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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.

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

Nonprofit boards are receiving increased attention from policymakers, media, researchers and the public. Yet most research, policy proposals, and best practice guidelines have been oriented toward large organizations. This brief helps fill a major gap in our understanding by focusing on governance among midsize nonprofits, identifying certain problem areas, and suggesting strategies that those engaged with midsize nonprofits may find helpful in strengthening their boards. The discussion uses data on the subset of 1,862 midsize organizations in our Urban Institute National Survey of Nonprofit Governance, the first national representative study of nonprofit governance.

Nonprofit boards are increasingly a focus of those interested in nonprofit accountability and transparency, including policymakers, the media, researchers, and the public. Yet most of the research has focused on boards of large nonprofits.1 Likewise, policy proposals and best practice guidelines often seem designed with large organizations in mind, raising concern among representatives of smaller organizations who feel the proposals may be inappropriate for their institutions.2 This brief helps fill a major gap in our understanding by focusing on governance among midsize nonprofits, identifying certain problem areas and suggesting strategies that trustees, managers, and others engaged with midsize nonprofits may find helpful in strengthening their boards.

The discussion uses data from our Urban Institute National Survey of Nonprofit Governance, the first national representative survey of governance in the United States.3 This brief focuses on the subset of 1,862 organizations in that survey that have annual expenses between $500,000 and $5 million, hereafter referred to as “midsize” nonprofits. Nonprofits in this size range make up approximately one in five public charities that file the Internal Revenue Service Form 990 (Pollak and Blackwood 2007). This report was funded by the Evelyn and Walter Haas, Jr. Fund, who asked that we employ our survey data to examine this subset of nonprofits. We also refer at points to our survey data on 1,101 larger nonprofits for purposes of comparison.

Comparing midsize nonprofits with their larger counterparts, we find that their boards are less engaged in many basic stewardship responsibilities. Midsize nonprofits’ boards also have greater difficulty attracting new members. These comparisons underscore the need for efforts targeted at midsize nonprofits to help them strengthen their governance. This paper highlights areas in which that need seems greatest and suggests some strategies that may help. In particular, the brief addresses the following broad questions:

How actively engaged are midsize nonprofits’ board members, and what factors promote greater engagement?How well do midsize nonprofits perform various responsibilities, and what factors promote stronger performance?Who serves on midsize nonprofits’ boards, and what populations might they target to expand their pool of potential members?

The paper also contributes to a recent discussion about the leadership crisis in the nonprofit sector sparked by the Daring to Lead study (Bell, Moyers, and Wolfred 2006). The study found that a high percentage of CEOs plan to leave their job and pinpointed frustration with board performance, particularly in the fundraising arena, as a key reason. Our findings on CEO ratings of their board’s performance in fundraising resonate with the study and highlight other areas where CEOs view boards poorly. More broadly, our study leads to a more general conclusion: discussions about nonprofit leadership challenges, now focused on CEOs, should be expanded to include boards. Our findings on levels of board engagement strongly suggest that unless measures are taken to strengthen boards and help them attract members—and unless boards start taking a more active role in monitoring their own performance—it is unlikely that they will be able to offer the assistance to CEOs and the effective oversight and governance that they are being called upon to give.

(End of excerpt. The entire paper 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.

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

The nonprofit sector in the Baltimore–Washington region is undergoing a profound, albeit quiet, revolution driven by demographic change. The people and communities that nonprofits serve increasingly reflect a multiracial and multi–ethnic world, and a new generation of leaders will soon emerge as baby boomer executives retire. This report examines whether the Baltimore–Washington region’s nonprofit sector reflects the new demographic realities. The report, based on a representative sample of 501(c)(3) organizations, documents the extent to which the region’s nonprofit boards, staff, and executive leadership are racially and ethnically diverse. It also analyzes diversity by the organization’s size, type, and geographic location, and examines how the sector has been affected by the current economic downturn.

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

The nonprofit sector in the Baltimore–Washington region is undergoing a profound, albeit quiet, revolution driven by demographic change. First, the people and communities that nonprofit organizations serve increasingly reflect a multiracial and multi–ethnic world. No longer is the region primarily a white–black society. It now has residents from all parts of the globe that bring different cultures, languages, and values to the region.

Second, nonprofit–sector leadership is beginning to move to the next generation. About a quarter of all nonprofits in the Baltimore–Washington region are led by baby boomer chief executives. As these leaders retire and phase out of active roles, a new cadre of leaders will take up the sector’s reins and direct its work. How ready is the sector to address this important transition?

To learn whether the Baltimore–Washington region’s nonprofit sector reflects current demographic realities, the Baltimore–Washington Regional Nonprofit Racial Diversity Collaborative (the Collaborative) commissioned the Urban Institute’s Center on Nonprofits and Philanthropy to survey nonprofit organizations in the region and study the diversity of nonprofit executive directors, governing boards, and paid staff.

The Study’s Questions
This report addresses four questions:

What percentage of executive directors, board members, and paid staff in the sector is people of color, and what percentage is members of specific racial–ethnic communities?Is there a gender difference in the leadership of organizations led by people of color?How does the diversity of nonprofit leadership vary by the size of the organization, field of activity, or geographic location within the region?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 and ethnic diversity of organizational leadership?

The findings of this study provide a valuable baseline for understanding how racially and ethnically diverse the nonprofit sector in the Baltimore–Washington region is. The findings also give an important context for the Collaborative’s efforts to promote diversity and strengthen the skills of minority leaders.

About the Survey
The survey is based on a representative sample of 501(c)(3) organizations in the Baltimore–Washington region. The sample was stratified by counties within the region, type of nonprofit, and size of organization to ensure good representation of nonprofits across the region. Hospitals and higher education are excluded from the sample. Data were collected using a mixed–mode technique (e.g., by mail, web, and telephone). The survey resulted in 283 usable responses, yielding a response rate of 32.6 percent. Further detail on regional definitions and the types of nonprofits in the study can be found in the appendices.

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

Measuring Racial-Ethnic Diversity in California’s Nonprofit Sector

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.

This brief summarizes results of the 2010 National Survey of Nonprofit-Government Contracting and Grants, a study of human service organizations designed to document the extent of nonprofit-government contracting, processes and problems. It also examines the impact of the recession on these organizations and the cutbacks they have made to keep their programs operating. While contracting problems are not new, many are exacerbated by the deep recession that has reduced government budgets and private contributions. Nearly 33,000 human service nonprofits have government contracts and grants, and 9,000 organizations with expenditures over 100,000 were surveyed for this study.

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

This brief summarizes results of a national study of human service nonprofits designed to document the extent of nonprofit-government contracting and related requirements and problems. It also examines the impact of the recession on these organizations and the cutbacks they have made to keep their programs operating. While contracting problems are not new, many are exacerbated by the deep recession that has reduced government budgets and private contributions.

The findings reported here are based on a national random sample of human service organizations with more than $100,000 in expenses in eight human service program areas (table 1).2 All estimates in this report are weighted to represent the entire U.S. human service nonprofit sector that had government contracts and grants in 2009. We explore the relationships between nonprofit and government contracting by type of human service provider, size of the organization, state, and level (federal, state, local) of government contracts.

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

Publications on Human Service Nonprofit-Government Contracting

National Study of Nonprofit-Government Contracting: State Profiles

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

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.

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.

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

This working paper offers a descriptive analysis of the Latino nonprofit sector in the Washington, D.C. metropolitan area. It examines the extent to which Latino nonprofits are equipped to address the needs of a rapidly growing Latino population. The study finds that both nonprofit organizations and religious congregations that primarily serve Latinos offer a wide range of services. Many of these groups are located in the suburbs. While Latino nonprofits constitute a significant economic presence in the region, the majority of organizations remain small. Data on nonprofits are drawn from the National Center for Charitable Statistics, and data on churches were collected by telephone survey.

According to the U.S. Census Bureau, Latinos are the second-largest minority group in the Washington, D.C., metropolitan area, after African Americans.1 In the year 2000, 432,003 Latinos (8.8 percent of the total population) were living in the region. This figure represents nearly a twofold increase in the number residing in the area since 1990 (224,786). Much of this growth has been related to the rise in immigration. Among all Latinos living in the region in 2000, 62 percent were foreign born.2

As an ethnic minority group largely composed of immigrants or children of immigrants, Latinos have specific social, economic, language, and cultural needs. In 1999, the Latino population’s poverty rate in the Washington, D.C., region was 12.5 percent, compared with 6.9 percent for non-Latinos.3 Among those living below the poverty level, 68 percent were foreign born. In addition, almost half the Latino population age 5 and older residing in the D.C. area speaks English less than “very well.”4 Further, because 46 percent of Latinos in the nation’s capital area are not citizens, they have no or limited access to various benefits including voting, employment-related programs (such as unemployment insurance and Social Security), and social welfare programs (such as food stamps, Medicaid, and Temporary Assistance for Needy Families) (DeSipio and de la Garza 1998).

Several scholarly articles have emphasized the role of community-based organizations, and especially immigrant and ethnic organizations, in the social, economic, and political incorporation of immigrants or ethnic minorities.5 Nonprofit organizations, in particular, have been depicted as playing a critical part in satisfying the needs and voicing the claims of these groups. What remains less known is how well immigrant and ethnic organizations are prepared to address the demands of and advocate for the growing Latino community in the D.C. region.

This paper offers a descriptive analysis of the Latino nonprofit sector in the Washington, D.C., metropolitan area. The purpose is to examine to what extent the Latino nonprofit sector is equipped to face the needs of a community that has been experiencing significant quantitative and qualitative changes over the past few years.

Using data on nonprofit organizations from the National Center for Charitable Statistics (NCCS) for fiscal years 2003 and circa 2005, this report portrays the type, size, age, and location of the Latino nonprofit sector.6 The NCCS data are based on information filed by organizations with the U.S. Internal Revenue Service (IRS). Because religious congregations are not required by law to register or file Forms 990 with the IRS, the data on churches in the NCCS dataset are very limited. Given that churches play a critical role in the lives of Latinos, both as civic associations7 and as service providers, a survey with religious congregations operating in the area was also conducted to fill that gap.

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

1 From the Census 2000 Summary File 1, 100-Percent Data.

2 From the Census 2000 Summary File 4, 100-Sample Data.

3 From the Census 2000 Summary File 4, 100-Sample Data.

4 From the 2005 American Community Survey.

5 See, for example, Abraham (1995), Bloemraad (2005), Cordero- Guzman (2005), Cortes (1998), Garc?a and de la Garza (1985), Hutcheson and Dominguez (1986), Koldewyn (1992), Minkoff (2002), Schrover and Vermeulen (2005), and Truelove (2000).

6 Only nonprofit organizations with more than $25,000 in annual gross receipts are required to file Form 990 with the IRS. Consequently, small organizations that do not complete Form 990 are not in the dataset and were not included in our analysis.

7 See Jones-Correa and Leal (2001).

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.

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. Figures on giving and volunteering include the most recent data available. Data reported on the nonprofit sector are from 2007—a snapshot of the sector just before the U.S. economic recession.

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

Highlights
Almost 1.5 million nonprofits were registered with the IRS in 2007 (table 1). The largest single category—501(c)(3) public charities—included more than 900,000 organizations and accounted for almost three-fourths of nonprofit revenue and three-fifths of nonprofit assets. In 2008, total private giving was $307.7 billion, down 2 percent from 2007. In 2009, 26.8 percent of U.S. adults said they volunteered through an organization. In 2008, volunteers contributed a total of 14.4 billion hours during the year, worth $260 billion at average wages.

Size and Scope
Internal Revenue Service (IRS) regulations define more than 30 kinds of tax-exempt organizations, often called nonprofits or not-for-profits. Almost 1.5 million were registered with the IRS in 2007. This figure does not include all nonprofits: those with less than $5,000 in annual revenue and religious congregations need not register with the IRS (although many congregations do). When most people think of nonprofits, they tend to think of public charities, those organizations active in the arts, education, health care, human services, and other areas to which donors can make taxdeductible contributions. The nonprofit sector, however, also comprises advocacy organizations, labor unions, business and professional associations, and social and recreational clubs in addition to a variety of more obscure types.

In 2007, 583,514 nonprofits collected more than $25,000 in gross receipts and filed an informational return with the IRS, comprising our category “reporting nonprofits” in table 1. These organizations reported over $1.9 trillion in revenue and $4.3 trillion in assets.

Table 1 shows the tremendous growth that has been occurring in the nonprofit sector. The number of registered nonprofits grew 30 percent from 1997 to 2007 (reporting nonprofits grew 60 percent). After adjusting for inflation, revenues and expenses of reporting nonprofits grew by almost two-thirds, while assets grew over 70 percent.

Public charities accounted for 63 percent of registered nonprofits in 2007 and 59 percent of reporting nonprofits. The number of registered public charities grew 60 percent from 1997 to 2007; the number of reporting public charities grew at a similar rate.

Public charities reported $1.4 trillion in revenue and nearly $2.6 trillion in assets in 2007, the majority coming from hospitals, human services, and higher education nonprofits.

(End of excerpt. The full brief 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.

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

Latinos, California’s largest minority population, are the most underrepresented group of color in the state’s nonprofit sector, according to the first systematic study of racial and ethnic diversity in California’s nonprofits.

Contact: Stu Kantor, (202) 261-5283, skantor@urban.org

WASHINGTON, D.C., November 12, 2009—Latinos, California’s largest minority population, are the most underrepresented group of color in the state’s nonprofit sector, according to the first systematic study of racial and ethnic diversity in California’s nonprofits.

Whether measured by the race and ethnicity of executive directors, board members, or employees, Latinos hold proportionately fewer slots than their share of the state’s population, Urban Institute researchers found. Latinos account for 36 percent of California’s population, but hold only 6 percent of executive director positions, 9 percent of board seats, and 28 percent of staff posts.

Asian Americans are underrepresented in executive director and board positions, but the discrepancy is less dramatic. African Americans and other groups of color hold about the same proportions of leadership positions as their shares of California’s population.

“Measuring Racial-Ethnic Diversity in California’s Nonprofit Sector,” by Carol De Vita and Katie Roeger, presents statewide findings and results by geographic region, nonprofit type, and organization size. The California Endowment, William and Flora Hewlett Foundation, James Irvine Foundation, and David and Lucile Packard Foundation commissioned the study.

Nonprofits and the California Mosaic
Minorities account for the majority of Californians. Non-Hispanic whites are the most common racial-ethnic group, at 43 percent of the population, but 36 percent of Californians are Latino, 12 percent are Asian American, and 6 percent are African American.

While people of color make up 57 percent of the population, they hold 25 percent of the nonprofit executive director or CEO positions, the study found.

California’s nonprofit boards are more racially and ethnically diverse than the national average, though most board positions are held by non-Hispanic whites. Seventy-two percent of California’s trustees are white, compared with 86 percent for the nation (according to a 2007 national Urban Institute study). Thirty-one percent of the state’s nonprofit governing boards have only non-Hispanic whites on them, compared with 51 percent nationwide. Nine percent of boards in California have only people of color.

Seventy percent of paid staff positions are held by women and 55 percent by people of color. The typical employee is a woman of color — 38 percent of all nonprofit employees. Non-Hispanic white women are the second-largest group (32 percent), followed by men of color (17 percent) and non-Hispanic white men (13 percent). Twenty-nine percent of the organizations with paid staff have only white employees and 16 percent employ only people of color.

Nonprofit Pain: Present and Future
Sixty-five percent of California’s nonprofits reported a revenue drop and 44 percent saw demand for their services increase in the current economic downturn. Thirty percent experienced the proverbial double whammy — falling revenue and rising demand.

Seventy percent of nonprofits led by a person of color reported decreases in funding; 50 percent reported increases in demand. The corresponding shares for organizations led by a non-Hispanic white director are 63 and 42 percent, respectively.

Sixty-two percent of nonprofit leaders expect more funding cuts in 2009?10 and 56 percent foresee hikes in demand. About one in three anticipate both.

What Is a Diverse or Minority-Led Nonprofit?
Three models of racial-ethnic diversity — based on definitions created by Urban Institute researchers, the Race and Equity in Philanthropy Group, and the Greenlining Institute — were analyzed in the study. If leadership diversity is the criterion, 16 percent of nonprofits would be considered diverse. If the model is based on leadership diversity and more than half the clients or customers are people of color, then 14 percent would be deemed diverse. If the definition requires most board members, paid staff, and service beneficiaries to be people of color, and the organization’s mission statement indicates a desire to serve people of color, then 4 percent of California’s nonprofits meet these criteria.

“Little is known about how service quality, cultural competency, and effectiveness are linked,” said Carol De Vita, the study’s lead author and a senior researcher in the Urban Institute’s Center on Nonprofits and Philanthropy. “Do nonprofits led by a person of color and serving people of color produce better results than other organizations? Finding answers to this tough question is vital to strengthening the nonprofit sector and the communities it serves.”

The Urban Institute’s study partners were the Daylight Consulting Group and the Social and Economic Sciences Research Center at Washington State University. The survey, conducted between February and April, received 1,736 responses, yielding a 31 percent response rate.

According to the Urban Institute’s National Center for Charitable Statistics, the most comprehensive database on nonprofits, California has about 34,250 nonprofit 501(c)3 organizations, excluding hospitals, colleges, religious groups, and small entities.

The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance challenges facing the nation. It provides information, analyses, and perspectives to public and private decisionmakers to help them address these problems and strives to deepen citizens’ understanding of the issues and tradeoffs that policymakers face.

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.

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.

As time goes on, more conflicts seem to flair between charities and businesses. Just last year, the Senate Finance Committee and the House Ways and Means Committee began investigating questions ranging from whether nonprofit hospitals were really charitable to whether corporate-sized salaries for some foundation board members and charitable officers were excessive. At the same time, charities and businesses collaborate like never before. We’ve all seen credit cards bearing a charity’s good name, donations of business staff time for pro bono work, and corporate logos associated with nonprofit events. (My favorites are the Chick-fil-A Bowl, the Meineke Car Care Bowl, and the Pioneer Pure Vision Las Vegas Bowl. Somehow, Sin City doesn’t summon up the pure vision of pioneers for me, but hey, I guess it works for some people.)

These new business-charity collaborations and conflicts, and consequent legislative attempts to ensure that charities really are “charitable,” can be tricky. But before attempting to judge all these attractions and repulsions between the two sectors, let’s hold our peace and ask what is fostering these new relationships in the first place.

Put simply, Americans are becoming more charitable! More and more of our industries produce goods and services that potentially serve charitable purposes. And ever more adults are engaged in activities and occupations that can be either charitable or profitable.

This isn’t fairy dust descending from the jet stream. Our economy’s growth is mainly in health care, information services, and research, while information science and nursing rank among the fastest-growing professions.

Professor Joseph Cordes of George Washington University and I have studied data on output by industry and employment by occupation to figure out just how much charities and profit-making businesses are beginning to look like each other. Between 2004 and 2014, industries involving businesses that could organize as charities and pass the charitable purpose test are predicted to grow by almost 3.5 percent a year, compared with about 1 percent for all other industries. Similarly, occupations with a nonprofit bent will collectively grow by a whopping 23 percent over that decade, compared with about 13 percent for other types of employment.

A typical “do-gooder” 100 years ago might have been someone who worked in a steel mill or grain elevator by day and volunteered at an orphanage or looked in on shut-ins at night. That person’s counterpart today might be a computer scientist or advertising exec who works for a profit-making drug firm but e-mails technical advice throughout the day and evening to community nonprofit organizations.

If such trends persist, in a few decades we’ll find that most people in developed nations will produce services and products that could be produced as easily in the nonprofit as in the profit-making sector.

In this new AC/DC system, charities, government, and charitable watchdog groups inevitably will see opportunities and tensions proliferate. And as service and innovation incubate together, the never-bright line between what is charitable and what isn’t—determined in part by “charitable purpose” so health care and research qualify but manufacturing and entertainment don’t—will blur even further.

Meanwhile, competition will increase. Profit-making institutions will continue entering fields once left to nonprofits as rising fees and government payments make these forays more lucrative. Charitable contributions may continue to stay fairly constant as a percentage of gross domestic product, but charities will produce larger shares of economic output as long as they continue to collect more private and government fees in exchange for what they provide.

With all this in mind, think about the recent evolution of hospitals as a test case. With the significant expansion of health spending, it’s easy to understand how nonprofit hospital output has grown rapidly even while the share of hospital work supported by charitable giving has declined and competition from for-profit medical service providers has intensified. A further upshot has been congressional investigation of what makes a nonprofit hospital charitable, the reorganization of some nonprofit hospitals into profit-making ventures and vice versa, and a whole host of questions surrounding the future research and teaching capabilities of hospitals.

So here’s the rub—and the opportunity. These forces are probably unstoppable, but they must be channeled to maximize the public good. Tax laws governing charitable giving and charitable status must continually be reexamined, and consumer protection and tax laws must help protect the charitable purpose of our charitable contributions in this polyglot of joint ventures, marriages and divorces across sectors, selling of charitable names, and competition for status. As businesses and charities increasingly cooperate and compete to meet both public and private demand, we will spend more and more of our time providing and receiving services once defined as primarily charitable. Whether all these changes beget greater generosity is an open question.

The Government We Deserve is a periodic column on public policy by Eugene Steuerle, a senior fellow at the nonpartisan Urban Institute and a former deputy assistant secretary of the Treasury.

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.

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

This report, funded by the Meyer Foundation, looks at the operating reserves—the cash and other liquid assets—of public charities in the Washington Metropolitan area. Using IRS Form 990 data, the report found that 57 percent had reserves insufficient to cover three months of expenses, a level that many experts consider the minimum necessary for financial stability. This leaves them especially vulnerable to the rapid declines in revenue or increases in expenses that occur in economic downturns like the present. A substantial perecentage of all types and sizes of organizations lacked adequate reserves.

Imagine having expenses of $2,000 and take-home pay of $2,100 every month. You are living hand to mouth in good times. Then your employer cuts your hours by 30 percent to keep its business afloat. If you have some money in the bank—an operating reserve—you can survive. If not, you could be in dire straits.

In addition to serving a growing elderly clientele, Medicare and Medicaid face soaring health costs per beneficiary. Historically, per capita health costs have grown by somewhat more than 2 percent per year faster than incomes per capita. Over the long run, excess health cost growth presents more of a budget problem than the aging of the population, but there is an important aspect of aging that is not much discussed. The average age of the population is growing both because there are more old people and because there are relatively fewer young people. The baby boomers did not produce enough little potential taxpayers to support them well in their old age. If baby boomers had had as many children as their parents, tax revenues would be growing more rapidly and the long-run budget problem would be much less serious.

This is the current predicament faced by many public charities in the Greater Washington area. Major foundations lost a median value of 28 percent of their endowments between 2007 and 2008. State and local governments in Maryland, Virginia, and the District of Columbia are all cutting back, most likely resulting in fewer grants and government contracts to public charities. In addition, private donations and fees, whether from tuition, patient fees, ticket sales, or other sources, are also likely to be down as unemployment rises and the economy continues to weaken.

Operating reserves are an important indicator of an organization’s financial health. They provide organizations with a cushion to either maintain their services or enable a relatively smooth reduction in staffing and services if faced with unexpected funding delays or revenue shortfalls. This study, the first of its kind, provides a snapshot of the financial well-being of Greater Washington’s locally focused charities during a time of economic stability (i.e., 2006). The data also suggest some conclusions about the vulnerability of these organizations during the current economic downturn.

In addition to providing a snapshot of the financial health of these charities in 2006, the study also looked at operating reserves trends for the subset of public charities that filed an IRS Form 990 in 2000, 2003, and 2006 to assess the use of operating reserves during the economic slowdown after the September 11, 2001, attacks.

(End of excerpt. The entire report 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.

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Contact: Stu Kantor, (202) 261-5283, skantor@urban.org

WASHINGTON, D.C., May 8, 2008—Most heads of midsize nonprofits give their trustees low marks for fundraising and monitoring board performance, an Urban Institute study of nonprofits with annual expenses between $500,000 and $5 million has found. Sixty-two percent of the chief executive officers say their boards do a fair or poor job raising revenue and 60 percent assign similar marks for boards’ self-examination.

More than a quarter of CEOs rate their boards as fair or poor when it comes to evaluating the CEO, planning, monitoring programs and services, dealing with the community, and educating the public about the organization.
Although most CEOs rate their boards as good or excellent in most roles, the only area in which a majority (53 percent) rate their boards as excellent was respecting board-staff boundaries. Just under half (48 percent) say their boards are doing an excellent job of financial oversight.?

“Substantial percentages feel their boards are doing a poor or fair job in many areas,” says researcher Francie Ostrower. “Our findings clearly do reveal disturbing levels of CEO dissatisfaction with board performance.”

Ostrower’s report, “Boards of Midsize Nonprofits: Their Needs and Challenges,” culled 2005 data on 1,862 midsize organizations that participated in the Urban Institute’s National Survey of Nonprofit Governance, the first national representative survey of its kind. Midsize nonprofits make up approximately one in five public charities filing the Internal Revenue Service’s Form 990. Ostrower’s report was funded by the Evelyn and Walter Haas, Jr. Fund.
What’s Behind the Dissatisfaction?

The level of board engagement in a particular role is the most influential factor associated with CEOs’ ratings of boards. For instance, the share doing an excellent job monitoring programs rises from 2 percent for those not viewed as actively engaged to 55 percent for those that are. The fundraising rating mainly reflects how actively the board seeks support, along with the percentage of board members making donations and whether members are required to give or fundraise.

Sixty-nine percent of leaders at midsize nonprofits say it is at least somewhat difficult to recruit new trustees. Twenty percent say it is very difficult. This problem is negatively related to performance ratings in all areas. For nonprofit boards that do not have recruitment problems, 24 percent are said to be very active fundraisers, for instance; that figure drops to 12 percent among those that have great difficulty.?

Boards that emphasize a willingness to give time as a recruitment criterion are more likely to be active in every specific board role, and boards that emphasize business and financial skills are more likely to be active in almost every role.

In most midsize nonprofits, the board chair and CEO are very influential in setting the agenda for board meetings. The level of influence given to other board members in determining the agenda is positively associated with greater activity in every board role.

Board Composition?

The demographic profile of board members reveals considerable ethnic and racial homogeneity. On average, 83 percent of trustees are white (non-Hispanic), 9 percent are black, and 4 percent are Hispanic, with the balance from other groups. Thirty-six percent of boards have no minority members. Furthermore, 48 percent of midsize nonprofits say that racial or ethnic diversity is not an important criterion when they select new board members.

Nonprofits whose clientele include higher percentages of ethnic or racial minorities are more likely to include board members from those groups. Still, many nonprofit boards have no minority representation, even among organizations serving a high percentage of minorities.

Other groups underrepresented on nonprofit boards are those under age 35 or over age 65. On average, only 6 percent of board members are under 35 and only 13 percent are over 65.

Recommendations

Ostrower recommends three steps boards should take immediately:

Carefully assess recruitment criteria and their fit with the organization’s needs. Attract well-rounded members and consider an array of backgrounds and skills.Promote a culture that encourages members to help set the board’s agenda rather than concentrate influence solely in the hands of the CEO or board chair. Institutionalize a procedure for the board to use to regularly monitor its own performance.

Ostrower says nonprofits must also get help recruiting new members and widening the pool from which they draw.

“Boards of Midsize Nonprofits: Their Needs and Challenges” is accessible at http://www.urban.org/url.cfm?ID=411659.??????????

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.

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This study, the first comprehensive look at IRS data on more than 26,000 environmental and conservation organizations – 8,000 of which had revenues of $25,000 or more – reveals a core of prominent national organizations and a larger, more rapidly growing universe of regional, local, and other specialized groups. Taken as a whole, the environmental movement expanded in number of organizations, members, and in total revenues almost every year since 1960. It focused less on advocacy than on projects and education, and was younger, more densely networked, and more dependent upon grants and contributions than was the nonprofit sector in general.

The community of environmental and conservation organizations in the United States has a core of high-profile organizations, many of them national in scope, which have sometimes been conflated with the U.S. environmental movement as a whole. For lack of information about the broader set of smaller organizations and volunteer groups, the national organizations have by default become the principal representatives of U.S. environmentalism, which has opened the door to accusations that the movement has accomplished little of late and is stuck in an elitist “inside the Beltway” mentality. In order to get a clearer view of the breadth and health of the environmental and conservation sector, the Urban Institute’s National Center for Charitable Statistics undertook this study, a first look at the full set of Internal Revenue Service (IRS) data on environmental and conservation organizations.

The quantitative data from the IRS from 1989 to 2005 reveals the core of national organizations and around it a much larger, faster growing ferment of lightly staffed and all-volunteer organizations formed to meet various specific challenges. Taken as a whole, the environmental movement appears to have grown in number of organizations, members, and in total revenues almost every year since 1960. Despite the perception that it engages mainly in advocacy, the great majority of environmental and conservation groups were focused on conservation of land, water, and wildlife through projects and public education. These groups were younger, grew faster, and had a very different mix of funding sources than nonprofits in general. Foundation and government grants were significant parts of their funding, although the role of foundation funding declined substantially since its peak in 2000. The largest organizations (by revenue) were clustered around Washington, D.C., but their portion of the total revenue pie was decreasing. The largest organizations were stable in terms of total revenue and members, but it was the youngest cohort which grew fastest.

(End of excerpt. The entire report 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.

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