NON-PROFITS INDUSTRY PROFILE

Volunteering is an important component of the nonprofit sector: over two-fifths of public charities rely on volunteers. Using data from the Current Population Survey and the American Time Use Survey, an estimated 25.1 adults, NA percent of the population volunteered at least once in 2017. The highest volunteer rate reported in the decade spanning from 2008 to 2017 was NA percent, which was reported in 2009 and 2011. The lowest volunteer rate was reported in 2015: NA percent.

The percentage of the population volunteering on a given day increased slightly in 2017, rising to — percent from — percent in 2016. This rise occurs after 2016 saw the lowest proportion of the population volunteering on an average day within the previous 10 years: however, the NA people volunteering on a given day represents an increase of over 1 million daily volunteers from 2016. In the past decade, the highest proportion of Americans volunteering on a given day was in 2009, when 52 percent of the population volunteered (NA people).

Americans volunteered an estimated 64.4 hours in 2017, a slight increase from 63.9 hours in 2016. This amounts to about 8.8 hours per volunteer, slightly more than in 2016.
The Urban Institute Study shows that governments using flawed contracting practices do so at the direct expense of nonprofit employees. For example, 45 percent of nonprofit human service providers (or almost 15,000 employers nationwide) reporting that governments failed to pay the full costs of performing the contracts indicated they cut jobs last year. That stark figure is a 17 percent higher rate than nonprofits reporting that governments paid full costs. For the employees who retained their jobs, a fifth of their nonprofit employers were forced to freeze or reduce their salaries because the government contracts did not pay the full amount of what it took to serve the people in need. When government contracting systems are broken, nonprofit employees bear the brunt.

In election campaigns throughout the country, voters are asking candidates what they will do to solve problems in their communities, make government work better, and resolve our many fiscal problems. Recognizing that there are fewer dollars available to state and local governments, the nonprofit community – working every day to improve lives and solve problems – has three proven, nonpartisan solutions for soon-to-be elected and re-elected government officials who are committed to strengthening communities, improving government, and saving money for taxpayers.

In communities across America, charitable nonprofit organizations are working to address local needs: protecting and educating children, training the workforce, nursing the sick, supporting our elders, caring for returning soldiers, rebuilding cities, fostering faith, elevating the arts, protecting natural resources, and more. Some nonprofits successfully pursue their public-spirited missions with very little government interaction; but often governments turn to nonprofits to provide vital services to citizens and fulfill commitments and programs established by policymakers. In all cases, charitable nonprofits are essential partners with state and local governments in solving problems and implementing solutions.

Some elected officials recognize the significant contributions that nonprofits make in improving lives and communities. For instance, in just the past two years Governors in Alabama, Idaho, Michigan, and North Carolina have proclaimed Nonprofit Weeks or Nonprofit Awareness Months. Right now, statewide officials like Governors, Attorneys General, and Comptrollers and local leaders like County Executives and City Mayors have the opportunity to go beyond recognition of nonprofits and make meaningful change by taking action on these simple things:
Establish a Nonprofit Liaison
Solving community problems requires open lines of communication. Across the United States, few government structures exist to tap the expertise, creativity, and local economic impact of the nonprofit community, despite

the fact that charitable nonprofits employ more than 10 percent of the workforce (13.7 million workers), contributing $587.6 billion in wages and salaries – or 9.2 percent of all wages and salaries paid in the United States in 2010.6 However, a few inspired government officials have discovered – and implemented – ways to open and maintain communications, thereby creating opportunities for government and nonprofits to work together on policy issues that threaten the sustainability of charitable nonprofits on which governments rely to provide basic services to constituents.

In his first week in office in 2011, Connecticut’s Governor became the first in the nation to appoint a cabinet-level official to serve as liaison with nonprofits providing services to the state’s residents on behalf of government.

The Governor of New York recently appointed an Interagency Coordinator for Nonprofit Issues who is responsible for tackling persistent problems that add costs and complicate otherwise effective government-nonprofit relations, including reforming contracting practices. In office for less than a year, the new official recently announced proposed action on ways to streamline processes to help taxpayers and nonprofits.

Several years ago, the Mayor of Denver created the Denver Office of Strategic Partnerships (DOSP) to serve as a liaison between the City of Denver and the nonprofit sector. Beyond providing a way “for both nonprofit and City staff to develop an understanding of each other’s strengths and capacities” to strengthen Denver’s communities, DOSP has trained hundreds of nonprofit leaders on how to apply for federal grants, bringing outside dollars to the City.

In these and other locations, elected officials have seen that the government and taxpayers benefit when ongoing dialogue is established – at the highest level – with solution-oriented charitable nonprofits. The core purpose of a nonprofit liaison is to establish a constructive way for government and charitable nonprofit leaders to interact and communicate directly to identify problems and create coordinated reform efforts. Through these arrangements, government executives can make more informed decisions based on ideas and solutions tested in the real world by organizations dedicated to serving their communities.
Most nonprofits are small businesses, too. Like their best small business colleagues, nonprofit organizations are dedicated to their communities; they are innovative and effective and provide jobs to local residents. The vast majority of charitable nonprofits are small; of those filing with the IRS, 89.5 percent of charitable nonprofits have revenues of less than $1 million.9 And like small for-profit businesses, smaller nonprofit employers experience limited access to credit, are forced to pay higher health insurance premiums, and need specialized consultation and technology assistance. Government officials should ensure that all job-creators in their communities – nonprofit and for-profit employers alike – are included in programs to promote economic development, capacity building, and community solutions.

Charitable nonprofits and governments serve the same individuals and communities every day to address local needs and improve the quality of life for all residents. They exist to solve problems in their communities and are natural allies. As elected officials in the executive branch of governments consider what they want to accomplish while in office, we urge them to reach out to and engage nonprofit community leaders to help solve the most pressing issues of the day. These three simple ideas are proven, nonpartisan solutions that serve the best interests of constituents, of communities, and of the public good.

Health Services
Health care is the largest sector within the nonprofit industry in terms of economic value and employment. Nonprofit health care comprises up to half of all nonprofit revenue and employment, and it has the largest share of wages and salaries in the nonprofit industry. In 1997 the thirty thousand nonprofit organizations in America had $385 billion in revenue, $461 billion in assets, and 5 million employees. Nonprofit general hospitals generate three times more revenue and jobs than government hospitals, and seven times more than their for-profit counterparts, according to the U.S. Census Bureau.

Education
The nonprofit education sector includes colleges and universities, preschool, elementary, secondary schools, libraries, and research institutions. The nonprofit education and research sector accounts for annual revenues of $175 billion. Each year 8 million students study in nonprofit educational institutions. This sector produces and disseminates cutting-edge knowledge and research to the benefit of millions of people in America and across the world.

Social and Legal Services
The nonprofit social and legal services sector includes legal pro bono aid counsels, individual and family services, residential care, job training, and community and housing development. According to the Independent Sector and Urban Institute, the social and legal services sector is one of the fastest growing sectors in the nonprofit industry, which reflects high demand for such services, which in turn leads to higher wages.

Civic and Environmental Advocacy
According to the U.S. Census, as of 2005 there are 8,300 “social advocacy organizations”. Their combined revenues are $7.5 billion and they provide more than 85,000 jobs. The two biggest advocacy groups are:
• human rights
• environment, conservation and wildlife

International Relations and Development
The Internal Revenue Service estimates that as of 2005 there are more than 2,000 American nonprofit organizations with a distinctly international focus. These organizations combine to represent $5.8 billion in revenue, $5.4 billion in expenses, and $6.1 billion in assets. Such organizations can be divided into four major subgroups:
• foreign policy research and analysis
• international development and relief
• international human rights
• international peace and security

Arts and Culture
The arts and culture sector is the smallest subsector in the nonprofit industry. According the Independent Sector and Urban Institute, ni 2004 it represented only 2 percent of the nonprofit sector’s total funds. Despite of that, the arts and culture sector includes performing-arts groups, ballet groups, nonprofit radio and television, scientific, natural, and historical museums, orchestras, literary organizations and various humanities-oriented organizations.

The largest use of volunteer hours in 2017 was on social service and care activities (22 percent). These activities include such tasks as preparing food, collecting and delivering clothing or other goods, providing care, and teaching, counseling, or mentoring. Administrative and support activities made up the next-largest proportion of volunteer time (24.8 percent); this category includes things like computer use, telephone calls (except hotline counseling), writing, fundraising, and the like. These two categories of activities also led volunteer hours in 2016, although the proportion of time spent in social service and care activities has decreased slightly (from 23.5 percent) while the proportion of time spent in social administrative and support activities increased slightly (from 25.3 percent). Volunteers spent a larger proportion of their time in performing or cultural activities and meetings, conferences, and trainings in 2017 than in 2016, while they spent less time in maintenance, building, and cleanup activities.

Bidding burdens, needless red tape, and other government contracting policies and bidding practices routinely impose avoidable inefficiencies on nonprofits, thereby creating waste, eroding productivity by diverting staff time from serving individuals, and reducing the amount of services actually delivered to individuals and communities in need. Many of these complexities also add costs to taxpayers.

Reporting and oversight processes that once made sense can run amuck when needlessly duplicated, resulting in higher costs to taxpayers without adding value and diverting resources from delivery of needed services. Everyone needs to recognize that spending certain dollars chasing possible pennies is not cost effective for taxpayers.

The communities in which nonprofits operate have significant influence on the extent to which organizations can achieve their missions. A complex network of beneficiaries, funders, competitors, and collaborators surround nonprofits and foster their success or facilitate their decline. Leadership has a responsibility to understand who the important actors are, how quickly changes in the market occur, and how volatility will impact the organization’s business model and long-term sustainability.

The environment in which nonprofit organizations operate seems constantly in flux. Shifting political landscapes and funder priorities have led to calls for more collaboration and mergers, “collective impact,” and self-sustaining nonprofits. Add to this the changing needs of constituents and demographic shifts affecting both constituents and donors, and it is easy to see how nonprofit leadership can be overwhelmed when thinking about their community.

Nonprofit markets consist not only of constituents who benefit from programs, but also funders who pay for them. A holistic view of the market in which a nonprofit organization operates also needs to include the landscape in which organizations: other for-profit, nonprofit and public organizations working side-by-side as well as those whose approaches differ and compete with the organization for resources, talents and impact. Likewise, a mix of programs, their effectiveness, and their sustainability can be influenced by the availability of skilled labor and the political and social environment. A true market analysis needs to explore all of these influences at some level.

Nonprofit marketers are having to target each giving generation differently. According to the Global NGO Online Technology Report, Millennials’ giving is most inspired by social media whereas email has the most impact on Gen X and Baby Boomers. Meanwhile, it’s predicted Gen Z will prefer mobile apps.

Donors of all ages are responding better to short, consumable, personalized content. Seek out opportunities to customize interactions while weaving the nonprofit’s impact story into every communication.

Personalization has become the norm. But this extends beyond a “Dear {Donor’s Name}” email greeting. Dive into the data to determine age, amount donated, what drove the donation, events attended and more to connect on an individual basis with givers.

On average 1.1% of website visitors made a donation. — M+R Benchmarks 2016. Monthly giving is on the rise. Although currently accounting for only 17% of all online revenue in M+R’s 2016 Benchmark study, this reflects rapid growth. In 2015, monthly revenue grew by 24% across all sectors, compared to 18% growth in one-time revenue. Encourage this by helping donors understand the value of monthly gifts and create content specific to these givers.

Email appeals are increasingly successful. Contrary to those claiming email is dead, M+R’s research found that among their 25 top performers, more than a third of all online revenue could track directly to an email appeal (34%). These top 25 also email revenue grow by 37% over 2014 levels (compared to 18% among all other groups surveyed).

M+R further noted: “Nonprofits sent more advocacy and fundraising emails in 2015 than they did in 2014. The average group sent 49 messages overall in 2015, including 19 fundraising appeals, 12 advocacy messages, and 9 newsletters.”

Online donation is ever easier. Facebook has added a Donate Now button, and there are several donation tools available for nonprofits. These make it more affordable for nonprofits to fundraise online, but also add convenience for donors. 62% of donors worldwide prefer to give online.— NonProfit Tech for Good
Throughout the marketing planning for nonprofits, it’s important to remember to make communications emotional and visual. Users often skip long passages of text in favor of illustrated examples and structured content. Be sure to convey the brand’s message in a convincing cause-based story-telling way.

When nonprofits with government contracts do not get paid, they have to raise additional funds to fill the void. This increases the competition for grants and donations from the philanthropic community, squeezing nonprofits that do not have government contracts. It also tends to limit the discretion of grant makers, leading some to shift their funding away from what they want to fund, to meet immediate human needs they feel they must fund instead.

This shift happens in two ways. First, when foundations and individuals see unmet human needs, they often respond in an ad hoc manner, redirecting their planned donations away from arts, civil rights, conservation,

education, research, and other important nonprofit groups to fill part of the gap in human services funding, effectively shortchanging some community needs while trying to rescue others. In the process, the community loses the benefit of programs and services that promote the public good, including cultural preservation, protection of civil and environmental rights, and much more.
Second, an increasing number of foundations have been diverting their regular giving to create special funding and loan programs to keep human service nonprofits afloat while those nonprofits wait to receive their late payments from government contracts.16 Yet other foundations have purposefully refused to do so, taking the longer-term view that they do not want to be enablers that effectively encourage government to delay payments and avoid reforms because it will only foster the misguided view that foundations will divert their money from elsewhere simply to bail out government obligations.

This “crowding out” effect is greater than most people realize. Data from other national surveys from last year and this year covering the entire nonprofit sector (not just human services organizations) reveal an even higher percentage of nonprofits that reported they have had to cut services, reduce employees’ hours and benefits, and lay off more employees than even the high numbers reported in the Urban Institute’s survey of human service nonprofits.

The Broader Costs to the Economy
This broken “system” creates serious drag on the rest of the economy in ways that many may not immediately recognize. For instance, as the Congressional Research Service recently reported, nonprofits employ more than the construction, finance, and insurance industries combined.

So when the broken contracting system forces nonprofits to eliminate jobs (e.g., cut 17% more jobs because government fails to pay the full costs of services nonprofits deliver on behalf of government and cut 12% more jobs because governments failed to make timely payments under the written agreements), freeze or reduce salaries (e.g., 20% more often when government does not pay full costs and 16% more often when government changes the terms of its binding agreements mid-stream), given the magnitude of the numbers it hurts everyone in the community, not just nonprofit employers and employees.

There is a ripple effect that happens when fewer services get delivered to those in need. Consider, for example, what happens when the single mother cannot keep her job because the child-care center she relies upon has to shut down or limit the number of children because the government failed to pay on time. Or the employee whose absenteeism rate spikes at work, hurting his employer’s productivity, because his elderly mother gets bounced between senior centers as a result of government funding not coming through to nonprofit providers as promised under written agreements.
This negative ripple effect can amount to a tidal wave, when considering how much money nonprofits recycle through local communities. Nonprofits not only pay their employees who spend money for local housing, goods, and services, but also nonprofits collectively spend billions of dollars annually by paying rent on their office spaces, purchasing office equipment and supplies, and other goods and services from for-profit businesses that further fuels the economy; that is, unless governments do not pay their written agreements with nonprofits, in which case that money stops circulating through the local economy.

Governments at all levels contract with charitable nonprofits to provide efficient and effective services to residents that would be more costly if provided by others. Yet governments are not always good partners with nonprofits: three out of four (75 percent) nonprofits receiving state funding report that governments do not reimburse the full cost of contracts and grants. In a separate study, over half of nonprofit human service providers (53 percent) contracting with government reported that government paid them late. Plus, nonprofits reported other problems such as governments imposing burdensome and redundant application and reporting requirements (76 percent), and governments changing contract terms mid-stream (57 percent). These practices add unnecessary costs for government and nonprofits that ultimately reduce the quality and quantity of services provided to individuals most in need.

To address contracting and other problems such as these, a few Democratic and Republican Governors, Attorneys General, and other officials have formed government-nonprofit task forces. These public-private collaborations already have produced results, consistently paying off for taxpayers in their states. The elected executives in the following examples created task forces addressing the dual goals of rooting out waste while maintaining and even enhancing accountability:
• The Governor of Connecticut created a high-level Cabinet on Nonprofit Health and Human Service – including significant nonprofit participation – to analyze and make recommendations to enhance client outcomes and the cost-effectiveness, accountability, and sustainability of the partnerships between the state and nonprofit health and human service providers.

• Through an Executive Order, New Jersey’s Governor established a permanent, bi-partisan Red Tape Review Commission to review government interaction with for-profit and nonprofit organizations and make detailed findings and recommendations, including an analysis of existing rules, regulations, and legislation that are burdensome to the state’s economy.

• In New York, the Attorney General appointed a Leadership Committee for Nonprofit Revitalization, which found that state laws “and regulatory practices have placed unnecessary and costly burdens on the nonprofit sector. Redundancies throughout the system waste scarce taxpayer and nonprofit dollars and bury nonprofits in duplicative paperwork and audits.”

These and similar collaborative efforts have reduced waste and enhanced accountability through the simple act of coming together to review, as the New York Attorney General’s Leadership Committee found, “outdated and burdensome requirements that result from a regulatory scheme that has not been meaningfully updated in decades.” The straightforward recommendations from task forces have included basic problem-solving ideas such as: creating electronic information repositories (document vaults) that cut down on repeated paper filings that consume government resources of staff time and storage space; and reducing duplication of efforts by multiple taxpayer-paid audit teams. Government-nonprofit contracting task forces consistently produce pragmatic recommendations that save taxpayers’ dollars and reduce burdens on nonprofit contractors.

According to the National Center for Charitable Statistics, in 2008, government funding accounted for 27.4% of all funding for the nonprofit sector, due to governments relying so heavily on nonprofits to deliver needed services in local communities.14 By comparison, private donations accounted for only 10.4%, with foundations contributing only 1% of funding to the nonprofit sector as a whole. Put simply: foundations do not have the assets to fill the void when governments do not honor their contractual obligations. Neither do the invaluable federated charities that give so generously to human services.