New Reports Shed Light on Payout Practices and Expense Patterns of U.S. Foundations

New York, NY — October 23, 2012. The Foundation Center, the nation's leading authority on philanthropy, has released new reports that examine the payout practices and spending patterns of more than 1,000 larger U.S. independent foundations. These reports provide an authoritative, unbiased source of knowledge to help the public and policymakers better understand foundation practice and to help foundations benchmark their own activities.

Understanding and Benchmarking Foundation Payout explains the concept of payout, which refers to the total amount that a foundation reports as its charitable distribution. (The law requires the vast majority of private U.S. grantmaking foundations to distribute at least 5 percent of their net investment assets for charitable purposes each year.) The report is the first of its kind to track payout practices of the largest U.S. foundations. It finds that during the period 2007-2009, the largest share of endowed foundations (46 percent) reported payout rates in the range of 5 to 5.9 percent, on average. Nearly one-in-five foundations had payout rates at or above 10 percent. The Foundation Center does not take sides on whether the minimum payout rate should be higher or lower — whether foundation assets should be spent down quickly or preserved long-term — rather it provides data and research to inform the debate.

"While the very top grantmakers tend to pay out close to the 5 percent minimum, there is surprising variation in payout levels of larger foundations overall, and annual rates are affected by drastic changes in the stock market," said Loren Renz, the author of the report and vice president emeritus for research at the Foundation Center. "Only by averaging these rates across multiple years can a balanced view of payout practices be realized."

The amount a foundation spends on staff, overhead, and other program-related administrative expenses is included in the calculation of its qualifying distributions each year. Benchmarking Foundation Administrative Expenses: Update on How Operating Characteristics Affect Spending considers how differences in foundations’ infrastructure, operations, and programmatic activities influence their spending patterns.

The report finds that whether a foundation employs paid staff is the single most important factor affecting its expense levels, followed by staff size. In addition, foundations that regularly engage in international grantmaking, foundation-administered programs, or making grants directly to individuals have expenses-to-qualifying distribution ratios that are roughly twice as high as those that do not.

Understanding and Benchmarking Foundation Payout and Benchmarking Foundation Administrative Expenses can be downloaded at no charge from the Gain Knowledge area of the Foundation Center's web site.

This research was made possible through support from the Charles Stewart Mott Foundation.

About the Foundation Center
Established in 1956, the Foundation Center is the leading source of information about philanthropy worldwide. Through data, analysis, and training, it connects people who want to change the world to the resources they need to succeed. The Center maintains the most comprehensive database on U.S. and, increasingly, global grantmakers and their grants — a robust, accessible knowledge bank for the sector. It also operates research, education, and training programs designed to advance knowledge of philanthropy at every level. Thousands of people visit the Center's web site each day and are served in its five regional library/learning centers and its network of more than 470 funding information centers located in public libraries, community foundations, and educational institutions nationwide and around the world. For more information, please visit foundationcenter.org or call (212) 620-4230.

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UPMC Among Nonprofits Eager to Avoid Paying Property Taxes

An interesting article about a major nonprofit (UPMC) who is making a rare move in order to avoid paying property taxes. Click on the link below to read this article and learn more about what types of deals other nonprofits are making.
 

 View Article Here

2011 Member Mapping Report from National Council of Nonprofits

2011 Member Mapping Report from National Council of Nonprofits
A unique report that gives your State Association data and analyses that are relevant to every State Association board and staff member in the National Council of Nonprofits' network. 

The 2011 report addresses many frequently asked questions, including:

• How are State Associations weathering the economy?
• How do State Associations earn revenue other than through member dues?
• Why are the numbers of people trained through our network trending down?
• Why are there lots of new members in State Associations every year, but not a corresponding growth in the network? 

VIEW REPORT HERE

Business Plans for Nonprofits

From NYCON's national partner, National Council of Nonprofits:

True or False: “Business planning is for businesses, and strategic planning is for nonprofits." Be honest. When you first heard the phrase "business plans for nonprofits," did you think, "We don't do that"? Many people think that businesses do business planning, and nonprofits do strategic planning. Strategic planning remains a core element of capacity building. State Associations of nonprofits report that strategic planning is perennially one of the most popular educational programs they offer. Funders often want to see a strategic plan along with a grant proposal. But increasingly, we’re hearing executive directors say to one another, “Do you have a business plan?” Are business plans for nonprofits becoming the new hot thing? And are they replacing strategic plans – simply by adding dollar signs? Advertisement Business planning is not the same as strategic planning. Ideally business planning will inform and improve a strategic planning process that keeps evolving. Business planning provides a sound financial context for the planning process and forces us to look at our nonprofit in the context of a competitive environment. It is hard work because it grounds big picture ideas in reality. Understandably given the option we might prefer to paint a canvas with a broad vision and fill in the colors, rather than first determine what it costs to buy the paint and canvas, and how to price our painting. (It’s much more fun to paint the picture and let somebody else figure out whether it will sell and for how much!) The problem for enthusiastic and inspired artists (as with board and staff members) is that the canvas gets bigger and bigger – but when the masterpiece is finished, there might not be a market for it.     For us amateur artists, two recent books approach nonprofit business planning from a strategic planning perspective and explain it in a very accessible way, even for those not familiar with business terminology. The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model , a new book by David La Piana and his distinguished colleagues at La Piana Consulting, may just change your attitude towards using the words “business” and “nonprofit” in the same sentence. Also take a look at Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by the terrific trio Jeanne Bell, Jan Masaoka, and Steve Zimmerman. We think both books are masterful in helping to explain why nonprofits need to pause and take a look at, well…let’s just say it, their “business model.”   Your nonprofit is in the business of something, whether it’s recycling computers, helping veterans rejoin the workforce, or preserving open space from development. And in order to pay for talented employees, that new website you dream of, and the internet connection that makes it work, your nonprofit needs cash. The problem is, assuming your nonprofit is like many others, it’s tempting to continually add new projects or improve existing programs to meet changing needs in the community. Just before a nonprofit launches that new program or makes the necessary adjustments, that’s the time to stop and ask, “How much is this really going to cost? And how will it be paid for?” The question should even be asked for services that clients pay for -- or that are paid by third-parties: “Are all the costs of the program paid for?” What we’re hearing is that many nonprofits have not calculated the full cost of running their operations. Consequently, the revenue received, whether through donations or fees for services (or a combination) might not cover 100% of what it costs to deliver those programs. Private philanthropy is concerned about this funding gap and the strain it puts on charitable nonprofits. The Donors Forum has convened a community of practice on the subject of overhead, bringing together funders and nonprofits to recommend how nonprofits can more easily identify and articulate the true cost of their work, and how grantmakers can become educated about the failure to pay full costs, as well as help nonprofits understand how to calculate the true cost of delivering services.   In today’s challenging economy, the severe consequences of failing to engage in business planning is laid bare when cash stops flowing. The cash flow crunch is a concern for a huge number of charitable nonprofits. The Nonprofit Finance Fund’s 2012 survey found that only 43% of nonprofits surveyed had more than 3 months of cash reserves – and many had less than one month. Nonprofits that continue to focus exclusively on what they do, instead of also what it costs to do it, will find themselves at risk of closing their doors for good. Here is just one example of the need for nonprofits and board members to focus strategically on business models: a 30 year old charitable nonprofit, dependent on donations to pay the rent and stay afloat, is hit hard by the recession when donations dry up. If the nonprofit closes its doors the community’s poor and disabled will be without access to medical equipment, such as wheelchairs, walkers, and oxygen tanks. For 30 years the nonprofit has collected donated equipment, refurbished it, and trained its new owners how to use it. For free. Now at the brink of being forced to shut down, the group’s executive director, reflecting on what happened, explained his mind-shift towards being more business oriented: “We’re not about money, but we have to be right now.”   A solid business plan will take into consideration not only the “vision” and the strategy for how your nonprofit will address needs in the community, but also how everything your nonprofit does fits within a competitive landscape, and how it will fund its activities in a cost-effective way. Done well, business planning is very comprehensive – and requires time. An outside consultant may be helpful to move the process along. The CEO, key program staff, and a few board members are usually tapped for the business planning team so that multiple perspectives inform the analysis of all aspects of the nonprofit’s operations: from mission delivery (programs, services, advocacy) to physical and human resources infrastructure, and marketing, to communications and fundraising activities. A business plan might also include funding projections, and address risk mitigation as well as how outcomes will be evaluated (and the associated costs).   The advantage of having a business plan in place – especially when an attractive new idea presents itself - is that some ventures, partnerships, or projects may strategically fit the mission and perfectly support the vision – but may not be successful financially. With the discipline of a business plan as the “enforcer,” it makes it easier to prioritize the activities that make the most financial sense, and to make hard decisions, such as stopping a program that offers little ROI. As champions for our nonprofits’ missions it is no longer enough to know deep in our bones that “the mission is good.” Instead we need to help boards and staff ask hard questions about money, so that the ability of each charitable nonprofit to deliver its mission into the future is protected. We encourage your nonprofit to take a look at the resources highlighted in this newsletter and on the Council of Nonprofits’ website, and we hope that when your nonprofit engages in this process, business planning will feel much more like painting a masterpiece than counting pennies. Coming soon - a new look for this newsletter and the National Council of Nonprofits   Interested in learning more about business planning for nonprofits? Join us for a free webinar on October 18th with Heather Gowdy and Lester Olmstead-Rose, authors of The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model. This webinar is an exclusive benefit for members of our network of State Associations. Contact your State Association for the registration link. Not a member? Find your State Association and join today!   This webinar is offered free of charge thanks to generous support from Resources on strategic and business planning (National Council of Nonprofits)    The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model , by David La Piana, Heather Gowdy, Lester Olmstead-Rose, and Brent Copen   Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by Jeanne Bell, Jan Masaoka, and Steve Zimmerman   Business Planning for Nonprofits: What It Is and Why It Matters  (Bridgespan)   Sample business plans for nonprofits (Bridgespan)   Tools for business planning, creating a theory of change, a case for support, and building a revenue plan (for purchase from Social Velocity)   Congratulations to Valerie Lies, President & CEO, Donors Forum, and Ann Silverberg Williamson, President & CEO, Louisiana Association of Nonprofit Organizations, as well as Tim Delaney, President & CEO of the National Council of Nonprofits, for being named to the 2012 NonProfit Times Power & Influence Top 50 list.   The National Council of Nonprofits provides information about the failure of government to pay the full costs of services both on our Government-Nonprofit Contracting website and in Nonprofit Advocacy Matters, our bi-weekly newsletter on public policy and advocacy matters affecting charitable nonprofits. An upcoming edition of Nonprofit Advocacy Matters will include an update on federal reforms affecting indirect cost reimbursements. Subscribe today so you won’t miss the latest on this important issue.

Copyright 2012 National Council of Nonprofits. All rights reserved 1200 New York Avenue, NW | Suite 700 | Washington, DC 20005 | www.councilofnonprofits.org

GuideStar Illustration: Nonprofit Organizations in US

Interesting overview of the number of nonprofits in the US.

Answers About Health Care Reform for New Yorkers

Many of you have questions about health care reform in New York and what its implications are for both you and your clients. Here is an article that clearly explains some of the main questions people are asking. These answers come from James Knickman, a knowledgeable and reputable source, who is the President and Chief Executive Officer of the New York State Health Foundation (NYSHealth), a private, statewide foundation dedicated to improving the health of all New Yorkers.

"What the Health Law Really Means for New Yorkers"

How America Gives- Fundraising Tool

Check out this great new interactive tool that can help nonprofit directors get information about the giving patterns in every state, county, city and ZIP code in the United States. This is an exciting new tool that can help  you out with fundraising. 

How America Gives is a free resource that spotlights giving statistics across a variety of income levels and allows users to compare and share data about charitable contributions. You can access it here:http://philanthropy.com/givingmap 

You are also invited to check out our exclusive How America Gives special report, which includes rankings, analysis, and much more: http://philanthropy.com/americagives