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Tim DelaneyPresident & CEO
State of the Nonprofit Sector~ National Perspective ~
Philanthropy Ohio | October 7, 2014
© 2014 National Council of Nonprofits | @NatlCouncilNPs
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25,000+ nonprofit members
42 State Associations & Nonprofit Allies
280+ Employees
500+ Board members
Coast to Coast, Border to Border
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Pattern Recognition
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State of the Nonprofit Sector:
10 Trends & Threats
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Increasing demands for servicesPercent of nonprofits reporting an increase in demand
for their services over the previous year
73%2008
77%2009
77%2010
85%2011
SOURCE: State of the Sector 2014, Nonprofit Finance Fund
82%2012
80%2013
# 1
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Demands outpace resourcesMore than half of nonprofits reported they were
unable to meet the demand for their services
SOURCE: State of the Sector 2014, Nonprofit Finance Fund
55%
45%
# 2
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One-third of nonprofit community revenues earned from government contracts and grants.
(e.g., hospital fees, tuition, ticket sales)
Sources of Nonprofit Revenues# 3
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Where the Action Is
Year # of Laws Passed
U.S. Congress State Legislatures2011-20122013-2014
# 4
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Where the Action Is
Year # of Laws Passed
U.S. Congress State Legislatures2011-20122013-2014
# 4
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Where the Action Is
Year # of Laws Passed
U.S. Congress State Legislatures2011-2012 2832013-2014 140*
* As of Sept. 9, 2014
# 4
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Where the Action Is
Year # of Laws Passed
U.S. Congress State Legislatures2011-2012 283 69,000+2013-2014 140* 66,559*
* As of Sept. 9, 2014
# 4
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Where the Action Is
Year # of Laws Passed
U.S. Congress State Legislatures2011-2012 283 69,000+2013-2014 140* 66,559*
* As of Sept. 9, 2014
# 4
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Stealth Shift from Govt to Nonprofits
Off-loading Programs
Contracting Challenges
Taxes, Fees, and PILOTs
Draining Dollars
Affects ALL Nonprofits!
A Mega-Trend/Threat:# 5+
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Note re Government Trends
We should NOT be demonizing our government partners!
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5A = Off-loading/ Abandoning ProgramsExpecting nonprofits and foundations to
take over and run government programs for free.
cutting funding, not human need
states: eliminated/reduced services for:
• Mental illness • Disabled • Elderly• Children
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5B = Taking Money from Missions
Ripping the Safety Net Held by Nonprofits
1. Imposing New Taxes (e.g., “sick bed”) and Eliminating Tax-Exempt Status (e.g., property tax, sales tax)
2. Assessing New “Fees” (e.g., sewer usage “fee” and streetlight “fee”)
3. Demanding “PILOTs” (Payments-in-Lieu-of-Taxes)
4. Latest trend reassessing (“are you charitable enough?”)
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5C = Draining Philanthropic Assets
Creating Own Nonprofits
Eliminating/Limiting Giving Incentives Federal States 2013 “March of the States”
• Hawai’i• Oregon• Minnesota• Kansas• North Carolina
Indirectly taking $$$ from nonprofit missions:
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5D = Withholding Money from Nonprofits 1. Failure to Pay Full Costs (e.g., GAO) 54% problem
Ohio = 8th worst at 62%
2. Changing the Agreement Mid-Stream 43% problem
Ohio = 10th worst at 53%
3. Complexification of Application Process 72% problem
Ohio = 19th worst at 73%
4. Complexification of Reporting 72% problem
Ohio = 31st worst at 69%
5. Paying Late 45% problem
Ohio = 7th worst at 58%
Nonprofits on average owed:•$200,000+ by state governments; $108,000 by federal, $85,000 by local governments
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Sunshine!
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Trend: Failure to pay indirect costs
Research: for-profit/nonprofit avg overhead range=25-35%
Of those governments … a quarter paid = 0 half paid 7% or less three-quarters paid 10% or less
53% nonprofits report governments limit indirect costs
# 6
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Compare Overhead Cost Ratios
Business Norm
Research shows that the average overhead ratio among for-profits and
nonprofits alike is about 25-35% to be efficient
and effective.
# 6
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Compare Overhead Cost Ratios
Business Norm
Research shows that the average overhead ratio among for-profits and
nonprofits alike is about 25-35% to be efficient
and effective.
Government Norm(CA—State Govt)
76% of state agencies have indirect cost
rates higher than 30%, 81% have rates higher than 20%, and no state
agency has indirect cost rate of 10%.
# 6
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Compare Overhead Cost Ratios
Business Norm
Research shows that the average overhead ratio among for-profits and
nonprofits alike is about 25-35% to be efficient
and effective.
Government Norm(CA—State Govt)
76% of state agencies have indirect cost
rates higher than 30%, 81% have rates higher than 20%, and no state
agency has indirect cost rate of 10%.
What Ohio Governments
Pay Nonprofits90% of nonprofits
facing caps reported being reimbursed at a rate of 10% or less.
# 6
2nd worst in the USA
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Compare Overhead Cost Ratios
Business Norm
Research shows that the average overhead ratio among for-profits and
nonprofits alike is about 25-35% to be efficient
and effective.
Government Norm(CA—State Govt)
76% of state agencies have indirect cost
rates higher than 30%, 81% have rates higher than 20%, and no state
agency has indirect cost rate of 10%.
What Ohio Governments
Pay Nonprofits90% of nonprofits
facing caps reported being reimbursed at a rate of 10% or less.
# 6
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Congress Appropriates the $$ Executive Branch Manages the $$
# 6 Good News
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Reforms in OMB Uniform Guidance
Some highlights (from 700+ pages):State & local governments, tribes, and other “pass-through” entities using federal funds will be required to reimburse nonprofit contractors and grantees for reasonable indirect costs.
In some cases, it expandsexpands which administrative expenses can be reported as direct costs, rather than indirect.
Eliminates some duplicative audit criteria, and clarifies cost allocation rules.
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What = “reasonable” indirect costs?
1. Apply the nonprofit’s federally negotiated indirect cost rate – if it already exists.
2. If a federally negotiated indirect cost rate does not already exist, then …
… the NONPROFIT has the power to pick either option:
a)To negotiate a rate with the government entity, ORb)To use the default minimum rate of 10%.
# 6
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Federal
State/Local – Implementation & Compliance
State/Local – Application to Non-federal Funds
Advocacy to Protect the Reforms# 6
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Direct Costs
►Nonprofits►Grantmakers►Governments
Cost Allocations
Indirect Costs
Other Costs
Common Knowledge
Negotiations
Accounting Skills to Secure the Reforms
# 6
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Free Resourceshttp://govtcontracting.org/research-findings
# 6
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Invading Nonprofit Independence
examples:• Executive Compensation (FL, MA, NJ, NY, NC, PA, +)
• Public Records Law • Mandated Board Training
# 7
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How can we change the culture of the nonprofit
community so advocacy is seen as an essential element of a
nonprofit’s pursuit of mission?
Is just more training the answer?
# 8
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Listening Tour
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False Barrier/ Standard Excuse
But nonprofits can’t lobby
FALSE!!!
Nonprofit Lobbying Is Legal!
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Nonprofit lobbying CAN be done …
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Our successful legacy includes …
Abolition GroupsSuffrage Groups
Townsend Clubs Civil Rights Groups
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False Lore: “I heard there
could be problems”
What Boards (needlessly) Worry About re Advocacy
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Action Step Tell Your Attorneys & CPAs:
Remove the muzzles!!
Learn the Law! Spread no more lore to nonprofits!
You EXPECT them to explain “how to,” NOT ‘not to.’
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False Barrier/ Standard Excuse
But we don’t have the time, we’re too busy
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False Barrier/ Standard Excuse
But we don’t have the time, we’re too busy
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False Barrier/ Standard Excuse
But we provide services, not advocacy
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False Barrier/ Standard Excuse
But I hate politics
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False Barrier/ Standard Excuse
But we’re too small
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False Barrier/ Standard Excuse
But I don’t know how government works
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Advancing Your Mission through Advocacy
One Simple Question
Who can I talk to today to advance our mission?
– Business leader?– Another nonprofit?– Reporter or publisher?– Appointed or elected official?
# 8
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Fads # 9
New Corporate Forms
•L3Cs•Benefit corps•“Hybrids” (that actually are for-profits)
New Funding Gimmicks
•Social Impact Bonds
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Measuring Impact
# 10
Question: How have high impact organizations?
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Board Members
# Bonus trend
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Board Advocacy Project
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What You Can Do
Alert Others re Threats!!! Staff, board, volunteers, funders, clients,
other nonprofits, friends, family, neighbors …
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Final ask…
America Gives More Act
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Connect with the
On Twitter @NatlCouncilNPs and @buildnpcapacity
Sign up for FREE Nonprofit Advocacy Matters and Nonprofit Knowledge Matters at www.councilofnonprofits.org/news/e-newsletters
Questions?