Drakes Bay Fundraising
A Next Generation Fundraising Company

Understanding Year-End Giving

Posted by Christopher Dann
Wednesday October 15, 2014
Categories: Fundraising
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At this time of year, it’s worthwhile comparing the business of managing individual giving to the business of managing holiday retailing. There are two reasons. One is that holiday gift-giving, like year-end charitable giving, is fundamentally voluntary and depends upon availability of discretionary income and willingness to spend or give it.  The other reason is that we can learn a lot by studying how retailers prepare for the season.

What nonprofit managers don’t know about people who give money may not hurt them but it surely complicates and confuses their work. The wisest of managers each fiscal year hedge their expectations of individual financial support by planning marginal shortfalls based on their own donor base histories. If the shortfalls occur, their budgets are safe; if they do not, they have money to spend or put in reserve.  But if everyone understands why this is a good idea, few know how to get it done.

Almost all retailers have one significant advantage over almost all nonprofit organizations as the giving season approaches: they invest in research and analyses that tell them who their customers are, how they behave, where to find more of them, how to deal with their varied dispositions toward spending, and generally what they need to do in any given year to adjust to market conditions.

The business press has begun to note that the broad-stroke appraisals of consumer attitude and available discretionary income have prompted cautionary tones from retailers as they look toward the holiday season. But while there’s a general acceptance that holiday spending will most likely be curbed, press coverage also reveals the diversity of response one would expect from the diversity of the sector, from hunkering down, price-cutting, and planning on tighter margins to aggressive marketing and pricing in situations where the market seems to be favorable to one’s specific offerings (the iPhone 6 being the very best example this year).

It’s an obvious point, but the fact is most retailers do not generalize about the consumer marketplace when it comes to their own business plans, and most nonprofit organizations, if they study the donor marketplace at all, do little more than reference broad-stroke generalizations.

But the nonprofit sector is every bit as diverse as retailing. We have done multiple studies over a couple decades that have documented very specific distinctions among donor constituencies of organizations across an array of nonprofit sub-sectors. And while it is very difficult for most organizations to find the money to do such research on an annual basis, it is easy to justify a regimen of annual donor base trend analytics combined with biennial quantitative research.

Typically, the justification for budgeting research and analytics has three dimensions: net income gain combined with fundraising cost efficiency, fiscal stability, and donor base value enhancement.  While it’s too late to prepare for Q4 this year, it is exactly the right time to consider commissioning analysis of one’s donor base’s trends as soon as year-end giving has been accounted for and to plan for surveying donors next year in time to better plan for next year’s year-end fundraising.

Incidentally, Macy’s has already announced plans to open their stores at 6 pm on Thanksgiving Day. They won’t be alone. In the parallel universe of fundraising, with the same competitive crunch, the mail, the air, and the Internet are already crowded with year-end solicitations.  The supply of discretionary income just doesn’t come close to the demand of retailers and nonprofit organizations.

The Phenomenology of Fundraising

Posted by Christopher Dann
Wednesday May 14, 2014
Categories: Fundraising
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In the earthquake zone that is the West’s coast, engineers pay special attention to the bottom floors and foundations of structures. Things have been done to those foundations and bottom floors over the years out of necessities valued higher than the necessity of preventing earthquake havoc.

In the San Francisco Bay Area, for example, the more readily available composites for bricks and ready means of transporting them (in barges across the Bay) engendered their wide use – especially after the 1917 earthquake – in foundations incapable of withstanding any ground movement. Strictly limited space, especially in San Francisco, Oakland, and Berkeley, made conventional the practice of having garages and wide open retail spaces as the first floors of apartment or commercial buildings, first floors into which floors above would be sure to collapse in the first seconds of the inevitable Big One.

What’s foundational to structure is fundamental to enterprise; and often we find that until a crisis occurs enterprises live on and expand for reasons and in ways that disconnect them from the fundamentals on which they were founded.

In commercial enterprise the most serious of those disconnections occurs between companies and their customers. The new book, The Moment of Clarity, by Christian Madsbjerg and Mikkel B. Rasmussen (Harvard Business Review Press) offers a variety of case studies in which companies discovered they’d lost their market moorings and started to drift. More valuably, the book introduces us to the methods through which each of them achieved their moments of clarity.

The Moment of Clarity is worth its weight in gold, unless you are an executive with a nonprofit organization who has anything to do with fundraising. In that case, it’s worth its weight in platinum.

My aim is to tempt you to read it.

In the nonprofit realm, disconnections can certainly occur between organizations serving people and the people they serve. But the more serious and common disconnections occur between organizations and those supporting them financially; and among those sources the most common and serious disconnections occur with individual donors. This happens principally because most donors are connected only through the mechanics of media and because for too many in nonprofit management, that’s good enough.

Madsbjerg and Rasmussen are founding partners of ReD Associates. Their work has transformed business strategies at companies like Intel, Adidas, LEGO, Coloplast and Samsung. The essence of their work is the disciplined application of human sciences to the solution of problems of disconnection between companies and their customers.

The human sciences – anthropology, psychology, ethnology, philosophy, and sociology – and their applications in art and literature deal with how people experience the world as opposed to what they experience, which is the realms of natural and social sciences.  Statistics of social and natural sciences can tell us with precision what people may do under the influences of their world experiences, like making a contribution, but our measures of response and sizes of gifts are not measures of the donor experience.

Does this matter? For as long the nonprofit sector in this country was a sellers’ market and organizations weren’t experiencing the acute pressure of buyers’ market competition, this distinction didn’t matter nearly as much. Ironically, organizations in the sellers’ market were far more inclined to state, as simply as possible, their cases for support in ways that engaged donors in those cases.

But we have now been in a buyers’ market for a long time, long enough to have also witnessed the ebb tide of one and the inflow of another generation of donors distinctly different from one another. And the buyers’ market has affected less attention rather than more to donor case engagement, and more attention to fundraising tactics and techniques.

The Moment of Clarity introduces many new or at least esoteric terms, all of them worth understanding and incorporating into one’s thinking about how to run companies and organizations more successfully. Two are central to the text. One is sensemaking. This is the authors’ term for the process of employing human sciences to solve complex problems of disconnection that are hard to conceptualize and articulate. They describe the skills and characteristics of sensemaker leaders in this way:

  1. Care deeply about the products and services they make or provide and the meaning that these offerings create for people
  2. Have a strong perspective on their business, one that stretches beyond the current horizon and the current company (or organization) boundaries
  3. Are good at connecting different worlds inside the company (or organization)

The second term central to the text is phenomenology, the study of how people experience life and the world.

The lessons for fundraising management from The Moment of Clarity, in brief, are that organizations don’t just need to re-brand themselves or re-create their marketing and fundraising strategies to raise more money. They need to understand the phenomenology of giving, or giving as a life experience.

Building codes inspired by events like the Bay Area earthquake of 1989 no longer allow brick foundations or open first floor plans without adequate cross bracing and what’s called shear-walling. The lesson learned is that an earthquake is not a disaster; the disaster is the result of not being prepared. The phenomenology of structural engineering is not in understanding earthquakes but in understanding the earthquake experiences of buildings.

Doing Good Well

Posted by Christopher Dann
Tuesday May 13, 2014
Categories: Uncategorized
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There’s a lot of attention paid these days to seemingly out-sized compensation packages, of corporate CEOs, of professional athletes, of entertainers, and recently of high-ranking executives of nonprofit organizations (CEOs along with star program talent such as medical and artistic directors).

I wish Gretchen Morgenson would take on compensation accountability in the nonprofit sector. The Pulitzer Prize-winning New York Times business columnist has done significant public service drawing attention for nearly a decade to the connections between the fortune-taking of top corporate executives and the good they have or have not done for their shareholders.

Whether it’s in private enterprise, professional sports, medicine, the arts, entertainment, or charity, doing good while doing well needs to be done well to do any good. Whining or ranting about how well anyone does financially is a waste of energy better applied, as Ms. Morgenson demonstrates repeatedly, to assessing the good that they do relative to how well they’re compensated.

As irresponsible as corporate directors have been shown to be in tying C-suite compensation to actual productivity on behalf of shareholders (the good they’re hired to do), so have so many in positions to do the right things in the nonprofit sector been irresponsible about accounting for the good to which their organization’s mission and vision statements aspire.

Brian Fung, writing in the Washington Post April 30 made an important contribution to this discussion. He was reporting on the fact that the tech start-up accelerator Y Combinator has begun assisting start-up nonprofit organizations.

Although he said the inevitable, “The aim is to do good while doing well,” just four paragraphs into his article, Fung’s reporting wasn’t about executive compensation. Rather is was concerned with the business planning that is essential to accounting for good. Y Combinator not only introduces entrepreneurs to financiers – in this case philanthropic financiers – it is determined to set them, whether for-profit or not, on productive courses.

There is much to be skeptical about in the presumptions of Y Combinator’s approach.  As an example, Fung reports Y Combinator’s specific emphasis on “the power of [a nonprofit’s] own business model to survive, rather than on donations…[believing that] weaning nonprofits off constant fundraising will make them leaner and more efficient.”  That’s a short-sighted – albeit common – view of fundraising; but it also seeds opportunity for great mischief if entrepreneurs come to believe that for-profit-forged business models exempt them from keeping their financial wellness commensurate with the good that their organizations do.

Fung did not, of course, write the headline for his article: “Can Silicon Valley Teach Nonprofits How to Save the World?”  But he did write:

…at a time when Americans are growing increasingly distrustful of Silicon Valley’s swagger, the more relevant question may be what engaging nonprofits may hold for a tech industry that’s reached an uncertain adolescence.

Alas, in Silicon Valley more than most places on earth, opportunities abound for doing good, not just with the money being made but with how it is being made.

What’s the Size of the Wallet You’re Trying to Share?

Posted by Christopher Dann
Monday March 24, 2014
Categories: Uncategorized
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American advertising has always been far more enamored of youth than the marketplace of goods and services justifies. It seems that nonprofit fundraising – especially since the emergence of electronic social media and the reintroduction to the United States of canvassing – has been drinking from the same punch bowl.

So disappointment is being heard with greater frequency about the impressive numbers of signers on to causes who prove to be deadbeat donors, or what The Economist years ago presciently dubbed slacktivists.

In other quarters and conversations, there’s mounting concern that the decline of the historically generous American middle class portends grave consequence for certain kinds of nonprofit organizations.

One behalf of our clients (and those we’d very much like to have as clients), we keep exploring sources of information that will help us and them understand how the fundraising environment is changing and how to do more productive fundraising in the new environment.

It was such an exploration that led to The Roles of Discretionary Income in Charitable Giving, a paper we invite you to study and encourage you to critique.

The paper carries the message that while there’s a new way to target donors with greater accuracy and efficiency we need to invest more money and energy in getting the data and information required. For the most part current practices fall woefully short.

Climate Change

Posted by Christopher Dann
Tuesday February 25, 2014
Categories: Climate Change, Fundraising
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Farmers and ranchers in California are experiencing the worst drought of their lifetimes. For the near term, they’re hunkering down, selling off cattle or letting fields go dormant and hoping the federal government provides some serious relief. Some — or perhaps many — hearing talk of the impact of global warming and knowing statistics are building a stronger foundation under that theory, are thinking about a future away from the ranch or the farm.

Farmers and ranchers have significantly greater stakes in their professions and therefore significantly greater commitment to hanging on and figuring out what to do. But while ranchers and farmers are increasingly tempted to get off their ranges and (literally) out of their fields, the ever expanding nonprofit sector has emboldened fundraisers to stay in the field, just keep moving.

Unbeknownst it seems to most in the nonprofit sector there’s been a situation unfolding for about twenty-five years that now shows change to be more on the order of global warming than regional drought. The declining financial capacity of the middle class means the decline of the most generous of donors and the need to shift fundraising business models as radically as in the 70s and early 80s they were shifted into models that capitalized on the emergence of unprecedented middle class financial capacity.

Here’s a look at contributions as percentages of household adjusted gross income in three ranges.

Table for blog 53 march 1 2014

It’s the lowest of theses ranges where we find the median household income of donors, where what we can consider middle income donors account for approximately 30% of household and 27% of income. The two ranges above account for approximately 20% of households and 51% of income.

The problem is that the financial capacity of that $50,000 to $99,999 population has been shrinking for  a long time. While certainly exacerbated by the Great Recession, the trends have been longstanding. In a column last week, with only incidental reference to the nonprofit sector, David Brooks characterized the situation as capitalism facing “its greatest moral crisis since the Great Depression,” noting, “…the share of the economic pie for the middle 60% of earners¹ nationally has fallen from 53% to 45% since 1970.”

Meanwhile, also last week, came news that with its sale to Facebook, WhatsApp will share among its 55 employees a windfall that will amount to an average per employee of $345 million. I mention this not only to underscore the contrasts between current harvests in the Great Imperial Valley and Silicon Valley but to foreshadow further examination the nature of fundraising business model change whose mandate appears immediate and demanding.



¹ By which I take him to mean households with adjusted gross incomes between $25,000 and $149,999.

Women Gain in Donor Value

Posted by Christopher Dann
Tuesday December 10, 2013
Categories: Demographics, Fundraising, Research, Trends
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Compensation equity between men and women is as complex a topic as it is heated.

We’re not going to either wade into its complexity or approach its heat. But both aspects of the topic have been largely responsible, we assume, for the Bureau of Labor Statistics attention to it. And we have now a new report, Highlights of Women’s Earnings in 2012, with data useful to our understanding of another complex topic, the donor marketplace.

The bad news in the report, as the always reliable American Consumers Newsletter points out, is that “the decades-long increase in the earnings of women who work full-time came to an end…[and] Women are joining men in the struggle to stay even.”

But there is a lot of good news, at least for fundraising, in seeing what came of those decades of progress that brought women’s earnings as a percent of men’s, full-time wage and salary workers from approximately 62% in 1979 to 82% in 2012. Two graphs from the report illustrate.

graph1

% Change in constant-dollar median usual weekly earnings by
educational attainment and sex, 1979-2011

The table shows that women have made more earnings progress through education. And we know, coincidentally, that more women than men have been enrolled in and graduating from colleges and graduate schools in recent times. With education attainment second only to age as a determining factor in giving, we have here documentation of one perspective on the increased capacity of the donor market.

With very little exception, the donor base research we have conducted for a wide variety of nonprofit organizations over the past 20+ years have shown female majorities in the donor bases or as giving decision makers.

graph2

Distribution of full-time wage and salary employment, by sex and major
occupation group, 2011 annual averages

Of the occupational groups on this graph, bachelor’s degrees are required mostly among management, business, and financial occupations, professional and related occupations, and office and administrative occupations. These three categories accounted for 68.4% of women’s full-time wage and salary employment in 2011 (versus 41.2% of men).

Again, the good news is that the capacity for giving among women has increased very substantially, even if it is now in stasis. This doesn’t tell us either whether the disposition of women to give has changed or whether the nonprofit sector has done what it should to affect greater disposition among women to give.

It certainly doesn’t tell us where any given organization stands relative to the opportunity to benefit from this greater capacity.  That takes research.

Hiding from Donors

Posted by Christopher Dann
Tuesday December 3, 2013
Categories: Fundraising
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It’s a very natural reaction to accede to a donor’s request when they ask to be solicited only once each year.

But those of us who have had a lot of personal interaction with donors have continuously entertained second thoughts. We know that donors who resonate most with an organization’s values, mission, and work want to know more, not less, about what’s going on. We know that as donors stay active in their support many tend to increase not just the amount but also the incidence of their giving, especially when given good reasons to consider additional gifts.

We’ve been critical of efforts we’ve seen over the years to protect donors presumed to be most valuable as if offering good, relevant information about organizations and opportunities to give were abusing rather than deepening relationships with them.

We have also many times been able to document substantial financial opportunities lost to organizations through misapplication of donor-sheltering practices and policies. Three examples come to mind:

  • An organization sending out solidly case-based additional gift appeals invited donors to say if their gifts were intended to renew annual general support rather than the purpose of the appeal. The implicit message was, “this really isn’t a good appeal.” The practice reduced both donor retention and income.
  • Another organization’s CEO, weary of mail from members and never properly coached on how to respond, wanted to reduce his organization’s annual renewal series to one effort. Fortunately, it was a test, because it showed there really is wisdom in multiple effort renewal campaigns. We had to scramble to recover lapsing members.
  • A highly respectable and well supported organization failed to train its donor services staff and within a short time found that 10+% of their donor base had been flagged “no mail.”  Test mailings of both membership renewal efforts and a substantive appeal produced results suggesting these were actually better than average donors.

Research has taught us that there are many reasons why donors ask to be solicited only once or not at all. But disfavor with the organization they have already supported is only one of the many and, arguably, the least common. When we probe the issue in focus groups the main complaint is getting too many solicitations from too many organizations and especially those donors don’t want to support. This cautions us to be careful that an organization’s solicitations do not look like those of competing organizations, a very basic branding principle.

This year we have had the opportunity to test lists of donors who had been flagged “limited mail” after requesting they be solicited only once each year. We collaborated with one of our clients whose donor relationship management practices are, we think, best in the business. We both wanted to find out if donors really won’t respond to mailings (only conventional mailings, we didn’t have the volume to test online contacts) when they’ve asked to be mailed only once each year.

The test universe was divided into four groups: 12-month active first-year and multi-year donors, and 13-24-month one-year and multi-year donors. Twenty-six tests were conducted with the intent of aggregating response data.  Single year donors were sent three very different appeals spread across 12 months, a newsletter, and the first effort of a renewal campaign. Multi-year donors were sent all four of the renewal efforts, a appeal with follow-up efforts, and a newsletter.

The aggregate response from the 1,350 donors was just under 12% and produced $102,000 in gross income — $94,000 net — with an average net per donor of $70.

The active, one-year donors responded best, at 17.7% in the aggregate with an average net per donor of $77. Next, active multi-year donors responded in the aggregate at 11.5% with an average net per donor of $76. One year lapsed, single year donors responded at 10% with an average net per donor of $54. Responses from multi-year lapsed donors were positive, but their numbers were too small to produce statistically reliable data.

This is an organization whose work gives it the capacity to make a good case for support virtually every day.  A good case is one that engages the donor by the prospect that something she would want to have happen is more likely to happen with her financial participation. Each one of the mailings in each of the 26 tests needed to pass a donor worthiness test, It’s a simple test; it asks, “Is this worthy of the donor’s time and consideration?”

To donors who have become engaged by a good case for support, a solicitation is as much or more an opportunity to participate than an imposition. When we withhold solicitations, we have to ask ourselves, “Are we protecting our donors or hiding from them?”

Sustainer Case Studies

Posted by Christopher Dann
Tuesday November 19, 2013
Categories: Fundraising, Public Radio, Sustainers
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Two clients — Colorado Public Radio and Friends of Arizona Public Radio in Phoenix — offer excellent opportunity for examining what comes of well-managed sustaining donor programs. In Phoenix, KJZZ (primarily news and information) had grown its sustainer support to 41% of the file at June 30 and K-BACH (primarily guess what?) had grown is sustainers to 32% of the file. Colorado Public Radio (three full-time formats: news/information, classical and new music) had grown its sustainers to 24% of their donor base, restricting sustainer giving to electronic funds transfer.

After the close of their fiscal years, we undertook Donor Base Trend Analyses of the three donor bases (separating the two Phoenix files) to produce the array of 6-year trend reports DBTAs provide, 11-year file census reports, and most recent year’s cross-tab reports. In all categories, wherever gift frequency is assessed, sustainers are broken out as an asset class.

Finally, for the recent year — FY2013 — cross tab reports, we also included reports quantifying ranges of cumulative giving, loyalty, and giving frequency (with sustainers broken out) by Target Analytics’ Loyalty Insights groups.

So there’s a lot of data, and there is a lot more studying to do. But we can summarize the major findings of our first analyses and enumerate the hypotheses we want to pursue with further study and time.

One hypothesis we posited decades ago when we and our colleagues at Craver, Mathews, Smith & Company first built huge sustainer programs for Southern Poverty Law Center and Greenpeace…in days long before public use of the internet and ubiquitous credit cards. That hypothesis stands as demonstrated: Sustainer programs work best and are of highest value when they are backed by a case for sustaining support. Public radio, and especially news and information public radio, makes such a case all day every day of the year.

Major Findings for the Two Clients

  • Sustaining donors are leading performers in terms of loyalty.
  • Sustainers have above average yield (current net support) but not better than multi-gift donors.
  • Their value (potential for future yield) exceeds the norm, principally through high retention but, again, not that of multi-gift/multi-year donors.
  • Sustaining donors cluster among the three most valuable Loyalty Insights groups.

This last finding stood out among the four. We have been able to demonstrate the efficacy of Target’s Loyalty Insights model across a wide variety of donor bases by looking at variances in annual cumulative giving, gift frequency and donor retention by each of the seven Loyalty Insights groups.

These were the first opportunities we had to look at model groups within substantial populations of sustaining donors.

What we found, in summary, was that 89% of Colorado Public Radio’s sustainers clustered in the four high-value Loyalty Insight groups and accounted for 95% of sustainer revenue in their fiscal 2012. For KJZZ, 79% of their sustainers were in those four groups and accounted for 90% of sustainer revenue. And for K-BACH, the four groups accounted for 76% of sustainer donors and 88% of sustainer revenue.

Hypotheses for Further Study

1.  Sustaining donors challenge the efficacy of fundraising programs/organizations they leave behind.

Corollary: They are a rich source of information on the organization and its case.

2.  Sustaining donors are not nor are they like multi-gift donors.

Corollary: they are making a single commitment, not multiple commitments.

3.  The sustainer arm’s length relationship disguises the strength and value of their engagement.

Corollary: The motive is not convenience, nor saving trees, but a way to be more generous than one could otherwise afford.

4.  Designation — even to a sector or aspect of annual operations — will enhance attraction and value development of sustainer donors.

5.  Sustainer programs can be as effectively instituted with high-dollar donors, albeit with refined cases and designations.

Corollary: They should be instituted at both base range and mid-range, preferably with different brands.

6.  Sustaining donors are more likely than average donors to commit to estate gifts.

A Most Unusual Gift

Posted by Christopher Dann
Monday November 11, 2013
Categories: Fundraising, Planned Giving
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The most unusual gift I ever experienced — unusual in both curiosity and value — arrived at The Nature Conservancy the week between Christmas and New Year’s Eve in 1972. It was in response to a new donor prospecting campaign. It was a diamond engagement ring, mailed in the campaign’s remittance envelope but with no identification of the donor.

While nothing like that is likely to happen, gifts of extraordinary size from new donors, in cash or securities, are likely at this time of year, more so than any other time.  At other times of year, prospecting is mostly a two-way street, with donors trying out organizations looking to enroll them.  In the fall, there are donors more ready to engage at what are for them normal levels of giving to favored organizations

Seasoned fundraisers know that there are actually three kinds of planned gifts. The oldest kind are annual gifts planned by extraordinary donors in the forth calendar quarter of the year. The next oldest kind are those planned in connection with estate planning. And the third and newest kind are those made to donor advised funds in connection with plans — often not yet made — for future distribution.

Most often those planned extraordinary annual gifts come from active donors of record. But solid, persuasive case making in prospecting mail or online can produce gifts whose donors warrant special attention.

We never learned who sent The Nature Conservancy that ring, and weren’t supposed to. We imagined, as I’m sure you would, that it came from a spurned fiancée who clearly favored the Conservancy as the means of achieving sweet revenge.  Great good was accomplished on her behalf and in her honor.

Part Two: Reconsidering Government Support of Nonprofits

Posted by Christopher Dann
Tuesday October 15, 2013
Categories: Fiscal Cliff, Fundraising, Politics
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In Part One we addressed the immediate concern about impact on the nonprofit sector of two aspects of the crisis over the Continuing Resolution and partial shut-down of the federal government, one being the direct impact on federal funding of nonprofit organizations and the other being the impact on consumer confidence of the politics of it all. While the former will have had varying impact by sub-sector, as demonstrated by a table showing varying percentages of government funding, the latter will continue to have negative impact on discretionary spending into the fall, including contributions to nonprofit organizations

Here we are going to take longer and broader views. Sensible thinking was restored to the situation on Capitol Hill when the strategy of holding the federal budget hostage to rescind or amend the Affordable Care Act was abandoned in favor of putting the budget itself back on the negotiating table. But Congressional attention will inevitably turn again to what governments call “tax expenditures” which include revenue foregone by virtue of both tax exemption and charitable tax deductions.

We know that in matters of legislation great mischief can be made by decisions based on poor information. In the case of the nonprofit sector, a major cause of the circulation of poor information — seemingly as much inside as outside the sector — is generalization. As we pointed out in the last blog, the nonprofit sector is as diverse in its financial models as retailing is, and we showed the variable percentages of revenue by sub-sector from government sources, private contributions, and fees.

Here again is the table from the prior blog.

blog 47

Here now is more evidence of the diversity the nonprofit sector presents to those wanting to make changes in the federal budget and the tax code.

First we’ll look at the distribution of reporting public charities by sub-sector, according to The Urban Institute’s The Nonprofit Almanac 2012.  Reporting public charities are those required to file form 990 with the IRS because they had (in 2010) at least $50,000 in revenue.

2010 Reporting Charities

In 2010 there were 618,062 reporting public charities, and the probability is that number has increased. This first perspective on the sector tells us, therefore, relative weights of sub-sectors. Those weights do not, however, translate into political influence. No one in Congress is going to take any of the benefits of exempt and publicly supported status away from religion-related 501(c)(3)s; yet international affairs is a relatively easy mark. The patrons of arts and cultural organizations, if not humanities, tend to be people of powerful political influence, although there is increasing sentiment that those very people least require or perhaps deserve tax deductibility for their philanthropy while the predominantly less well-off donors to human service charities should be rewarded for their more altruistic charity.

Next, the tables below show percentages of total revenue and total public support by sub-sector, the difference between the two being revenue generated by service and other fees, investment income, and government grants.

total revenue_public support

Bear in mind that one percentage point of public support is approximately $3 billion and that sales of nonprofit goods and services now amount to almost $1 trillion. These figures make consideration of what in the argot of our times we might say clawing back some of that forgone tax revenue very attractive indeed.

With the health sub-sector, as Peter Orszag recently pointed out in a Bloomberg  online article, there is increasing notice being paid to the lack of distinction between nonprofit healthcare and for profit, something he pointed out will also occur with education both as tuitions continue to escalate and for-profit education institutions grow through digitization. Now at Citigroup, Orszag was director of the Office of Management and Budget in the first Obama administration. His has an insider’s understanding of both the tax code and its politics.

But we’re well reminded again that neither legislators nor the IRS nor often the nonprofit sector itself tends to look at these major sub-sector distinctions. That and lobbying by the well-heeled are the reasons why, for example, the National Football League and the NCAA continue to luxuriate in the status of nonprofit organizations. So if the dominating shares of health and education affect the impression that similarities in revenue generating practices make the sector overall attractive for reducing tax expenditures, all sub-sectors are likely to be implicated.

The point is that a revenue-generating activity may then not be able to hide behind the program-related shield if it looks in any way like the taxable commerce of a tax paying enterprise.

Next Generation Fundraising and Drakes Bay Fundraising merged in the fall of 2013, bringing the longstanding professional acquaintances of their four principals – Tim Oleary, Carol Leister, Cindy Germain, and Christopher Dann – into a single company and combining the special resources and experiences of each to provide clients greater breadth and depth of service.

For more information about Next Generation Fundraising, click here.