Thursday, August 30, 2007

WHERE DID 1.2 MILLION NONPROFITS GO?

How many nonprofits are there in the U.S.?

According to the Nonprofit Quarterly, there are 1.4 million nonprofits in the U.S.

299,000 of which were 501(c) 3's over $25K and 545,000 were non-filing under $25K.

That is 845,000, NOT 1.4 million. What are the missing 568,000?

Turns out they are "other nonprofits" meaning not 501 (c) 3's.

104,000 were private foundations - 501(c) 4's and the remaining 465,000 was the 501's that weren't "3's" and "4's).

Now I was down to 299,000 nonprofits in the U.S. (the kind I usually think of as nonprofits--the human services, the charities, the arts, the education, etc. etc.)

But we're not done yet. Of the 299,000, 39,000 of them are the hospitals & health groups I was originally looking for. That leaves us with 260,000 nonprofits - not 1.4 million.

Those 39,000 hospitals (only 13% of the 299,000) spend 47% of the billions of budget dollars.

Here's the data:

Type # of nonprofits

Hospital & Health 38,633 13% 3%
Education Related 53,074 18% 4%
Social Services, Culture, all other 207,326 69% 15%
Active Filers: 299,033 100% 21%




Non-reporting (under $25K) 546,200
39%
Total 501 (c ) 3's: 845,233
60%




501 (c ) 4's - Private Foundations 103,880
7%
Other nonprofits 464,595
33%

1,413,708
100%

Wednesday, August 29, 2007

NONPROFIT SALARIES: DOING OUR DUE DILIGENCE

Nonprofit Salary Due Diligence: Comparing Nonprofit Compensation to our "for-profit" cousins


How did I wander into this strange land where nonprofit executive salaries over $200,000 may be considered excessive?

In 2004, the median nonprofit CEO salary was $291,356[1] (keep in mind that these were in the mid-range salaries):

As nonprofit leaders we must perform our due diligence and consider the reasonableness of these for-profit sector salaries. Hmmmm. Let's start with a peak at the AFL-CIO’s “Executive Pay Watch”:

  • Alan G. Lafley, of Procter & Gamble earned $ 24,620,600;
  • Kenneth I. Chenault American Express earned $ 23,619,693;
  • Charles O. Prince of Citigroup Inc. $ 22,994,729;
  • William B. Harrison of JPMorgan Chase & Co. earned $ 22,338,815;
  • Kenneth D. Lewis of Bank of America earned $ 22,027,984.

Compare these to your salary!


[1] Chronicle of Philanthropy, September 30, 2004 Executive Pay Rises Modestly “Trend could continue as IRS increases scrutiny” by Ben Gose


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Sunday, August 26, 2007

AUDIT FIRM THROWS DOWN THE GAUNTLET; WILL NONPROFITS STEP UP?

Deloitte & Touche and the Points of Light Volunteer Foundation conducted a study that challenges nonprofits to consider whether time is, in fact, money. They make an observation:
(that) while a majority of nonprofit leaders think the greatest contribution companies can make to them is financial, corporate contributions represent only about one percent of the total operating budgets of nonprofits, indicating an extremely limited resource

and then asked 200 non-profit leaders and 750 white-collar workers about the value of workplace skills to nonprofits.

What do you need to run your company? The universal answer: money. The challenge: Aren't skilled management professional volunteers just as important (or more important) than money? What if (and this will be a shocker) there isn't enough money to go around?

They concluded that "Despite the fact that nonprofits and volunteers both place a very high value on workplace skills, neither are capitalizing on them to make an even greater impact on society."

Now the ball is in our court. We want the for-profit world and the public to regard us as well-run businesses (efficient use of charitable funds, forthright and transparent accountability, demonstrated ability to achieve performance goals, etc. etc.)... But, can we break through our own bias and see the new volunteer as an incredible resource? Or will we hold tight to the image of a volunteer as someone who would be getting paid if they really had any talent? Are our volunteers staffing phones or food closets, folding fliers, and cleaning hospitals??? Could they be (instead) setting up our computer networks, offering management advice, helping us with our public reporting, training our own management in leadership models?

Can we morph the image of the Candy Stripe-er into a "Suit"?
Read the Executive Summary below for a full summary and analysis of their key research findings:

Volunteer IMPACT Study (277 KB)
2006 Deloitte/Points of Light Volunteer IMPACT Study



SIDEBAR:


The nonprofit sector still has a public relations issue. Why on earth is the public still wondering if we are businesses? Even Deloitte & Touche, a company who to all appearances is committed to allocating some of its valuable staff resources to nonprofit management, frames the question this way:

Although nonprofits are not in business to turn a financial profit, they are indeed businesses and they encounter many of the same resource constraints and operational and management challenges as any for profit enterprise.

Holy Cow, stop the presses. We are indeed businesses? Who would have thunk?


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Sunday, August 12, 2007

NONPROFIT FOUR-LETTER WORDS

What words strike fear into the hearts of nonprofit accountants? Here is my list so far:

Matching Costs
Depreciation
In-kind Donations
Cost Allocation
Overhead

If auditors want to play "gotcha" all they have to do is utter these 4-letter words. No matter how properly a nonprofit handles these, they will always be open to question. Auditors know this, and so, when they have no findings, they seem to always pull these out of the hat.

Matching Costs: How did you calculate these costs? How do you ensure you haven't used the same funds to match multiple grants?

Depreciation: Why haven't you depreciated your capital improvements? Because you won't let us own the building!

In-kind donations: How did you value these? Did you reflect them on your general ledger?

Cost Allocations: What is your basis? Do they fluctuate over the year? Did you allocate based on budgets (g-d forbid!)

Overhead: You can't charge this here, it's unallowable. Then who is going to pay for it?

Learn more about how auditors assess risk


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Monday, August 06, 2007

NONPROFIT EYE LEADERSHIP CHALLENGE

Many a nonprofit staffer has looked around and not liked what they saw. We've all heard the complaints, perhaps we've been the one making them. The techie's complain that our leaders "don't understand today's technology"; the accountants complain that "they're kidding themselves about the fundraiser being a success"; the program staff complain that "the performance measures are BOTH impossible to meet AND meaningless"; the staff complain that "they aren't paid enough" AND "that they don't have an adequate budget to run an effective program". We all complain that we don't have the government and public support we require.
The stats say the baby boomers are about to retire. Who will take the reigns? How will be meet the challenge our leaders leave us?

There really is no other answer, we'll have to put our money where our mouth is.

The challenge is not then, but now. Why wait? Let's learn what we need to learn, teach and share it, and lead from within. If we don't we'll have no one to blame but ourselves.

My focus? Confronting my own demons. Tonight I put it out to the universe: I will bring my best to the table and know that change can occur, truth prevails, knowledge brings light. Trite? Maybe. Essential? Yes
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Saturday, August 04, 2007

SB 1262 - DO WE NEED AN ACT TO PROVE OUR INTEGRITY?

Do nonprofits need an act to prove our integrity? The whole notion irritates me. It irritated California Association of Nonprofits (CAN) too. After the bills passage, CAN issued a statement including this message:
In addition to the fiscal burdens highlighted in the Governor’s message, we remain concerned that SB 1262 sets a dangerous precedent, detailing the composition and operations of nonprofit boards of directors, dictating the contents of contracts, and establishing government mandates for practices that are best left to the discretion of individual organizations.

We urge that future legislation intended to improve nonprofit integrity not be conceived without extensive consultation with all stakeholders and be based on a comprehensive examination of the issues rather than reactions to specific incidents. In addition, CAN looks forward to improvements in nonprofit oversight growing out of the California Performance Review and to joining with the Governor to strengthen the work of nonprofits and to promote involvement in nonprofit community service.

The Governator acknowledged his concern with by issuing a message accompanying the act encouraging the Legislature to re-visit the bill if it turns out to impose unnecessary burdens on nonprofits.

Does your state have a "nonprofit integrity act"? So far at least five states do: Connecticut (SB 946/HB 6515), California (Nonprofit Integrity Act of 2004 SB 1262), Massachusetts (Act to Promote the Financial Integrity of Public Charities), New Hampshire (HB 1408), and Connecticut (passed SB 946/HB 6515).

Most "integrity legislations" covers the same bases.

California's Nonprofit Integrity Act, for example, applies to nonprofits with gross revenues over $2 million, not counting funds for which a governmental entity requires an accounting, must comply with these requirements:

  1. Annual CPA-audited financial statements using generally accepted accounting principles
  2. Independent auditor-The financial statements must be audited by an independent auditor
  3. Public Disclosure - The audited financial statements must be available to members of the public on the same basis as its Form 990
  4. Audit committee- A charity that has a finance committee must have a separate audit committee, the chairman of the audit committee may not be a member of the finance committee, and members of the finance committee must be a minority on the audit committee
  5. CEO/CFO Compensation The Board of Directors must review and approve the compensation, including benefits, of the corporation’s President or CEO, and its Treasurer or CFO, "to assure that it is just and reasonable."


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Wednesday, August 01, 2007

TALE OF A BLOGGERS EXISTENTIAL TECHNO CRISIS

I took a break from blogging for the past few months. It was not really a summer vacation. It was just that I got the blogging blues. Because I was getting wrapped up in the Wiki-RSS-SecondLife-Web 2.0-Social Media maelstrom. I was afraid my philosophical musings couldn't compete. In short, I lost my way.

What is my way? I’m here to provide a philosophical examination of the issues underlying our nonprofit ways. Sometimes it’s accounting or compliance and yes sometimes technology or meta-tech. Unfortunately, I’m a generalist lost between the hot topics with the great "take aways". My message isn’t clear (or clear enough) and I only reach 39 unique visitors. Yes I’m RSS-able and search optimized and post regularly (at least I did for 14 consecutive months.

So why bother? Because there are things that I need to say and I’m compelled to say them. In addition, because I have found myself among a community--one that I never had before. A group of nonprofit bloggers I’m proud to be a part of.

Without further adieu here are the five bloggers with a philosophical bent that I love the most

  1. Andrew Taylor’s TheArtfulmanager
  2. The Agitator (IF that is Roger Craver and Tom Belford, does this count as two? Then I’d have to have the top 6 but that wouldn’t qualify for the “top five” carnival!)
  3. Ken Goldstein’s The Nonprofit Consultant
  4. Phil Cubeta’s Gift Hub
  5. Bao Vang’s Minnesota Council of Nonprofits blog


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