucial emerging fiscal and

operational challenges facing each sector– engage both sides in identifying and promoting deeper

reforms to forge a stronger long-term partnership, capable of weathering the current crises

Statewide Human Services Summit Oct 2009

• 200 State and Nonprofit Leaders Participated • Review of Conditions/Updates on New State, Nat’l

Developments• Four Workshop/Dialogues

– Administrative Streamlining, Communication and Problem-solving

– Expanding Capacity to Identify/Pursue Federal and Philanthropic Grants

– Maximizing Volunteer & National Community Service Resources

– Confronting Performance Measurement Challenges

Statewide Human Services Summit Oct 2009

Sampling of Ideas on Administrative Streamlining• move toward one time posting of routine boilerplate

information in response to RFP’s; • encourage state use of networked, collaborative

contracting, so that smaller grass-roots organizations don’t routinely get closed out;

• create a locus for more consistent cross-division coordination of contract management practices;

• provide routine, scheduled opportunities for exchange of viewpoints on contract issues

Statewide Human Services Summit 2009

Sampling of Ideas on Improved Grants Capability • Form a distribution clearinghouse that ensures grant

opportunities get circulated widely, quickly, and across sectors• Create a system for ready “partner-match” where nonprofits

and state agencies can easily identify potential grant partners for open opportunities

• Secure seed funding to support cross-sector “grant start up” efforts

• Work with local grant-makers and AFP to build skills in effective grantsmanship

• Conduct training to demystify pursuit of federal grants

Statewide Human Services Summit 2009

Sampling of Ideas on Volunteer and Community Service• Secure a round of briefings for nonprofits on opportunities to tap

expanded AmeriCorps, Public Allies and other national service programs

• Support efforts of the State Office Of Volunteerism to integrate recruitment and informational resources on volunteering

• Create a major initiative to promote expansion in corporate volunteering as a supplement to corporate funding of nonprofits

• Learn what works elsewhere as effective strategies to recruit/prepare committed volunteers for nonprofit boards

• Strengthen nonprofit understanding of effective volunteer recruitment/coordination practices

Statewide Human Services Summit 2009

Sampling of Ideas on Performance Measurement• Develop and secure funding for side by side state-nonprofit

training in performance measurement• Promote consistency in state agency use of language/

terminology with respect to performance measurement• Assess the value of “easy to gather” outcome measures being

field-tested for nonprofits nationally• Connect state performance measurement approaches with

general strategies/language employed by United Way • Ensure that state performance measures set for public

programs are fully informed by “street-level” perspectives of nonprofit frontline workers

Forward Together Project

Concluding Observations:• Update on Workgroup Activity• Are we on path to partnership?• What’s needed now?

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

What We Don’t Know butWhat We Don’t Know butNeed to Know AboutNeed to Know About

Philanthropy and NonprofitsPhilanthropy and Nonprofitsin Delawarein Delaware

Observations bySteven W. Peuquet, Ph.D.

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

First, many thanks to Mary Kress Littlepage, Pam Cornforth and Deborah Auger . . .

. . . their research and presentations give us very important information and insights into the characteristics and functioning of charitable giving and nonprofit organizations in Delaware.

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

However, there are still gaps in our knowledge. For example:

Why is individual giving on a per capita basis lower in Delaware?

What’s really happening with corporate giving, and how/where can we get better data so we can better understand this?

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

What is the overall impact of the nonprofit sector on Delaware’s overall economy?

For every dollar spent in Delaware’s nonprofit sector, how does it ripple through the state’s economy?

Compared to other sectors, are dollars spent in the nonprofit sector more likely to circulate within the state and generate even more local economic activity?

Other gaps in our knowledge:

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

What are the effects of the current recession on the financial health of nonprofits?

Are people being laid off Are services being cut? If so, what services are being cut, where are they being

cut and at what rate? What effects is the recession having on charitable giving?

Other gaps in our knowledge:

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

Our community should conduct a broad study of the status of philanthropy and the nonprofit sector, like the KBT & Associates Study, every 4-5 years.

What we need to do . . .

While we need to fill some of these gaps in knowledge, we also need to conduct research on a more frequent and systematic basis. Here are my suggestions:

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

In doing such studies, the best available secondary data sources should be used, but we also need to do some primary data collection, such as:

Direct surveys of nonprofits and different types of donors

Focus groups with key nonprofit and foundation leaders

What we need to do . . .

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

For the years in between the broader studies, I recommend that, on a rotating basis, we do special studies of the conditions and needs of nonprofits in specific fields, such as:

Essential services to children Essential services to adults K-12 education, early childhood education, and day care Arts and culture

What we need to do . . .

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

Carrying out this kind of sustained research program would be money and effort well spent because . . .

As a community it would help us better understand trends and problems

Like the current KBT & Associates study, would help us develop strategies to increase charitable giving and strengthen the capacity of key nonprofits

And it would provide high quality information that could be used to advocate for the sector and to raise funding from grant makers and the public

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware

Thank You!

Center for Community Research & Center for Community Research & ServiceService

University of DelawareUniversity of Delaware