Tim Delaney President & CEO State of the Nonprofit Sector ~ National Perspective ~ Philanthropy Ohio | October 7, 2014 © 2014 National Council of Nonprofits

Tim DelaneyPresident & CEO

State of the Nonprofit Sector~ National Perspective ~

Philanthropy Ohio | October 7, 2014

© 2014 National Council of Nonprofits | @NatlCouncilNPs

25,000+ nonprofit members

42 State Associations & Nonprofit Allies

280+ Employees

500+ Board members

Coast to Coast, Border to Border

Pattern Recognition

State of the Nonprofit Sector:

10 Trends & Threats

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

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

One-third of nonprofit community revenues earned from government contracts and grants.

(e.g., hospital fees, tuition, ticket sales)

Sources of Nonprofit Revenues# 3

Where the Action Is

Year # of Laws Passed

U.S. Congress State Legislatures2011-20122013-2014

# 4

Where the Action Is


U.S. Congress State Legislatures2011-20122013-2014

# 4

Where the Action Is


U.S. Congress State Legislatures2011-2012 2832013-2014 140*

* As of Sept. 9, 2014

# 4

Where the Action Is


U.S. Congress State Legislatures2011-2012 283 69,000+2013-2014 140* 66,559*

* As of Sept. 9, 2014

# 4

Where the Action Is


U.S. Congress State Legislatures2011-2012 283 69,000+2013-2014 140* 66,559*

* As of Sept. 9, 2014

# 4

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+

Note re Government Trends

We should NOT be demonizing our government partners!

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

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?”)

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:

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


3. Complexification of Application Process 72% problem


4. Complexification of Reporting 72% problem

Ohio = 31st worst at 69%

5. Paying Late 45% problem


Nonprofits on average owed:•$200,000+ by state governments; $108,000 by federal, $85,000 by local governments

Sunshine!

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

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


Business Norm



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


Business Norm



and effective.





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


Business Norm



and effective.





What Ohio Governments

Pay Nonprofits90% of nonprofits

facing caps reported being reimbursed at a rate of 10% or less.

# 6

Congress Appropriates the $$ Executive Branch Manages the $$

# 6 Good News

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.

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

Federal

State/Local – Implementation & Compliance

State/Local – Application to Non-federal Funds

Advocacy to Protect the Reforms# 6

Direct Costs

►Nonprofits►Grantmakers►Governments

Cost Allocations

Indirect Costs

Other Costs

Common Knowledge

Negotiations

Accounting Skills to Secure the Reforms

# 6

Free Resourceshttp://govtcontracting.org/research-findings

# 6

Invading Nonprofit Independence

examples:• Executive Compensation (FL, MA, NJ, NY, NC, PA, +)

• Public Records Law • Mandated Board Training

# 7

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

Listening Tour

False Barrier/ Standard Excuse

But nonprofits can’t lobby

FALSE!!!

Nonprofit Lobbying Is Legal!

Nonprofit lobbying CAN be done …

Our successful legacy includes …

Abolition GroupsSuffrage Groups

Townsend Clubs Civil Rights Groups

False Lore: “I heard there

could be problems”

What Boards (needlessly) Worry About re Advocacy

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.’


But we don’t have the time, we’re too busy


But we don’t have the time, we’re too busy


But we provide services, not advocacy


But I hate politics


But we’re too small


But I don’t know how government works

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

Fads # 9

New Corporate Forms

•L3Cs•Benefit corps•“Hybrids” (that actually are for-profits)

New Funding Gimmicks

•Social Impact Bonds

Measuring Impact

# 10

Question: How have high impact organizations?

Board Members

# Bonus trend

Board Advocacy Project

What You Can Do

Alert Others re Threats!!! Staff, board, volunteers, funders, clients,

other nonprofits, friends, family, neighbors …

Final ask…

America Gives More Act

Connect with the

On Twitter @NatlCouncilNPs and @buildnpcapacity

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Tim Delaney President & CEO State of the Nonprofit Sector ~ National Perspective ~ Philanthropy Ohio | October 7, 2014 © 2014 National Council of Nonprofits