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State of Nonprofits Quarterly Index

Top 5 Reasons to Attend the State of Nonprofits 2nd Annual Summit

If you are thinking about attending the 2nd annual State of Nonprofits Summit on June 5, 2014 at the University of San Diego, here are five reasons you won’t want to miss this event:

Reason #1:  Learn About the Major Economic Trends Facing San Diego Nonprofits

Nonprofits of all types are affected by changes in individual giving, volunteering, public confidence, and demand for service.  At the Summit you will learn how these factors have fluctuated over the past two years and what may be in store for 2014.  You will also hear about how San Diego nonprofits are engaged in major strategic initiatives to redesign how they do business. The Caster Center’s annual report will identify a few of these initiatives and you will have a chance to talk with other San Diego nonprofit leaders about the changes they are making.

Reason #2:  Learn How to Better Evaluate Programs and Communicate Outcomes

Funders are increasingly asking nonprofits to measure impact, and nonprofits are responding.  If you’re still developing a strategy for program evaluation, attend the Outcomes Evaluation workshop that will discuss evaluation from both grantmaker and grantee perspectives.  This session is designed to give you the tools needed to better evaluate your programs and communicate those outcomes to funders.

Reason #3:  Hear How Other Nonprofits Use Social Media to Engage Donors

If you have already quantified your impact in the community, the next step is communicating that impact to donors.  Social media is one of the tools used by many nonprofits to share their success and engage donors in long-term conversations.  But how can you capitalize on the promise of social media without wasting time and money?  The social media and donor engagement workshop session will highlight local nonprofits that effectively use social media to develop relationships with donors. You’ll hear directly from experts in the field about what works and what doesn’t.

Reason #4:  Network with Nonprofit Leaders, Funders, and Policy Makers

If all of this information has your head spinning, don’t worry.  Plenty of time will be allotted for you to network and discuss ideas with your peers.  More than 100 other nonprofit leaders, funders, and policy makers are expected to attend.  You can ask questions, pick their brains, and develop relationships.

Reason #5:  Spend a Beautiful Day at USD

In addition to learning about the state of nonprofits and networking with your colleagues, you’ll spend a beautiful day at the University of San Diego. You’ll enjoy sunshine and good conversation while eating lunch on the West Terrace. You’ll have a chance to step back from the day-to-day operations of your organization and, if you like, wander through the Meditation Garden as you think strategically about the changes needed to keep your organization current in a changing environment.

Register for the summit today.

Trend Reporters: To thank you for all of your contributions, you get a special discount! Email jjones@sandiego.edu for the discount code.

Demystifying Social Enterprise

Jennifer A. Jones, M.A., Research Associate at the Caster Family Center for Nonprofit and Philanthropic Research.

Social Enterprise. B Corporations. L3Cs. These are a few of the hot buzz words floating around these days. But what do these words actually mean and how can 501(c)3 nonprofit organizations harness the promise of social enterprise?

In the broadest sense of the definition, social enterprises have both a social mission and a market-based mechanism for generating revenue. As the Social Enterprise Alliance indicates:  Social enterprises are businesses whose primary purpose is the common good. They use the methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas.

Social enterprises come in a variety of models, most of which can be distilled down into two main categories: nonprofit or for-profit. This article will offer a brief definition and a few examples of social enterprises within these two categories. For those working in the third sector, it is important to recognize that nonprofits can – and in many cases should – be involved in social enterprise.

Category I: Nonprofit Social Enterprise

Nonprofits have operated social enterprises for decades, if not centuries. In fact, any nonprofit that offers fee-for-service programs or charges an admission price is, in the broadest sense, a social enterprise. These activities generally take place within the umbrella 501(c)3 organization. For example, the San Diego Opera sells concert tickets and Dreams for Change operates a mobile food truck which sells hot, nutritious meals to the homeless. Both are social enterprises, although each has a very different mission.

Nonprofits can also incorporate a separate company in order to raise revenue. For example, Jewish Family Service of San Diego owns two companies, one nonprofit and one for-profit. Both companies accept donations of cars, trucks, vans, SUVs, boats, motorcycles, ATVs, RVs, trailers, and airplanes. These donations are liquidated and the funds distributed to a nonprofit of the donors choosing. Profit generated from the administrative processing is donated to the parent company, Jewish Family Service.

Example #1: Nonprofits engage in earned-income business development. Business can be related or unrelated to mission.
Dreams for Change operates a mobile food truck that sells hot, nutritious meals to the homeless and accepts food stamps.

Example #2: Nonprofits form separate for-profit enterprises to provide revenue.
Jewish Family Service of San Diego owns for-profit company CARS, Inc.

Category II: For-Profit Social Enterprise

In recent years, increasing numbers of for-profit companies are forming or advertising as social enterprises. There are a number of legal structures under which to incorporate, three of which will be outline here. First, for-profit companies of all sorts can partner with nonprofit organizations to engage in cause marketing ventures or campaigns. Susan G. Komen for the Cure is one of the most well-known examples. The Komen foundation partners with several hundred for-profit companies including American Airlines and New Balance. In a cause marketing campaign, there is a formal agreement between the for-profit and the nonprofit. For example, the for-profit may agree to give all or a portion of the proceeds to the charity.

Additionally, there are new legal structures emerging which allow for-profit companies to signal a commitment to a social mission. The Low-profit, Limited Liability Company (or L3C) and the Benefit Corporation are two such structures available. These structures are taxed as for-profit companies and cannot receive tax deductible contributions. However, such corporations can and do explicitly market their charitable activities and, as will be described in the next section, many apply for Program Related Investments from foundations. To date, more than half of the states in the country have approved or are considering legislation allowing companies to incorporate as either an L3C or Benefit Corporation.

Example #1: Traditional business structures engage in cause marketing
Susan G. Komen for the Cure partners with American Airlines (and many other corporate partners).

Example #2: Low-profit, Limited Liability Company (L3C)
Urban Worm Girl is a for-profit consulting company. It also sells products related to in-home composting.

Example #3: Benefit Corporation
CRSURF (Costa Rica Surf) markets itself as an environmentally conscious surf travel company. 

Additional For-profit Social Mission Realization Strategies

Regardless of legal structure, there are many ways that a for-profit company can achieve a social mission. One way, of course, is to donate all or a portion of proceeds to a nonprofit charitable organization. This is the model followed by the popular brands TOMS Shoes and Newman’s Own.

An alternative to donating proceeds is to commit to socially conscious business practices. Think, for example, of the many companies committed to selling only fair trade coffee, being ecologically friendly, or hiring disadvantaged populations such as persons with disabilities or formerly incarcerated. This commitment from a for-profit company is, in the broadest sense, a form of social enterprise.

For-profit companies committed to a social mission are eligible to receive low-interest loans and investments from private foundations. Also known as Program Related Investments (PRI), these loans have historically only been offered to nonprofits. In recent years, increasing numbers of foundations are offering them to for-profit companies as startup or investment capital. One example of this is Gates Foundation’s purchase of stock in Liquidia Technologies, a for-profit biotechnology company working on vaccine delivery. The foundation used PRI funds to purchase stock with the intention of influencing the delivery system for the world’s vulnerable population.

Finally, impact investing is an emerging form of social enterprise whereby the donor expects to make a profit from their philanthropic investment. One example is the emerging Pay-for-Success or Social Impact Bonds (SIBs). First introduced in the United Kingdom in 2010, SIBs are still a relatively new form of philanthropy designed to fund long-term pilot projects based on promising but untested practices. A donor/investor contributes the initial funds. A nonprofit carries out the project. An independent evaluator evaluates the project. If the project is successful, the government repays all or part of the investment to the donor/investor, usually with interest. Success metrics are predetermined by all parties. Goldman Sachs launched the first SIB in the United States. Their $10 million is aimed at reducing the recidivism rate for adolescent offenders at the Rikers Island correctional facility.

 Method #1: Profit distribution to nonprofit organization
TOMS Shoes donates one pair of shoes for every pair purchased.

Method #2: Socially conscious business practices
Starbucks is committed to fair trade coffee and benefits for employees.

Method #3: Program Related Investments (PRI)
Liquidia Technologies: Gates Foundation used PRI funds to purchase stock in a for-profit biotechnology company working on vaccine delivery.

Method #4: Impact Investing
The Acumen Foundation’s website states that $13 million in cash has returned to the foundation from social investments such as $600K invested in India-based, for-profit company WaterHealth International which provides safe drinking water for the poor.

Conclusion

As you can see, social enterprise takes many different structures and can be effective for nonprofits of different subsectors and budget sizes. Social Enterprises can be as novel as a $10M Social Impact Bond or as “routine” as the beloved Girl Scout cookies.

It’s also important to remember that nonprofits have operated social enterprises for many years, long before any of today’s buzzwords were created. The category of social enterprise, in the broadest sense, includes any agency that has a fee-for-service program such as hospitals, clinics, theaters and museums.  In fact, your organization might already have a social enterprise venture. If so, we’d like to hear from you.

What has been your experience? Please share in the comment section below.

Playing Matchmaker – The Intersection of Volunteer Interests and Organizational Needs

Sue Carter Kahl, M.S.W., Research Assistant at the Caster Family Center for Nonprofit and Philanthropic Research.

Volunteer engagement involves two sides of the same coin: volunteers and the nonprofit organizations that need them. However, we often discuss volunteerism from the volunteer perspective or the organization perspective. For example, in an effort to encourage more people to volunteer, we focus on the benefits of volunteering or volunteer motivations and traits. From the organizational perspective, we target issues such as volunteer recruitment and retention.

In reality, volunteerism encompasses volunteer and organizational needs and takes place at the intersection between the two.  Volunteer practitioners know that an effective volunteer match involves connecting the right volunteer with the right position at the right organization.

The University of San Diego’s Caster Center for Nonprofit and Philanthropic Research recently conducted a needs assessment with 166 organizations and 394 volunteers to help shed light on this intersection and the related importance of volunteer matchmaking. The results offer a new way to view an old dilemma. Specifically, the study found a mismatch between what volunteers want and organizations need in terms of volunteer service. This lack of alignment is one of the reasons that engaging volunteers is challenging.

Needs Assessment Highlights

Volunteer time and availability were cited as the greatest challenges to service by the volunteer and organization survey respondents. Volunteers prefer one-time and short-term volunteer opportunities while organizations seek long-term commitments of three months or more from their volunteers.

Figure 1. Length of Commitment Preferences

length of commitment jpg

 

 

 

 

 

 

 

Many individuals find volunteer opportunities through volunteer connectors like online volunteer databases, a volunteer center, or United Way. They also learn about projects through word of mouth or relationships at work, their places of worship, or their children’s schools. Another 27 percent use the host organizations’ website to find volunteer opportunities.  Many organizations use similar methods to find the volunteers that are the best matches for their needs.

Figure 2. Matching Mechanisms Used by Volunteers

matching prefs jpg

 

 

 

 

 

 

Implications for Practice

Nonprofit leaders can use the assessment findings to enhance their volunteer recruitment with the following recommendations.

Use short-term experiences to cultivate longer-term volunteers.

Consider the ways that people interact with your organization (volunteer or otherwise), and use these experiences to education them about how to get more involved.

Equip those affiliated with the organization with messaging about becoming a volunteer.

Staff, program participants, organization partners, and current volunteers can be ambassadors for recruiting new volunteers.

Use volunteer connectors strategically.

Be selective about volunteer connector sources (Hager & Brudney, 2011).  Determine which ones yield the best volunteer matches for your organization and focus on those rather than posting to every source you can find. Provide specific details about available projects so that volunteers can determine whether they are a fit.

Ensure your website is volunteer friendly.

Help volunteer prospects get to know your organization and the ways they can get involved. Make it easy to inquire about or apply for volunteer positions.

References

Hager, M.A., & Brudney, J.L. (2011). Problems recruiting volunteers: Nature versus nurture.  Nonprofit Management and Leadership, 22, 137-157. doi: 10.1002/nml.20046

Carter Kahl, S., & Deitrick, L. (2013). Volunteering in San Diego: A needs assessment.

 

Leading with Authenticity in the Nonprofit Sector

Taylor Peyton Roberts, Ph.D., Research Consultant with the Caster Family Center for Nonprofit and Philanthropic Research

Nonprofit employees know the importance of their work, as their efforts help keep society running.  Through various activities, their organizations regularly demonstrate widespread immediate and long-term impact.  The work of nonprofits is diverse; they contribute greatly across many different subsectors, such as arts, education, environment/animals, health care, economic development, and human services.  The scope, reach, and impact of many nonprofit organizations is often apparent to actors within the sector and to the people the sector serves.

Yet the funding structure and competitive landscape within which nonprofits operate can impose great challenges for preserving organizational identity and primary purpose.  The external focus that drives nonprofit leaders’ service to society can, at times, threaten the heart of the nonprofit when paired with a lack of resources, extreme busyness to make ends meet, and/or an organizational culture that glorifies the martyr mentality (which makes a virtue out of making personal sacrifices for the benefit of a given cause).  When pressures abound, it is far too easy for many nonprofits to stray away from the fundamental reason they came into existence, and instead focus on serving the needs of their funding sources, political benefactors, or the personal goals of their own leaders.

In order to remain on target with carrying out a core mission, it is helpful for nonprofit leaders to consider the degree to which they facilitate authenticity at the organizational level.  To probe for this issue, a leader could ask questions such as,

  • To what degree does my nonprofit operate in a manner that is true to its purpose, values, and long-term goals?”
  • “Does my organization ever ‘fake it to make it’ in order to secure funding, deliver promises outside of its core realm of expertise, or deviate from key values in the name of expediency?”

Here I am offering a framework, developed from psychological theory, which can be used to guide the practical investigation of authenticity.  In good and bad times, there are at least four aspects to organizational authenticity that should be considered.  They involve:

  1. acting in accordance with primary purpose, mission, identity, and values;
  2. knowing the organization;
  3. inviting collective awareness; and
  4. ensuring functional and vigilant maintenance of inauthenticity when it matters most.

Act in Accordance with Primary Purpose, Mission, Identity, and Values

First and foremost, maintaining your nonprofit’s authenticity involves acting in accordance with your nonprofit’s true reason for being.  Ask: “To what extent does my nonprofit actually behave in alignment with its primary purpose, mission, identity, and values?” Leaders often believe that their actions and decisions are upholding their organization’s primary goals and values when, in fact, this is not the case.  Do you, as a leader, perceive that your daily work, and the work of others employees, is reflective of your organization’s broader purpose?  Do you sense that your nonprofit is achieving what it set out to achieve?  Do you ask others outside of your nonprofit for their interpretation of what your nonprofit truly stands for?  Do your employees agree with what outsiders say, or do they hold a different perspective?  To what extent to the funding sources that drive your organization’s sustainability align with your mission?  Do you really, truly, act in accordance with your nonprofit’s values?  If your answers to these questions begin to suggest a lack of alignment between your nonprofit’s core mission and its actions, then I strongly encourage you to keep reading.

Note that, in response to the questions just raised, it is easy and gratifying to conclude, “Yes, my nonprofit’s work aligns with its core mission,” deem your organization authentic, and then consider the case closed.  However, aligning your nonprofit’s work with its primary objectives, mission, and values is not enough for the organization to remain authentic to its purpose for the long term.  Why?  Because achieving and maintaining organizational authenticity also requires working with the other three components of authenticity proposed earlier.  Let’s next explore these remaining components by raising some key questions for consideration.

Know the Organization

Check on the degree to which you, and those around you, actually are familiar with important qualities of your nonprofit.  Ask: “Does my nonprofit truly know its purpose, mission, identity, values, and culture?”  If your organization’s purpose and mission is not clearly articulated, and/or if your employees are unfamiliar with your core reason for being, then that makes acting in accordance with your purpose very difficult.  Do you, as a leader, verbally remind those around you of the big-picture and broader meaning underlying your nonprofit’s work?  Do you invite others into the process of redefining or co-creating the significance of your nonprofit’s work as things change throughout the years?  Do you openly talk about your nonprofit’s values, and the priority of those values in certain situations?  Do your employees know your nonprofit’s history, particularly with regard to where your organization stands today and how that informs its future goals?

Invite Collective Awareness

Additionally, recognize that organizational authenticity is something to be maintained and managed at the collective level.  Ask: “Does my nonprofit have effective methods for noticing and addressing tough issues that would otherwise inhibit our organization’s ability to be true to its purpose, mission, identity, values, and culture?”  Do you, as leader, encourage employees to explore and talk about the degree to which their personal values are aligned with your nonprofit’s values?  Do you have effective procedures for responding to situations when employees deviate from important organizational values?  Does everyone in your organization feel respected and safe to express their opinions?  If not, consider why this might be the case.

Ensure Functional and Vigilant Maintenance of Inauthenticity

Finally, recognize that there are many instances when practicing organizational authenticity is either irrelevant or not helpful for nonprofit performance.  The key here is to be vigilant of when the practice of inauthenticity (i.e., behavioral deviation from purpose, mission, identity, or values) becomes a problem for the organization.  Ask the following: “In moments when my nonprofit deviates from honoring its true purpose, mission, identity, or values, why is that happening? Is the result a potential issue?”  Do you, as a leader, too often deviate from your mission because of the need for money or resources?  Do you work to establish healthy limits to what you will actually promise to deliver to potential funders, for purposes of not drifting too far away from your established areas of expertise?  Or is the competitive environment changing such that a shift in organizational strategy is actually warranted?  Do you, as a leader, forego your nonprofit’s primary objectives out of some underlying guilt or fear?

Considering all four aspects of authenticity can shed light on the degree to which your nonprofit is truly authentic to its purpose, mission, identity, and values.  If such questions remain ignored, the long-term risks include mission drift, being stretched too thin, or employee burnout from a lack of reinforcing deeper meaning in the organization’s day-to-day work.  Furthermore, funders and key external parties may begin to mistrust or question your nonprofit’s real purpose and the degree to which it operates from a core area of expertise.

Raising questions like these can be highly helpful for reconnecting with the primary reason your nonprofit exists, and for linking that purpose with the hearts and minds of your employees.  For those of you engaging in this work already, I invite you to comment below and share what you have found.

In closing, consider a quote from the movie Lincoln: “A compass . . . it’ll point you True North from where you’re standing, but it’s got no advice about the swamps, deserts, and chasms that you’ll encounter along the way.  If, in pursuit of your destination, you plunge ahead heedless of obstacles and achieve nothing more than to sink in a swamp, what’s the use of True North?”

Leading with authenticity is not as simple as pointing your organization toward its primary purpose, mission, identity, and values and assuming it will stay its course.  It requires continued effort and commitment to arrive at greater knowledge, awareness, and increasingly effective ways to learn from and maintain situations that put authenticity at risk.  The ongoing process of asking the above—often challenging—questions can help nonprofits and other types of organizations gracefully navigate the swamps, deserts, and chasms of our time.  This is important work.  Hopefully we will be well-equipped to rise to the occasion.

Checkout Charity: A complete shopping experience.

Kim Hunt, M.A., Research Assistant at the Caster Family Center for Nonprofit and Philanthropic Research.

Giving is taking on an entirely new dimension. Do not be surprised if, when running errands, you are asked to donate at the cash register of your local grocery store, pet store, favorite dining establishment, and yes, even teen clothing store. On a recent shopping trip before our youngest daughter headed off to her final year at UCLA, we were amazed that almost every store we visited asked for donations to one charity or another. This experience brought up a few questions:

  • Which charities are benefiting from Checkout charity campaigns?
  • How can nonprofits become involved and what should nonprofits know before they embark on a Checkout Charity campaign?

Checkout Charity

Checkout charity campaigns have raised more than $2.3 billion dollars for nonprofit organizations during the past 30 years, however recent years have seen a surge in participation. According to a recent report by the Cause Marketing Forum, the 63 top-performing checkout campaigns raised more than $358 million in 2012. The biggest beneficiaries included children’s health charities (47% of the donations), and charities fighting disorders and diseases (21% of the donations). Charities included: St. Jude Children’s Research Hospital, Reading is Fundamental, Toys for Tots, Salvation Army, American Diabetes Association, American Red Cross, and many more.

Not surprisingly, the largest collector of funds has been eBay. In 2012, eBay helped raise $54 million for nonprofit organizations. Vendors can set the amount of a sale on eBay to go to charity and peruse a plethora of charities to choose from, and buyers can shop based on the charity they want to support all from the comfort of their own home. Nonprofits who would like to become part of this Checkout charity campaign on eBay can click here and register with PayPal Giving Fund (eBay’s nonprofit partner).

What should nonprofits keep in mind?

Nonprofit organizations wishing to get involved in checkout charity should think carefully about the pros and cons.  Cause marketing, of which checkout charity is a part, triggers numerous laws including state commercial co-venture (CVV) laws, federal and state tax laws, standards established by the Better Business Bureau (BBB), and laws regarding false and/or misleading advertising such as Bureau of Consumer Protection laws. It is wise to consult a lawyer familiar with these laws.

There are also some things to think about from a practical perspective. In 2012, the Chief Corporate Partnership Officer for Children’s Miracle Network Hospitals, Clark Sweat, offered the following helpful tips in the 2012 America’s Checkout Champions report.

1)    Select the right partner

2)    Educate employees

3)    Create professional materials

4)    Build incentives for customers

5)    Involve vendors to build a total store event

6)    Analyze the data

7)    Recognize and thank

Many large nonprofit organizations post guidelines on their website for potential cause marking partnerships. While cause marketing is broader than checkout charity, the overall concept is similar.

What has been your experience with checkout charity either as a donor or as a benefiting nonprofit? Please share below.

Proud of your Board? Nominate Your Nonprofit for The Kaleidoscope Award

By Liz Shear, USD Instructor and Nonprofit Governance Consultant, and Jennifer A. Jones, M.A., Research Assistant ar the Caster Family Center for Nonprofit and Philanthropic Research.

At the University of San Diego, we want to recognize, promote, and inspire excellence in nonprofit governance.  One of the ways we do this is through our annual Kaleidoscope Award, honoring exceptional governance in nonprofit organizations.

Like a kaleidoscope, the work of nonprofit governance is intricate, varied, and involves viewing the organization through a variety of lenses.  Exceptional governance requires precision, imagination, and principled and adept decision-making.  Governance practitioners are dedicated volunteers who contribute valuable services to our community.

Here is one of our USD Kaleidoscope Award winners in action.

Click here to seee what the San Diego Youth Symphony has to say about Board Governance!

In addition to the Kaleidoscope Award, San Diego Youth Symphony (SDYS) won the first ever BoardSource Prudential Award for Exceptional Governance.   Certainly, the Kaleidoscope Award experience was great on its own, but was also good practice for the national scene.

What about you?

If you think your board exemplifies exceptional governance, please consider applying for the 2014 Kaleidoscope Award.  Award winners receive a $500 cash award and five complimentary passes to the 10th annual Governance Symposium in January, 2014 ($873 value).  The winner will be announced at the symposium on January 10th at 3:15pm.  The award ceremony and panel discussion will be followed by a Kaleidoscope Award reception at 4:15pm.  To apply, click here for an application.

Past Kaleidoscope Award Winners include:

  • Francis Parker School (2013)
  • Girl Scouts San Diego (2012)
  • San Diego Youth Symphony and Conservatory (2011)
  • United Through Reading (2010)
  • San Diego Jewish Academy (2009)
  • Volunteers of America of Southwest California (2009)
  • Chicano Federation of San Diego, Inc. (2008)
  • San Diego Hospice and Palliative Care (2008)
  • Casa de Amparo (2007)
  • Home of Guiding Hands (2007)
  • San Diego Jewish Community Foundation (2007)

The key deadlines are:

9/16/13: Notify Jennifer Yebba, jyebba@sandiego.edu, of your intent to apply.

10/1/13: by 5:00pm: Submit hard copy and electronic application with attachments to Liz Shear, lizshear@sbcglobal.net, and Liz Shear, INER, SOLES, 5998 Alcala Park, San Diego, CA, 92110.

10/9/13: Receive notification of status.

11/1/13: Participate in committee site visit and interview with your board leadership and key staff.  Please make sure you are available on this date when you submit your application, as our committee will be unable to make scheduling changes.  Also have additional materials available (listed in application) for on-site review at that time.  Please plan 1.5 hours for the visit and interview.

11/9/13: The committee will notify you of their decision.

The Kaleidoscope Award Committee is comprised of:

  • Mary McDonald, Assistant Professor at the University of San Diego
  • Janine Mason, Executive Director of the Fieldstone Foundation
  • Edith Glassey, Associate Executive Director of Development at the Center for Community Solutions
  • Donald Stump, Executive Director at North County Lifeline
  • Paul Van Dolah, President of Van Dolah & Associates
  • Liz Shear, Faculty member and Director of USD’s Nonprofit Governance Symposium

Exceptional governance is always a work in process.   If you are proud of your board’s track record at oversight, foresight and/or insight and have an exceptional governance story to tell, we encourage you to submit your organization for consideration. The application for the 2014 Kaleidoscope Award can be downloaded here.

 

Nonprofits Making a Profit?!

Jennifer A. Jones, M.A., Research Assistant at the Caster Family Center for Nonprofit and Philanthropic Research.

One of the biggest myths in the nonprofit sector is the idea that nonprofits cannot make a profit. Nonprofits can make a profit as long as that profit is reinvested back into the organization’s mission. In fact, using excess cash to create operating reserves – or a financial cushion – is key to growth and long-term sustainability.

Let’s look at the facts. In order to be considered tax exempt under IRS rules, nonprofits must be “organized and operated exclusively for exempt purposes set forth in section 501(c) 3, and none of its earnings may inure to any private shareholder or individual.” This means nonprofits 1) must have a charitable mission and 2) that any “profits” (where income is greater than expenses) are reinvested in the mission and do not go into the  pockets of an individual.

Many nonprofit organizations find it prudent to develop an annual budget where income exceeds expenses. This allows the organization to build a financial cushion from which it can draw during months and years when revenues are lower. The organizations that had such a financial cushion in 2008 had an easier time surviving and maintaining services during the recent recession.

Unfortunately, according to the 2013 State of the Nonprofit Sector Survey by the Nonprofit Finance Fund, 29% of organizations operated with a deficit in 2012 and 25% had 30 days or less of cash on hand.

It is generally recommended that organizations have an operating reserve of at least 25% of the annual budget. This constitutes three months of expenses (administrative and program expenses). Some nonprofits will need more. For example, organizations that are largely government funded can run in to trouble if the budget isn’t passed on time. The government will often delay funding for programs until the budget is signed. In California at least, this delay can last three to six months. A healthy operating reserve will allow a nonprofit to continue services and pay staff through those lean months.

Operating reserves are simple, but they are not easy. It takes a great deal of discipline on the part of the CEO and Board of Directors. It also takes a certain degree of buy-in from funders. The State of the Nonprofit Sector Survey indicated that only 5% of nonprofits are talking with funders about their debt burdens and only 30% talk with funders about developing operating reserves. It can be especially difficult to build an operating reserve when it’s a struggle to fund current programs.

In order to save sufficient operating reserves, nonprofits must first have a healthy stream of unrestricted income from which to save. Unexpected gifts or bequests can provide a boost to start or fund an operating reserve, if the Board of Directors and CEO are disciplined enough to capitalize on the opportunity. Again, it’s simple but not easy.

It’s important to remember that the term nonprofit is a tax status, not a financial death sentence. Nonprofits can show a profit at the end of the year and it can be wise to use that excess cash to fund operating reserves, and therefore increase the long-term sustainability of the organization.

Resources:

 

Talking about Taxes

Pat Libby, Director, Institute for Nonprofit Education and Research

Every year In the United States, approximately 30 million to 40 million people, gripped with fear and anxiety, sidestep a visit to the dentist (Columbia University College of Dental Medicine).   The rest of us grudgingly but diligently show-up whether we like it or not (and, most don’t).  For nonprofits, talking about taxes is a lot like going to the dentist except that most of us avoid it at all costs.

Yet like going to the dentist, nonprofit leaders need to get up the courage to talk about taxes.   We need to educate ourselves on the relationship of our sector to government and we need to be able to articulate that to others – a good starting point are those folks who sit on our boards of directors.

Now you might be thinking, wait a minute – aren’t we coming out of the great recession?  After all, eight states (including some big ones like California and Wisconsin), have recently announced budget surpluses.   That is good news indeed.  Sadly though, most of those “surplus” dollars will likely be spent paying off debt that accumulated during the lean years.  Therefore, we still need to bite the bullet and have some heart wrenching talks about taxes.

I like to start this difficult discussion with a simple premise: good government makes for a civil society.

We need government to do all kinds of things like pave our roads, provide police and fire protection, pay our teachers,  operate our judicial and penal systems, monitor our air, water and food safety, and, yes, provide social safety support for the elderly, children and people who are in poverty among many other functions.  The nonprofit sector works alongside government and in many instances acts as a service provider on behalf of government.

According to The Urban Institute (The Nonprofit Sector in Brief, 2012), nonprofits in the U.S. receive 8% of their revenue from government grants and 24% of their revenue from “fees for services and goods from government” (for example, payments for providing services to people who are disabled, who visit community clinics for health care, who receive subsidized day care or afterschool programs, etc.).   With nearly one third of our sector’s budget coming from government, we have an obligation to stand up and be counted when it comes to defending the role of government and yes, that dirty word, taxes.   In fact, in many parts of the country, like mine, where foundation dollars are hard to come by, the percentage of nonprofit revenue that comes from government is much greater.

One of my “go to” sources for information on the budget and taxes is the Center on Budget and Policy Priorities (CBPP).  They are a think-tank of economists who magically boil down the big issues of government finances and taxes in a way that makes sense to everyday people.   For example, if you go to their website they’ll tell you that “70 percent of the $2.3 trillion in policy savings that the President and Congress have enacted over the past few years have come through program cuts rather than revenue increases.”   They’ll also tell you that poor people are taking it on the chin as a result of the sequestration that was never supposed to happen.

While air traffic controllers are back in their towers, Head Start toddlers are being tossed out of classrooms across the country, meals on wheels aren’t being served to many hungry seniors, unemployment benefits have been reduced for 800,000 people in 19 states, and low-income seniors, families and people with disabilities are losing vouchers for affordable housing (CBPP).

Yet despite this litany of cuts, voices of protest from the nonprofit sector are muted if they are heard at all.  All this is happening within the context of U.S. tax rates that are still well below many developed countries around the world.

Please don’t stick your head in the sand and pretend that we, as nonprofit leaders, can step away from this important debate.  Nonprofits and government are intertwined. That’s a fact we cannot deny.

Get involved by:

  • Logging onto the CBPP website www.cbpp.org to learn about taxes.  You’ll find fascinating reading there such as “Misconceptions and Realities About Who Pays Taxes”
  • Reading “Pork: ‘The Other White Meat’ or Quagmires of Government Budgeting in The Lobbying Strategy Handbook, for a simple explanation of government, taxes and their relationship to nonprofits
  • Bringing this research to your board for a discussion about how tax cuts are affecting your organization and your community
  • Calling your elected officials and having a discussion with them about how the sequestration is affecting people within your community

It is our responsibility as nonprofit leaders to be informed about these issues and to advocate for our interests.  So get going – get informed – and be an advocate for your interests.

Inaugural State of Nonprofits Annual Summit

Register Today

Friday June 7th from  8:30am – 2:00pm

According to what we hear on the news, the overall economy is growing stronger day by day. But, what is the state of the local nonprofit economy, and what does an improved regional economy mean for San Diego nonprofits? Join us to hear and discuss the key findings from the first annual State of the Nonprofit Sector Report which is a compilation of the first full year of our State of Nonprofits Index  and other nonprofit research. 

 

Special Guest Discussants:

To help frame our opening discussion, the Caster Center is pleased to convene a dynamic panel including Nancy Sasaki, CEO of the Alliance Healthcare Foundation, Jerry Sanders, San Diego’s former Mayor and the newest President/CEO of the San Diego Regional Chamber of Commerce, and Fred Galloway, Professor and lead methodologist for the State of Nonprofits Index.  They will provide their unique insights about the increasingly complex landscape of San Diego’s nonprofit sector.

 

Register for one or both of the following sessions by clicking here.

 

The State of Nonprofits: Charting the Health of San Diego’s Nonprofit Sector

8:30am – 10:30am

For the first time, data about the economic health of San Diego area nonprofits is being collected regularly.  This part of the day includes the presentation of research findings from the 2012 State of Nonprofits Index followed by an interactive panel.  Together, we’ll look at the current economic trends and discuss ways to increase the sector’s impact.

 

Strengthening Your Nonprofit’s Economic Resilience

10:30am – 2:00pm

Are you trying to secure funding and stay competitive amid changing government and funder priorities? Do you know what strategies will increase your resiliency to economic challenges? USD nonprofit faculty and local nonprofit leaders will offer training sessions on issues highlighted in the report including:

  • Social Enterprise Strategies
  • Cross-Sectoral Collaboration
  • Advocacy
  • Media relations…and more!

 

Register today for one or both of the sessions by clicking here.

 

$50— Registration (full day)

$25—Trend Reporter Discount (full day)

$10—Report Presentation Only (morning)

 

Trend Reporters  who contributed to the 2012 project will receive a 50% discount on lunch and workshops. This discount is valid for as many employees as you would like to send. It’s our way of saying thank you for your continued support of this project.

For questions regarding the event or the Trend Reporter discount, please email Jenny Jones at jjones@sandiego.edu or call 619-260-4600 x4312.

 

 

How to Show Some Valentine’s Day Love to Nonprofits

Jennifer A. Jones, M.A., Research Assistant ar the Caster Family Center for Nonprofit and Philanthropic Research.

The nonprofit sector touches everyone, regardless of income levels. Whether we’re opera lovers, cancer survivors, or Girl Scout troop moms, our lives are better because nonprofits exist.

In honor of Valentine’s Day, here are a few ways to show your “love” to a nonprofit:

Join a Board. Board governance is an incredibly valuable albeit underappreciated service. As almost anyone who has been on a board of directors will tell you, it is a tremendous learning experience. Board members have the opportunity to develop skills in strategic planning, consensus building, and leadership, to name just a few.

Volunteer. Volunteering is one of the oldest and well known ways to contribute to a nonprofit. These days volunteering is getting even easier.  Did you know that you can volunteer in tiny blocks of time as short as just a few minutes? This is called micro-volunteering. Or did you know that you can volunteer from your own home (or the neighborhood coffee shop)? This is called virtual volunteering. There’s no excuse. With all of the new technology, anyone can volunteer!

Friend-Raise. With the advent of the internet and the explosion of social media anybody can help a nonprofit by talking about them on Facebook, Twitter, or other site. Just post a note about your favorite nonprofit, encouraging friends to donate or volunteer.

Vote. Just like businesses, nonprofits are governments at all levels. Many times, our elected officials don’t understand the many ways in which nonprofits contribute to our society.  It is important to educate our elected officials and to “Vote with Your Mission.”

Donate.  Giving money is the obvious – and one of the most helpful – ways to show your love. Even small amounts can add up and make a big difference.  Most donors like to fund programs but operating expenses are also important. Remember, no organization – nonprofit, government or business – can keep the lights on without paying the electricity bill.  

Consider a charitable bequest. Have you thought about legacy giving? It’s not just for the wealthy. Anyone can leave part of their estate or life insurance plan to a nonprofit organization. Talk to your family today and decide, what will your legacy be?  

Watch where you shop. There are many companies now that have charitable foundations or that make significant contributions to nonprofit organizations. By shopping with these companies you can increase the social impact of your money. However, consumers beware: many cause marketing campaigns give very little to the nonprofit. It’s important to do your homework first.

Thank a staff member. Nonprofit staff members often work long hours for pay that is either below or barely competitive with the going market rate. A “thank you for your service” from a donor or volunteer can go a long way to brighten a staff member’s day.

***

These are just a few ideas. Of course there are many, many more ways to help. Nonprofits should be able to let you know what they need most. Perhaps they need volunteers for the next big event or donations to fund a special project.  Call today and find out.

What is your favorite way to contribute to nonprofits? Please share your ideas below!

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