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(Originally published in The NonProfit Times, March 1, 2010. Used with permission.)

President Barack Obama on January 22 signed into law a provision allowing charitable gifts made for Haiti relief during February and most of January 2010 to be deducted on 2009 federal tax returns. This noble sentiment would work a lot better if deductions were allowed for all giving made to qualified charities by April 15.

A 14-week window isn’t just an accounting trick. It would very likely increase charitable giving, get Congress out of the game of picking charities, and cost almost nothing if it doesn’t spur more giving.

The Haiti provision was not the first time taxpayers were allowed to apply deductions retroactively to the previous calendar year. Charitable contributions made early in 2005 for Indian Ocean tsunami victims were deductible in 2004. With that precedent matched, Congress can be expected to follow suit with ever-greater frequency in coming years. So let’s get it right from here on out.

All charitable deductions should be treated just like contributions to Individual Retirement Accounts (IRA) — allowable up until April 15 or the filing of one’s tax return. The incentive to give would be increased substantially. As pointed out by my colleague Howard Gleckman, resident fellow at the Urban Institute and editor of the Tax Policy Center’s blog, TaxVox, the option to deduct in one year or another doesn’t affect the value of the deduction that much, especially if the taxpayer adjusts withholding or estimated tax payments.

What does change is knowledge of the exact amount of tax saving that can be generated. Households can only guess during 2009, for instance, the tax incentive for gifts made that year. When they file their tax returns in 2010, they know the exact value.

Perhaps most important, people pay a lot of attention to potential tax savings when they are filing their returns. Behavioral economists and other social scientists who study motivation understand how choices are presented hugely influences how choices are made. Advertising execs and marketers say that the time to advertise a sale is when they’ve got the customers’ attention. Stores stage advertising blitzes on big shopping days.

Let’s apply that logic to a permanent offering of charitable giving until April 15. Tax preparers would ask taxpayers if they wanted to give to some favorite charity and would show the exact tax saving involved. Tax preparers, human and electronic, could easily add this question: “Would you like to see how much tax you?d save by giving additional gifts to charity? If so, specify amount here ________.”

Contrast that approach with last-minute and occasional actions to benefit Haiti, victims of the tsunami or whatever comes along next. By the time Congress got around to acting, many people (fortunately) had already responded. Tax preparers could barely be brought on board to help “advertise” the additional option. In the case of Haiti, many people will not go to their tax preparers until after the February window is closed.

At the same time, an across-the-board allowance for all charities avoids a major problem that arises when Congress picks particular causes. People are induced simply to switch charities rather than increase overall giving.

Extended donation deadlines call for a better reporting system. A permanent rule again would help us get it right. Record-keeping rules similar to those for IRAs would enable both the individual and the Internal Revenue Service (IRS) to be sure that a contribution made early in the year doesn’t get deducted on both last year’s and this year’s return.

IRS Form 1099 reporting could gradually be required, beginning with gifts of $250 or more, for charities that want to accept contributions retroactive to the previous calendar year. By starting with charities that want to be on the receiving end of April 15 giving, these administrative approaches would significantly reduce compliance problems for other giving.

For those who believe that government dollars should follow actual performance, part of the beauty of April 15 allowances is that if they don’t increase giving, the U.S. Department of the Treasury is out very little or nothing at all. There is a slight timing difference as to when the deduction is taken, but an improved reporting system could more than offset that cost. In contrast, many of today’s tax and spending provisions subsidize actions taxpayers would take anyway and yield low benefits relative to costs.

It makes sense to start allowing charitable deductions up until April 15 sooner rather than later. Recovery from a deep recession puts the needs of individuals — not to mention the charities that serve them — at their highest level.

We’re already moving down the road toward allowing charitable deductions made during the filing season to be claimed for the previous tax year. Therefore, let’s proceed in the cleanest and most efficient fashion, deter Congress from picking favorite causes, and keep our eyes on the prize of increasing charitable giving.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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This compilation of state profiles from the 2010 National Survey of Nonprofit-Government Contracting and Grants, provides national and state-by-state snapshots of human service organizations that have contracts and grants with local, state and federal governments. The individual state profiles are designed to document the extent of nonprofit-government contracting, processes and problems. They also examine the impact of the recession on these organizations and the cutbacks they have made to keep their programs operating. States are also ranked according to number of grants, types of issues, and actions taken by human service nonprofits to address the challenges they face.

The text below is an excerpt from the complete document. Read the full report in PDF format.

Governments contract with human service nonprofit organizations to deliver pivotal services to individuals, families, and communities. The U.S. economic recession has depleted many nonprofit budgets while increasing the demand for their services. Many state governments—which are large providers of government contracts and grants—are in a fiscal crisis. As a result, many nonprofits were forced to freeze or reduce salaries, draw on reserves, or scale back their operations. Each state is faced with unique financial challenges and employs different policies and procedures which are affecting the nonprofit-government contracting relationships in various ways. This report provides state by state data on government contracts and grants with human service nonprofits, problems encountered, and the effect of the recession.

Government contracting problems are widespread at the federal, state, and local levels. Key problems facing nonprofits were identified in this study and include late payments, changes to contracts, complexity of application and reporting requirements, and insufficient payments. Whether these were large or small problems, well over half of all nonprofits experience problems with their contracts and grants.

Nationwide, nearly 33,0003 human service providers had almost 200,000 government contracts and grants in 2009. Government contracting is more widespread in Arizona, where human service nonprofits averaged six contracts each, than in South Carolina, where nonprofits averaged three contracts each.

The types and sizes of government contracts are as varied as the organizations that receive them. Nationwide, 54 percent of human service nonprofits have government contracts and grants that require matching or sharing of costs. The number ranges from 82 percent of nonprofits in New Hampshire to 37 percent of organizations in Arizona. In addition, many contracts and grants limit the amount of money that can be used for program or organizational administrative costs. In Utah, 78 percent of organizations report limits on program administrative-overhead costs. In North Dakota, only 29 percent report such limits.

Human service nonprofits have been hit hard by the recession. Revenues from major sources such as government and donations have declined, and about 42 percent of human service nonprofits faced a budget deficit in 2009. Half of all organizations froze or reduced employee salaries, and almost 40 percent drew on reserves or reduced staff size. There were notable differences by state; 66 percent of nonprofits in Connecticut froze or reduced salaries but only 24 percent in Arkansas took this action. In Indiana, 62 percent of organizations drew on reserves but just 22 percent did in South Dakota.

This study also identifies key problems with government contracts and grants. The problems include insufficient payments to cover the cost of services provided, complexity of and time required to apply for and report on outcomes of contracts and grants, changes made by governments to existing contracts and grants, and late payments. The results varied significantly by state with some states reporting fewer problems than others. For example, 84 percent of organizations in Rhode Island had problems with payments not covering the full cost of contracted services, compared to just 37 percent of Montana nonprofits. Eighty-three percent of organizations in Illinois reported that late payments were a problem, but only 11 percent of organizations in South Dakota report that late payments were a problem.

The policies, procedures, and budget situations of each state are affecting the nonprofitgovernment contracting relationships in different ways. This report provides state-by-state data on the government contracting experience in all 50 states and the District of Columbia as well as an overview of the nation. It also includes state rankings for contract limitations, the effects of the recession, and problems experienced by nonprofits with government contracts and grants.

End of excerpt. The full report is available in PDF format.)

Publications on Human Service Nonprofit-Government Contracting

Human Service Nonprofits and Government Collaboration: Findings from the 2010 National Survey of Nonprofit Government Contracting and Grants

Contracts and Grants between Human Service Nonprofits and Governments

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Usage, posting and reprint of materials on the UI web site:

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If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.

This brief highlights trends in the number and finances of 501(c)(3) public charities as well as key findings on private charitable contributions and volunteering, two vital resources to the nonprofit sector. It includes the most recent data available.

Over 1.5 million nonprofits were registered with the Internal Revenue Service (IRS) in 2008. The largest single category? 501(c)(3) public charities?included over 950,000 organizations and accounted for three-fourths of nonprofit revenue and sixtenths of nonprofit assets. In 2009, total private giving was $303.8 billion, down 3.6 percent from the revised estimate for 2008. In 2009, 26.8 percent of U.S. adults said they volunteered through an organization. Volunteers contributed a total of 15 billion hours during the year, worth $279 billion at average wages.

Read the full report in PDF format.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Usage, posting and reprint of materials on the UI web site:

Most publications may be downloaded free of charge from the web site in PDF format. This information may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required.

Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact paffairs@urban.org.

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This policy brief summarizes the findings of a larger report on racial-ethnic diversity in California’s nonprofit sector (see www.urban.org/url.cfm?ID=411977). It documents the extent to which California’s nonprofit boards, staff, and executive leadership are racially and ethnically diverse, and analyzes diversity by an organization’s size, type, funding patterns, and geographic location within the state. The brief examines how California nonprofits with diverse leadership have been affected by the current economic downturn, and presents three models for measuring diversity using different definitions of organizational diversity.

The text below is an excerpt from the complete document. Read the full brief in PDF format.

Racial and ethnic minorities are fast becoming a larger share of the U.S. population, and California is on the forefront of this change. Already, “minorities” account for the majority of California’s population. Non-Hispanic whites are the largest racialethnic group in the state, but one in three Californians is Latino, one in eight is Asian American, and one in sixteen is African American. About 1 percent is Native American or Pacific Islander. And while California as a whole is diverse, there is enormous variation in the patterns of racial-ethnic diversity among the state’s regions. Some regions, such as the North Coast and Sacramento, have a majority non-Hispanic white population, while in the Los Angeles area, two-thirds of the residents are people of color. To learn whether California’s nonprofit organizations reflect this demographic change, the Urban Institute’s Center on Nonprofits and Philanthropy conducted a statewide, representative survey on the diversity of nonprofit boards, executive directors, and staff in California’s nonprofit sector. The survey addressed five questions:

What proportion of California’s nonprofits can be categorized as “diverse”? In addressing this question, the report compares three different models for defining diverse organizations (see box).1What percentage of board members, executive directors, and staff in the sector are people of color, and what percentage are members of specific racial-ethnic communities?How does the number and proportion of diverse organizations vary by the size of the organization, field of activity, or location in the state?Is there a gender difference in the leadership of organizations led by people of color?What effects, if any, is the current economy having on nonprofit organizations in terms of demand for services and funding, and are the effects correlated with the racial or ethnic diversity of organizational leadership?

The study provides valuable baseline information on how racially and ethnically diverse California’s sector is in terms of leadership and staffing. However, it does not address questions pertaining to such issues as the relationship between diversity and quality of service, why some organizations are more diverse than others, or how diversity can be promoted in the sector.

(End of excerpt. The entire brief with citations is available in PDF format.)

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Usage, posting and reprint of materials on the UI web site:

Most publications may be downloaded free of charge from the web site in PDF format. This information may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required.

Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact paffairs@urban.org.

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Contact:Stu Kantor, (202) 261-5283, skantor@ui.urban.org (Urban Institute)
Maggie Morth, (212) 807-2415, mor@foundationcenter.org (Foundation Center)
Suzanne E. Coffman, (757) 229-4631, ext. 27, scoffman@guidestar.org (GuideStar)

WASHINGTON, D.C., February 7, 2008—Foundation type, size, staffing patterns, and operating activities are the key factors that consistently drive foundation expense and compensation patterns, according to a new report issued jointly by the Urban Institute, the Foundation Center, and GuideStar. Moreover, even under changing or volatile economic conditions, the administrative expense and compensation patterns of U.S. foundations are consistent and predictable, the new report shows.

The report, What Drives Foundation Expenses and Compensation? Results of a Three-Year Study, presents final results from the first large-scale, long-term study of independent, corporate, and community foundations’ expenses and compensation. It is based on information from 2001 through 2003, the latest years for which data were available when the study began.

The study looks at characteristics and activities of the 10,000 largest grantmaking foundations and documents how differences in these factors affect foundations’ spending patterns. It focuses specifically on charitable administrative expenses, those expenses that relate exclusively to programs and count toward the federal government’s 5 percent minimum payout requirement for private foundations. The new report confirms and extends findings from an initial report published in 2006, Foundation Expenses and Compensation: How Operating Characteristics Influence Spending.

The latest study fills a long-standing data gap by providing information and analyses about foundation administrative expenses, compensation levels of executive staff and board members, and the factors that determine both types of expenditures. Its ultimate goal is to inform foundation practice, public policy debates, government oversight, and sector self-regulation.
“With current assets of roughly $600 billion dollars and annual grants surpassing $40 billion, the nation’s foundations are essential engines of civil progress,” said Elizabeth Boris, the study’s coauthor and director of the Urban Institute’s Center on Nonprofits and Philanthropy. “Understanding the factors that propel their expenses and being able to compare foundations with similar characteristics is a huge step forward for foundation managers, trustees, and policymakers. The study’s detailed data and findings show how expense ratios vary and reveal in stark terms the wisdom of avoiding one-size-fits-all thinking about foundation expenses.”

The report points to the need for improvements to IRS Forms 990 and 990-PF, the main sources of data for the study. “The forms don’t allow for adequate reporting of new types of foundation expenses, such as technology, communications, and evaluation, or non-grantmaking activities, in-kind gifts, and donated labor, which makes it difficult to fully assess foundations’ administrative costs and to provide a complete picture to stakeholders and the public,” said coauthor Loren Renz, senior researcher for special projects at the Foundation Center.

The tax forms also fail to distinguish board members who serve as paid staff from those who are involved mainly in governance, leading to confusion over foundation compensation patterns. “For the first time, the field has a multiyear picture of compensation patterns for foundation executives and for the small proportion of non-staff board members who are compensated,” said Chuck McLean, GuideStar’s vice president for research and quality. “One of the main contributions of the new report is to separate staff members from board members.”

Key findings include the following:

—Foundations differ greatly in their structures, resources, and operating characteristics and these differences significantly affect their expense levels. Even among foundations of the same type, differences in assets, giving levels, work styles, geographic reach, and program type vary dramatically and account for wide variations in expense and compensation patterns.

—Employment of staff is the single most important factor affecting expense levels, followed by staff size and level of program activities. Of the 10,000 foundations studied, only 2,938 have paid staff. The minority with staff incur significantly higher charitable administrative expense-to-qualifying distribution ratios than those without staff, and expense ratios increase along with staff size. Engaging in complex activities, such as direct charitable activities, international grantmaking, and program-related investments, also tends to increase cost ratios.

—Foundation scale influences cost ratios. Foundations with more resources tend to employ more staff, engage in complex activities, and pay their chief executives more. At the same time, the largest foundations also enjoy some economies of scale, so they can achieve lower cost ratios for certain activities.

—Most foundations do not compensate board members; those that do are most often staffed and independent. Of the 10,000 foundations, 2,571 compensated individual non-staff board members. Corporate and community foundations rarely compensate board members. Larger independent foundations, especially those with more complex program activities, tend to provide higher levels of compensation to board members than smaller or mid-sized foundations.

—There is relatively little year-to-year change in the factors that drive expense ratios and in how foundations allocate their charitable administrative expenses. While some annual fluctuations occur, the underlying patterns remain consistent. This finding holds for all foundation types.

—The status of the economy and the stock market affect assets and giving levels, which in turn affect the charitable administrative expense portion of qualifying distributions. Independent foundations are particularly sensitive to economic trends because their mandated charitable distribution levels (payout) are based on their net assets. In general, sharp declines in the stock market reduce foundation assets and giving. Foundations may be slower to adjust their program-related expenses. Institutional infrastructure—especially staff size and multiyear program commitments—cannot be easily changed as assets fluctuate from year to year.

GuideStar provided financial, expense, and compensation data from IRS Forms 990 and 990-PF. The Foundation Center provided financial data and information on operating characteristics gathered from foundation reports and an annual survey. The Urban Institute obtained missing data and created the study dataset. The Foundation Center and the Urban Institute analyzed the data and wrote the report.

This research was made possible through major grants from the Charles Stewart Mott Foundation and the Ford Foundation and through additional support from the California HealthCare Foundation, the W.K. Kellogg Foundation, and the Rockefeller Foundation.

What Drives Foundation Expenses and Compensation? Results of a Three-Year Study is available for free download at the web sites of the Foundation Center (http://www.foundationcenter.org/media/news/pr_0802.html),
the Urban Institute, and
GuideStar (http://www.guidestar.org/news/features/foundation_expenses.pdf).

The Foundation Center strengthens the nonprofit sector by advancing knowledge about U.S. philanthropy.

The Urban Institute is a nonprofit, nonpartisan research and educational organization that examines the social, economic, and governance challenges facing the nation.

GuideStar offers information about the programs and finances of more than 1.7 million IRS-recognized organizations.

The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance challenges facing the nation.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Usage, posting and reprint of materials on the UI web site:

Most publications may be downloaded free of charge from the web site in PDF format. This information may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required.

Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact paffairs@urban.org.

If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.