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Nonprofit Advocacy Matters | September 8, 2014

Posted: 
September 8, 2014

Federal Government Clarifies New Grant Reforms

The federal government has taken steps to deliver on its recent promise that nonprofits will be paid the true costs for performing work on behalf of governments. In recently published Frequently Asked Questions (FAQs), the federal Office of Management and Budget (OMB) removes much of the gray area in the mandate that pass-through entities (typically state and local governments) using federal funds must pay federally negotiated rates for indirect cost or, if such a rate doesn't exist, pay at least a 10 percent rate to eligible nonprofits. The FAQs also provide preemptive instructions on what governments may not do to avoid complying with federal grantmaking reforms that take effect in December. See the September 2 special edition of Nonprofit Advocacy Matters for a brief analysis of the FAQs and related information.

Nonprofits with government contracts and grants should review the new FAQs in detail and adjust their practices accordingly. Nonprofit leaders can help in the development of tools to turn the new reforms into reality for their organization and others by completing this short survey and by encouraging colleagues at other nonprofits to fill it out as well. 

Federal Issues 

America Gives More Act Update
A Short Shrift Senate Session, Unless …

Congress is scheduled to return to Washington today with a goal of passing spending legislation to fund the federal government through the elections, address a few other pressing matters, and leave town as quickly as possible. Earlier calendars showing that the House and Senate will be in session for 15 days this month may get tossed, as congressional leaders are now predicting a shorter, rather than longer, work period in order to enable politicians to return to their campaign trails. A Washington Post editorial today expresses the dissatisfaction of many: “Instead of passing bills into law and allowing voters to judge their work, the legislators appear to be pushing hopes of any serious lawmaking off into the safety of a post-election, lame-duck session." Unless Senators can be convinced to immediately take up and pass the House-passed America Gives More Act (H.R.4719) in September, many of the incentives for giving to the work of nonprofits in communities will be lost.

State associations of nonprofits and their members have been making calls, writing letters, and meeting with policymakers, all with the goal of motivating Senators to take up the legislation. The foundation community is mobilizing in support of the bill as well, by, among other things, joining forces with their state associations of nonprofits in sending letters to their Senators and encouraging colleague organizations to contact their Senators. Many foundation leaders across the country are taking public positions both in support of the legislation and urging immediate action. See last week’s op-ed by Vikki Spruill of the Council on Foundations, and articles by foundation leaders in Utah, New Mexico, and West Virginia. The National Council of Nonprofits takes the position that conventional wisdom – the view that the Senate doesn’t have time to take up the America Gives More Act – can be overturned if everyone committed to the mission of nonprofits, be they board members, volunteers, donors, clients, or employees, calls their Senators to deliver a clear message: “Don’t leave Washington in September until the Senate passes the America Gives More Act; our communities are counting on you.Learn more about what individuals can do to support the America Gives More Act.

Partisanship Splits Investigation on IRS Political Bias

The Internal Revenue Service inspector general improperly omitted a finding that there was "no evidence of political bias” when he issued a May 2013 audit alleging that the IRS engaged in political targeting of applicants for 501(c)(4) nonprofit status, according to a new report from the Democratic members of the Senate Permanent Subcommittee on Investigations. In a detailed dissent, Republicans on the subcommittee assert that the IRS was indeed biased against conservative-leaning applicants for social-welfare status. Both sides reviewed over 800,000 pages of documents and reached polar-opposite interpretations of the facts. Read the full subcommittee report, majority statement, and minority statement.

State and Local Issues 

States Consider Performance-Based Budgeting

More states are turning to “performance-based budgeting,” an approach for allocating budget funds based on measurable program successes or outcomes. As Stateline reports, the idea is to use specific measures of past performance to assess whether a particular budget item, such as a child nutrition program or a new road, is worth the expense. Eleven states have shifted to a “Results First Initiative,” which planners believe will bring accountability and cost-outcome analysis to all levels of state government. However, the results of this and similar performance-based approaches have been mixed so far. Since the process relies heavily on accountability, its success depends as much in how compliant state leaders and agencies are in implementing the approach as it does in how well successes can be measured and economic conditions can be anticipated. A 2014 analysis by the National Association of State Budget Officers concluded that “despite widespread interest and growing use of performance budgeting practices, the process of actually tying performance information to funding decisions in an effective, meaningful and practical manner continues to be a major challenge for all levels of government.”

Billions Pour Into State Campaigns

Money flowing into state political campaigns and ballot initiatives may exceed $3 billion this year, reflecting the growing recognition that the real policy action is happening in the states, not at the federal level, according to Stateline. The projections for this year are 50 percent higher than six years ago when state candidates, legislative caucuses, and state political parties raised $2 billion in the 2007-2008 election cycle, according to figures compiled by the National Institute on Money in State Politics. Observes Professor Paul Brace of Rice University, there is “more power and influence on policy at the state level than 30 years ago,” which is one reason for the rapidly increasing amount of money being spent on state races. Another reason is “the fact that a wide array of hot-button issues, such as educational standards, the Affordable Care Act, immigration, gay rights and gun control, are being shaped and implemented in the states because of political gridlock in Washington.” Further, the Citizens United decision of the U.S. Supreme Court removed limits on independent expenditures levels by corporations and unions at not only the federal, but also the state level. 

Taxes, Fees, PILOTs

  • Taxes: The city council in Nome, Alaska is considering eliminating sales tax exemptions for the city’s nonprofit charities and churches in an attempt to increase city revenues. While other options for filling city coffers were evaluated at an August meeting, stripping nonprofits of their tax exempts was touted as the “easiest to implement” by city administrators.
  • Fees: Nearly 80 churches, schools, and other nonprofits in Oahu, Hawai’i will now have to start paying for trash collection after the city decided to discontinue its free refuse collection service for nonprofits that had been in place for decades. 

New Jersey City to Pull Grants from Nonprofits

City administrators in Paterson, New Jersey recently announced plans to rescind over $800,000 in grants to a dozen nonprofits providing food and assisting the elderly and instead use the funds to pay for street repairs. The grant money, which the City had previously awarded to the nonprofits for various community programs through the federal Community Development Block Grant program, comes after a change in administrations and may result in staff layoffs and shuttering of certain community centers, such as the Grandparents Relatives Care Resource Center. The grants had been awarded and approved by the City Council, and in reliance of those official actions nonprofits may already have incurred costs. But the city’s new administrators claimed that the money did not yet belong to the nonprofits since the formal contracts had not been signed.

Nonprofit Commercial Activities Undermine Property Tax Exemption in North Carolina

A conservation nonprofit in Western North Carolina has been denied property tax exemption because the state Court of Appeals ruled that some limited commercial activities on the property were not operating "wholly and exclusively" for charitable or educational purposes. The court decided the case based on a strict construction of the term "wholly and exclusively" and noted that commercial activities such as the operation of a gift shop and a restaurant and the presence of administrative offices were not appropriate for a nonprofit receiving property tax exemption. North Carolina nonprofits have expressed concerns that broad application of the court’s decision to all types of nonprofit property tax exemption could affect many organizations that engage in some commercial activities to offset mission-related operational costs. The North Carolina Center for Nonprofits is exploring whether nonprofits should challenge the court's decision.

Advocacy in Action 

Never Say Never

Supporters of the America Gives More Act can take inspiration from environmental and conservation groups in New Jersey which have proved the nonprofit advocacy adage: “never say never.” The groups are now promoting public support for a state constitutional amendment on the November ballot, a proposal that was declared by many to be dead when the General Assembly adjourned for the year in June.

The proposed constitutional amendment would create a permanent funding stream for preservation of open spaces, farmland, and historic structures by tapping at least $70 million in revenues generated by the state’s corporate business tax. The proposal was widely supported by state Senators, but some Assembly members had expressed concern over the cost of the measure and the need to get New Jersey’s fiscal house in order.

Although the constitutional amendment seemed dead in June, the coalition of environmental and conservation groups did not give up. They continued to promote the measure despite the apparent lack of an opportunity for the Legislature to place the proposal on the ballot. Yet, in a rare August session, and on the last possible day for a vote, the Assembly passed the amendment with enough votes to ensure that the question would be on the ballot this November.

Those expressing conventional wisdom talked about “next year.” Dedicated advocates continued to advocate for immediate action, however, and prevailed. 


 

Worth Reading

Push the Senate to Pass the America Gives More Act, Vikki Spruill, president & CEO, Council on Foundations, Chronicle of Philanthropy, August 29, 2014.

W.Va. needs U.S. Senate to act on charitable giving, Paul Daugherty, Philanthropy West Virginia, and Becky Ceperley, Greater Kanawha Valley Foundation, Charleston Gazette, August 24, 2014, expressing their view that, "West Virginia's itemized charitable giving has not returned to the pre-2008-09 Great Recession levels,” and that the “America Gives More Act makes it possible for more people to give for local needs.”

OMB, Nonprofits and Social Impact, Elaine Carpenter, ZeroDivide blog, August 22, 2014, explaining the impact of the requirement in the new OMB Uniform Guidance that governments pay nonprofits for their indirect costs, stating, “governments using federal funds will no longer be able to say ‘we don’t pay for administrative or overhead costs; your nonprofit will have to eat those costs or raise the money on your own.’ … No longer will nonprofits need to postpone investments they require to do their work, nor will they have to continue subsidizing their work with government agencies.”

Business as usual for business tax breaks?, Korey Clark, StateNet, September 8, 2014, analyzing developments in making businesses more accountable for the $80 billion in tax breaks that states and local governments grant annually.

Worth Quoting

"We also realize that if somebody's not there to speak out, that [legislators] take the silence as agreement and so we need to speak out as well as any others that might be impacted,”

- Eddy Aliff, executive director of the Virginia Assembly of Independent Baptists, in a WVIR-TV interview referring to the need to speak up for all nonprofits at a public hearing in Virginia on nonprofit tax exemptions.

“Members of Congress tend to act like harried undergraduates, leaving their hardest assignments till the end of the term and then finishing with a blizzard of activity.”

- Drew DeSilver, writing in Congress continues its streak of passing few significant laws, Pew Research Center, July 31, 2014, pointing out that among “the past seven Congresses, between 39% and 59% of all the substantive laws they passed came in the last five months of their respective two-year terms; the average was 49%.”

Worth Studying

The Distribution of Select Federal Tax Deductions and Credits Across the States, Pew Charitable Trusts, September 4, 2014, providing an interactive map and tables with state-specific data for 2012 on taxpayer deductions for charitable giving, state and local taxes, mortgage interest, and tax credits.

Nonprofit Advocacy Matters Special Edition | The Promise of Grantmaking Reforms Moves Closer to Reality

Posted: 
September 2, 2014

The Promise of Grantmaking Reforms Moves Closer to Reality

Nonprofit organizations that perform work on behalf of governments moved several steps closer to securing reimbursement for their true costs with the publication by the White House Office of Management and Budget (OMB) of its clearest statement yet of how governmental entities must comply with pro-nonprofit reforms published last December. Those reforms (discussed below) are incorporated in the OMB Uniform Guidance, which presents a comprehensive overhaul of the federal grantmaking process designed to ensure consistency across governments and the entities to which they provide resources. Styled as answers to Frequently Asked Questions (FAQs), OMB addressed multiple areas of confusion and inconsistency arising from the Uniform Guidance. The FAQs provide answers that are binding on federal agencies and pass-through entities – typically states and local governments receiving federal funding.

How governments interpret and implement the OMB Uniform Guidance (also called the SuperCircular or OmniCircular) is critical, particularly in dealing with the new rules related to payment to nonprofits of their indirect costs (sometimes called administrative or overhead costs). The OMB Uniform Guidance explicitly requires pass-through entities and all federal agencies to reimburse a nonprofit for its indirect costs by applying the nonprofit’s federally negotiated indirect cost rate, if one already exists. If a negotiated rate does not yet exist, then nonprofits are empowered to request negotiating a rate or elect the default rate of 10 percent of their modified total direct costs (MTDC). 

Key Clarifications

Based on past experiences with state and local governments, many nonprofits have expressed concern that governmental entities passing federal funds through to nonprofits will ignore, avoid, or implement new policies and practices that have the effect of denying nonprofit organizations the benefits of the reforms dealing with indirect and other costs promised in the Uniform Guidance. The National Council of Nonprofits and many other organizations posed questions to OMB seeking clarification on how governments can and, importantly, cannot interpret the Uniform Guidance. The answers by OMB should help nonprofits protect their rights under the Uniform Guidance.

Following the Money: The OMB Uniform Guidance applies the new rules to federal funding streams. Observers recognized that if a pass-through recipient could break the connection with federal funds or blur the lines, then the new mandates may not apply. The FAQs provide this clarity: (1) The new requirements follow the federal money through every layer of grantmaking, meaning that the protections for nonprofits stay in place even through several layers of subawards; (2) governments cannot erase the nonprofit protections by using non-federal funds to pay for a grant and later seek reimbursement from the federal government; and (3) pass-through entities cannot eliminate the nonprofit protections in the Uniform Guidance merely by blending several federal funding streams and following a common set of rules; the obligation to follow the specific rules for each funding stream remains intact unless all participating Federal awarding agencies agree to a common set of rules.

Indirect Cost Rates: The FAQs remove any gray area in the mandate that pass-through entities must pay federally negotiated rates for indirect cost. The FAQs provide direct instructions to state and local governments:

“If the subrecipient already has a negotiated F&A [facilities and administrative] rate with the Federal government, the negotiated rate must be used. It also is not permissible for pass-through entities to force or entice a proposed subrecipient without a negotiated rate to accept less than the de minimis rate. The cost principles are designed to provide that the Federal awards pay their fair share of the costs recognized under these principals. (See section 200.100(c).)…” (emphasis added)

Commentators had expressed concern that governments may demand that nonprofits waive their rights to a federally negotiated rate or take less than a ten-percent indirect cost rate. The OMB made clear that this will not be allowed.

However, the FAQs appear to undercut the significance of the mandate when a nonprofit seeks to reach agreement in setting an indirect cost rate with a state or local government. The document states, “Pass-through entities may, but are not required, to negotiate a rate with a proposed subrecipient who asks to do so.” This language appears to contradict the Uniform Guidance and may apply only at the initial grantmaking or contracting stage when the nonprofit may otherwise be entitled to the ten percent MTDC specified in the Uniform Guidance. More clarity from OMB is still needed here.

Enforcement: Federal grantmaking rules are typically enforced after performance under a grant is completed and after government inspectors and auditors issue reports. This approach, of course, provides little comfort to nonprofits that have been denied their rights from the outset of the grantmaking process. Acknowledging that current law is insufficient, the FAQs state that federal officials are “working with a Coalition of non-Federal entities to evaluate the effectiveness of implementation and the overall impact of the guidance.” Elsewhere in the FAQs, OMB states that it is working with this same group, in which the National Council of Nonprofits participates, to ensure that the Uniform Guidance will be consistently interpreted across all of the states. Combined, these answers demonstrate both a desire by OMB to promote full compliance by governments from the outset and the need for nonprofits to identify challenges and misinterpretations that need to be corrected.

Other Provisions: The Uniform Guidance merged eight existing Circulars into one set of rules designed to provide consistency and certainty. Yet confusion arose as new definitions were applied to existing practices and as rules from one Circular were applied to nonprofits and other organizations for the first time. The FAQs clarify that in most cases OMB did not intend for changes to alter the way in which pass-through entities structure agreements with nonprofit subrecipients. For instance the FAQ clarifies that the change in terms from “vendor” to “contractor” does not require government to stop contracting for services with nonprofits. The FAQs also provide a one-year grace period for nonprofits to implement new procurement requirements, which, among other things, will require nonprofits to prepare written procurement policies. OMB further clarified that procurement does not apply to purchases of items or services that are indirect costs and that during the transition period, nonprofits must document in writing whether their old or new policies apply to each purchase. Despite detailed language in the FAQs regarding fixed amount awards, grants that often apply to human service work, it remains unclear whether the current agreements used by pass-through entities and fixed amount awards are synonymous and requiring adjustments in the future. Further clarification is needed.

Effective Dates

Federal agencies must implement the new requirements on December 26, 2014 and apply the Uniform Guidance to new funding on or after that date. Incremental funding is not considered new unless modifications are made to the terms and conditions to the award as well. Nonprofits should follow the new requirements when submitting an application this year for funding expected to be approved after December 26, 2014. New audit requirements will apply to funding beginning with the nonprofit’s fiscal year that starts after December 26, 2014. 

Next Steps: What You Can Do Now

We encourage nonprofits to review the new FAQs in detail and adjust their practices accordingly. Here are three steps nonprofit leaders can take to help ensure that the Uniform Guidance benefit their organizations and all nonprofits:

  1. Take the Nonprofit Survey: You can help in the development of tools to turn the new reforms into reality for your organization and others by completing this short survey and by encouraging your colleagues at other nonprofits to fill it out as well.
  2. See Something, Say Something: These FAQs clarify some questions and take away some potential ways in which pass-through entities could deny nonprofits their rights to indirect and other cost reimbursements. But new techniques to avoid or evade the costs mandates could emerge in the coming months and years. Nonprofits working with governments under grants or contracts should be alert to potential challenges to their rights under federal policies. When you see something that doesn’t look appropriate, say something, whether to the government program officer, to the state or local government agency, to an official at the federal awarding agency, or to the network of the National Council of Nonprofits.
  3. Stay updated through your State Association: The law and practices in this area are changing rapidly and your state association of nonprofits is part of a national network that is actively engaged with federal, state, and local government partners in ensuring full and fair compliance, as well as successful implementation and utilization by nonprofits. Find your State Association and get active in these advocacy and capacity building efforts.

About the Government-Nonprofit Contracting Reform Project

The National Council of Nonprofits works through its network of state associations of nonprofits to proactively promote reforms to government contracting and grants such as these being implemented by the federal government. Readers are encouraged to contact their state association of nonprofits to learn more about efforts to streamline and improve contracting and grants in your state. Learn more about ongoing government-nonprofit contracting reform efforts across the country and find practical resources at www.govtcontracting.org


 

OMB Grants Guidance Resources

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Office of Management and Budget, December 26, 2013.

Frequently Asked Questions, Office of Management and Budget, August 29, 2014, providing answers to 78 frequently asked questions regarding the OMB Uniform Guidance and incorporating previously issued FAQs.

Worth Reading

National Council of Nonprofits Statement, December 19, 2013

New OMB Guidance on Indirect Costs: What It Does and Why It Matters, National Council of Nonprofits, updated May 20, 2014.

Investing for Impact: Indirect Costs Are Essential for Success, National Council of Nonprofits, September 30, 2013.

Changing the Conversation about Overhead, by Rick Cohen of the National Council of Nonprofits, in NTEN: Change, June 2014, making the case that old thinking about overhead or indirect costs is undermining the ability of nonprofits to be effective and demonstrating ways to communicate the connection between investments in technology and greater mission impact.

Nonprofit Finance Fund Social Currency Blog by Beth Bowsky, National Council of Nonprofits

Who Has the Time, and Other Questions on Nonprofit Advocacy, by David L. Thompson in the Summer 2014 edition of Nonprofit Advantage (pp 3-4), a publication of CT Nonprofits, making the case for everyday advocacy using government-nonprofit contracting data and the new OMB Uniform Guidance on mandatory reimbursement of nonprofits’ indirect costs.

Find your State Association 

While Nonprofit Advocacy Matters can be a source of information on policy issues affecting nonprofits in your state, don't miss out on the benefits of being connected locally with your state association of nonprofits. These groups, which serve as the backbone of our national-state-local network, connect your nonprofit with training and resources on everything from the basics of effective governance to the latest trends in fundraising, and they serve as your advocacy voice in the state capital. Find your State Association and join this powerful nationwide network of more than 25,000 community-based nonprofits.

Nonprofit Advocacy Matters | August 25, 2014

Posted: 
August 25, 2014

Federal Issues

The Push Is On to Pass the America Gives More Act in September

If the Senate votes to pass the America Gives More Act in September, it will be thanks to the voices of tens of thousands of nonprofit board members, employees, volunteers, clients, and donors who have joined in the nationwide call to action on this legislation to promote giving to the good works of charitable nonprofits. Conventional wisdom in Washington, DC, which is often proven wrong, holds that there isn’t time in September to take up the bill and that a possible post-election, lame-duck session will at best adopt another temporary extension of tax incentives. This approach, which some Senate staffers are repeating to many nonprofits demanding action, would deny communities the benefits of permanent extensions of the IRA rollover, enhanced deductions for donations of food inventories, and land conservation easements, as well as frustrate efforts to streamline the foundation excise tax and extend the deadline for making charitable donations up to April 15 each year.

In a concerted effort to overturn conventional wisdom and secure support for communities, nonprofit leaders are making extraordinary efforts. State associations of nonprofits are informing and mobilizing their members through action alerts, articles, and tweets. Trisha Lester of the N.C. Center for Nonprofits made the case clearly in a blog message to members: “Proving Conventional Wisdom Wrong (Again) on Charitable Giving Tax Incentives,” using success in recent legislative challenges in North Carolina as a guide.

Similarly, members of the Forum of Regional Associations of Grantmakers are speaking up through action alerts, blog posts, and news updates. This op-ed by leaders of Philanthropy West Virginia articulates the reason for action: "The substance of America Gives More Act is sound and undisputed. Nonprofits and philanthropy are telling Congress to set aside their partisan bickering, solve this problem Congress has created, and do something for their communities before leaving town in September to focus solely on the mid-term elections.” 

A broad spectrum of the nonprofit and grantmaking community is uniting to demand that the Senate vote on the America Gives More Act in September. For instance, the Land Trust Alliance is asking its members to take time in August to attend Senators’ town hall meetings, as well as to invite their Senators to visit preserved land sites. The organization has also provided tools for securing local publicity as well as guides to how to secure your Senator’s support for these tax incentives. Independent Sector has a take action page that provides numerous communications tools, and the Council on Foundations is offering an Activate in August toolkit designed to promote direct advocacy on the legislation. See more background information on the America Gives More Act and learn what nonprofit leaders, staff members, and volunteers can do to help.

Positive News on Charitable Tax Deduction Life Expectancy

The deduction for charitable contributions is “the one area where I believe we should not have a top cap,” Rep. Paul Ryan (R-WI) said on a television interview last week. He went on to say, “I think that is what feeds civil society, which is a very, very important part of American life and society.” The statement is noteworthy mainly because of who said it. Ryan is currently chair of the House Budget Committee. He appears to be the leading contender to become next chair or ranking member of the House Ways and Means Committee starting in 2015. That is the committee in the House that will do the heavy lifting in crafting a comprehensive federal tax reform package that may or may not alter the tax incentives for giving to the work of charitable nonprofits in communities.

Nonprofits Payroll Tax Debt Has Declined

Nationally, nonprofit employers owe $875 million in payroll tax debt, down from over $1 billion in 2007, according to a report from the Treasury Inspector General for Tax Administration (TIGTA). The report found that about 64,000 nonprofits, or 3.8% of tax-exempt organizations, failed to remit payroll taxes to the IRS as required by law. Most of those entities owed minor amounts but approximately 1,200 owed more than $100,000 each. The report is a useful reminder that while nonprofits generally are exempt from paying federal income tax, they still must pay payroll and other taxes. 

State and Local Issues

Nonprofit Sales Tax Exemption, Land Conservation Credits Under Review in Virginia

Virginia legislators are scheduled to review the nonprofit sales tax exemption and tax credits for land conservation this week as part of an ongoing re-evaluation of many tax credits, deductions, exemptions, and exclusions contained in the Virginia Code. Nonprofits from across the Commonwealth are either submitting comments in support of the exemption or planning to attend a public hearing on Tuesday, August 26. Some may be calling on the General Assembly to repeal a provision in current law that limits a nonprofit's administrative and fundraising expenses to no more than 40 percent of its annual gross revenue as a condition for receiving tax exemption. Multiple studies reveal that in nonprofit and for-profit organizations, the usual range of overhead rates is approximately 25 percent to 35 percent, meaning that arbitrary caps like the one in Virginia law have the effect of discouraging essential investments in education, infrastructure, and efficiencies that have been shown to improve performance. A separate hearing on the land conservation tax credit is scheduled for Friday, August 29. All interested nonprofits are encouraged to participate and express their views to the Joint Committee to Evaluate Tax Preferences.

Oregon Challenge to Property Tax Exemption

Cultural nonprofits may be denied exemption from property taxes in Oregon if a recent decision in the state’s Tax Court is upheld. The dispute involves the Salem-based nonprofit Newspace Center for Photography, which opens its gallery to the public and charges fees for classes and use of facilities. “Photography education and public awareness are culturally enriching, not necessarily charitable” as that term is defined in Oregon Law, according to a decision of the state Tax Court.

Health Insurance Coverage and Charity Care

The expansion of health insurance coverage as a result of the Affordable Care Act is causing hospitals to re-evaluate their policies on charity care and community benefit. Many health care systems reportedly are continuing to provide free or reduced cost care but are also requiring uninsured patients seeking medical treatment to apply for insurance coverage. At least one hospital in New Hampshire is taking a harder line, publicizing a policy that “applicants who refuse to purchase federally-mandated health insurance when they are eligible to do so will not be awarded charitable care.” In California, groups continue to push for legislation that would expand the definition of the care provided to satisfy “community benefit” standards and impose a mandate on how much community benefit care must be provided by nonprofit hospitals.

New York City Regulates Clothing Donation Bins

New York City’s City Council is considering a proposal to expedite the process for removing illegal clothing donation bins from city streets. The donation receptacles purport to support charities, but typically generate revenue for private companies that are not permitted to place bins on public property. Other cities have banned for-profit collection bins as well: in April, Ypsilanti, MI ordered the removal of all clothing bins from city streets, and earlier this month Evanston, IL began requiring permits

Advocacy in Action

Everyday Advocacy Starting on Day One

Stories in this segment of this newsletter frequently reinforce the message that advocacy, like the mission of a charitable nonprofit organization, deserves attention every day. Jeffery Duplessis of the Mississippi Center for Nonprofits applies this perspective not just every day, but from Day One.

A recent interview in the Mississippi Business Journal illustrated Duplessis’ philosophy, and passion, for nonprofits. “I can’t tell you how many people have called me over the years and said they need a job and want to start a nonprofit.” His advice: “That is not the right way to begin. You have to be passionate about your cause — to make a difference in your community.”

The point isn’t purely idealistic, Duplessis points out. “You are going to have challenges. If you are not committed, those challenges can become brick walls.” Therefore, people dedicating themselves to the public good must be doing it for reasons that will help them overcome adversities. “You have to be passionate, persistent, and patient,” the Mississippi Center’s Duplessis concludes.

Not surprisingly, passion, persistence, and patience are the key ingredients both for advancing nonprofit mission and for nonprofit advocacy. And they are needed from Day One and every day in the life of a nonprofit leader.

 


 

Worth Reading

Don’t let tax reform undermine charitable giving, byJeramy Lund and Fraser Nelson, Salt Lake Tribune, August 16, 2014, highlighting the philanthropic spirit in Utah and calling on Congress to pass the America Gives More Act.

First Social Impact Bond Fails to Meet Halfway Mark Performance Target, Rick Cohen, Nonprofit Quarterly, August 13, 2014, commenting on the failure of the world's first Social Impact Bond project in Great Britain to meet its early performance targets. 

Worth Quoting

“For public officials, the law of unintended consequences should need no introduction.”

- Joseph A. Curtatone and Mark Esposito, writing in “Systems Thinking: a Better Way to Make Public Policy,” Governing, August 18, 2014, explaining how applying the holistic way of thinking, known as “System Thinking,” is a practical way to develop solutions to real-world problems that anticipate potential consequences.

Worth Studying

Hunger in America 2014

This 2014 study reveals that each year the Feeding America network of food banks provides service to 46.5 million people in need across the United States, including 12 million children and 7 million seniors. The survey data find that each year 1 in 7 Americans use a food bank, including 5.4 million individuals in any given week. 

Numbers in the News

Spotlight: Arkansas

93,000

Arkansans employed by nonprofits in 2010

6.8

Percent of the Arkansas workforce employed by nonprofits

Source: Arkansas - Where Bold Nonprofits Work, Arkansas Economic Development Commission.

See economic impact reports from other states.

Nonprofit Advocacy Matters | July 28, 2014

Posted: 
July 28, 2014

Take the Survey, Share the Survey

In less than five months, new reforms governing payments to nonprofits for their indirect (overhead) and other costs will go into effect. Learn what the reforms do and why they matter to nonprofits.

You can help in the development of tools to turn the promise of the new reforms into reality for your organization and others by completing this short survey and by encouraging your colleagues at other nonprofits to fill it out as well. 

Federal Issues

House Passes Charitable Giving Tax Provisions

The House of Representatives approved a package of charitable tax provisions on July 17 by a vote of 277 to 130. The bill (American Gives More Act of 2014) would permanently extend three expired charitable giving incentives – food inventories, conservation easements, and the IRA rollover – as well as permit taxpayers to claim charitable deductions from the previous year up through April 15. The bill also would simplify the current two-tiered excise tax to a flat rate of one percent. The underlying substance of the package appears to have strong bi-partisan support, although a majority of Democrats voted against it because the bill did not include provisions to offset the $16 billion cost. The Senate, due to a separate partisan dispute, has not been able to advance legislation to renew for two years several expired tax provisions, including the charitable giving incentives. Without significant advocacy efforts by the nonprofit community, the Senate is unlikely to take up the House-passed bill before adjourning for the mid-term elections.

Winter Optimism Turns to Summer Doldrums on Federal Budget

Seven months after an historic deal on the federal budget, Congress has failed to enact any of the dozen spending bills that fund the federal government and a stopgap funding measure, known as a Continuing Resolution or “CR,” is already being discussed as a likely solution to continuing partisan gridlock. At the end of 2013, Congress reached agreement on a budget that set spending levels and was supposed to allow the appropriations committees to approve annual spending legislation prior to the start of the next fiscal year on October 1. However, both the House and Senate are scheduled to start a five-week recess on Friday without addressing n umerous policy and political disagreements. For example, the bill to fund the Treasury Department next year has drawn strong opposition from the White House partly because the House-passed version cuts the budget of the Internal Revenue Service by more than $550 million. The cuts reportedly are intended as punishment for perceived obstruction of congressional investigations into the IRS’s allegedly partisan handling of applications for tax-exempt status. Many in the nonprofit community are concerned that the reduced funding will divert the IRS diverted from its assigned duties of enforcing against fraud, lawfully screening applications for tax-exempt status, and providing help to the public and charities about appropriate stewardship of donor resources.

State and Local Issues

National Voter Registration Day Proclaimed

The fourth Tuesday of September is officially designated National Voter Registration Day for the next five years, according to a resolution adopted this month by the National Association of Secretaries of State. The bipartisan endorsement from top state election officers puts this celebration of voting and democracy firmly on the election calendar through the rest of the decade and reinforces the commitment to expand the electorate and engage thousands of new voters in the democratic process as the deadlines to register and vote approach. The third annual National Voter Registration Day takes place this year on September 23, 2014. In its first two years, over 1,000 organizations and 10,000 volunteers registered more than 300,000 people to vote. Readers are encouraged to check out Nonprofit VOTE's 501(c)(3) Permissible Activities Checklist, visit its webpage on Staying Nonpartisan, and register for a national webinar on National Voter Registration Day on Thursday August 7th at 2pm Eastern. 

Human Service Providers Assess Progress on Government Contracts and Grants

Nonprofit human services providers continue to struggle with challenges presented by government contracting and grantmaking policies and procedures, according to a new report from the Urban Institute which compares the experiences reported in its surveys conducted in 2010 and 2013. The analysis found that significantly more nonprofits reported decreases in the percentage of government contract and grant dollars that could be used for organizational overhead costs. Fifty percent of nonprofits reported limits on how the amount of funds that could be used for organizational overhead, and of those, three-quarters said the amount was limited to 10 percent or less. This important finding reinforces the need to protect the new federal requirement that state and local governments pay nonprofits their legitimate indirect costs.

The new Urban Institute report also found that nationwide late payments showed a slight improvement from 2009 to 2012 in terms of the length of time payments are delayed, with fewer being reported more than 90 days late. Yet 42 percent of nonprofits surveyed still reported problems in their states with late payments. Complex and time consuming application and reporting requirements continue to be reported as the biggest problem by nearly three-quarters of survey takers. Go to the National Council of Nonprofits' website dedicated to contracting/grantmaking reforms for more information.

Additional Government-Nonprofit Contracting Reform News

Taxes, Fees, PILOTs

  • Taxes: The New Orleans City Council President has blamed nonprofits for crumbling public roads. She contends the city is “missing out on” tax dollars that she believes the 15,000 nonprofit property owners in the city should have to pay. The idea of imposing a property tax onto nonprofit property owners has been brought up before by the Council President, but may gain more traction now that she has suggested that the extra revenue could be put toward the politically popular use of repairing city roads.
  • Fees: The City Commission in Helena, Montana is considering whether to levy a fee on nonprofit property owners to help fund the city fire department, which is currently funded by property tax revenues. The plan being considered by the Commission would allow the city to create a methodology to levy a fire protection fee on tax-exempt properties, mainly government entities such as the VA hospital, and local nonprofits including churches and schools.

Maine to Allow Volunteerism as One Requirement for Food Benefits

Maine will, once again, start requiring recipients of the supplemental nutritional assistance program (SNAP, or food stamps) to work a certain number or hours or volunteer with nonprofits to be eligible for the benefits. This requirement is federally mandated, but the state had received a waiver due to high unemployment. In response to protests that the jobless rate still remains too high in the state to assume that recipients could easily find work, the Department of Health and Human Services Commissioner claimed that volunteer work was an easily accessible alternative to receive the benefits. 

Privately Funded Detroit

Detroit is turning to private funding sources to support the arts as well as political priorities. The Detroit Institute of Arts has secured an additional $26.8M in corporate donations towards its total $100 million pledge to the “Grand Bargain.” The museum has now raised over $80M towards paying down Detroit’s pension liability and transferring ownership of the museum from the city to a nonprofit. Separately, Detroit Mayor Mike Duggan is raising private funds for his new 501(c)(4) organization, the Detroit Progress Fund. The new nonprofit, which is tax-exempt under the “civic league, social welfare organization” portion of the federal tax code, was formed in February to support the “Mayor of Detroit’s agenda.” The Mayor’s spokesperson has said the fund can also be used to “pay for some city-related needs that we don’t currently have the budget for.” It is unclear what those needs are, but some suggest it may be to provide travel budgets for out-of-state job candidates, and not to supplement funding for services provided by nonprofits on behalf of the government. Mayor Duggan says he will disclose funders and spending of the Detroit Progress Fund.

Milwaukee Nonprofit Sector has Grown and Will Continue to Do So

Milwaukee has a “growing, robust nonprofit sector supported by a donor base willing to fund its endeavors,” according to a report from the Public Policy Forum. The report, titled “Give and You Will Receive,” also finds that the growth of the nonprofit sector in the city outpaced that of the city’s GDP, but observes that the increase in the number of nonprofits may have also led to a decrease in overall revenue in all nonprofits. The study suggests that the nonprofit sector in Milwaukee is healthy and will continue to be so, yet individual nonprofits may want to consider more collaboration to maintain or increase capacity.

Advocacy in Action

And the Beat Goes On

Nonprofit advocacy is about advancing nonprofit missions, every day. You win one day, you lose another, and you show up the next day and keep trying. And that’s a good thing because nonprofit missions need and deserve the effort.

Over the years, the Center for Non-Profits in New Jersey has identified complex contract and grant applications processes with the state as barriers to nonprofit efficiency and effectiveness. The state association of nonprofits in the Garden State has successfully advocated with others for numerous reforms, such as increased acceptance of electronic submissions and ensuring that the new e-procurement portal, www.NJSTART.gov, is “nonprofit-friendly.” Recognizing that advocacy works on a continuum, the Center’s advocacy efforts aren’t limited to just legislative lobbying and they don’t stop with the administrative “win” of new regulations written into law or e-systems gone live; the Center regularly surveys its members to ask what has gotten better and what has gotten worse with contracting/grantmaking with the state of New Jersey. 

The latest survey results showed positive and negative attitudes about various changes and provided valuable insights that can be shared with government officials to help streamline processes even farther. Seeing the results of past efforts, nonprofits know that their survey response can make a difference. So it is not surprising that one nonprofit official took the opportunity to raise a “very important point” even though it “doesn’t fit any of your questions” on the survey. The person wanted to challenge the state’s “use it or lose it” policy through which unspent funds from government contracts or grants must be returned to the state rather than applied to the next year’s contract or grant. The comment was imminently reasonable from a nonprofit’s perspective: “I would like to be able to move money forward for the next year since I know that rent, insurance, health, etc. will continue to rise and I can’t count on additional funding from the government contract.”

Because the nonprofit official used his or her voice to broach the issue, the Center received a crucial reminder of its continued significance to organizations. Making the point that every communication provides the opportunity to advance a nonprofit mission, every day.

 


 

 

Worth Reading

Social Impact Bonds: Phantom of the Nonprofit Sector, Rick Cohen, Nonprofit Quarterly, July 25, 2014, providing an extensive analysis and critical review of social impact bonds and pay-for-success initiatives at the federal level.

Worth Quoting

“We depend on these nonprofit organizations, which in many cases operate on tight budgets in their mission to help needy and vulnerable people. A government that expects the rest of us to pay our taxes on time needs to also pay what’s due, when it’s due.”

- “State Should Pay Up Now,” editorial in the Albany (NY) Times-Union, July 14, 2014 urging state officials to start complying with prompt payment and prompt contracting laws designed to protect nonprofits.

“There is no virtue in self-imposed austerity that leads to mediocrity in our programs, and constant turmoil in our finances.”

- Kurt Clotz, “Value, cost, and price: a nonprofit dilemma,” blog posting for Nonprofits Assistance Fund, July 17, 2014 addressing the challenge that merely covering costs is a meager measure of success.” 

Worth Studying

States Recording the Largest Job Gains, Losses in June, Governing, July 18, 2014, providing an analysis of state-specific employment data, showing that 33 states added jobs last month, while 17 lost them.

Nonprofit Advocacy Matters | July 14, 2014

Posted: 
July 14, 2014

The Promise of Government-Nonprofit Contracting Reforms

In less than six months, new reforms governing payments to nonprofits for their indirect (overhead) and other costs will go into effect. To prepare, and to benefit all nonprofits (not just those with government contracts and grants) and grantmakers (that historically often have been forced to subsidize government shortfalls), we're dedicating space in Nonprofit Advocacy Matters and on Twitter at hashtag #NPFullCosts to talk about recovery of full costs and how nonprofits and governments can work together toward more effective service delivery. Learn what the reforms do and why they matter to nonprofits.

You can help in the development of tools to turn the promise of the new reforms into reality for your organization and others by completing this short survey and by encouraging your colleagues at other nonprofits to fill it out as well. Thank you.

Federal Issues 

House to Consider Charitable Giving Incentives

The House is expected this week to consider a package of nonprofit-related tax provisions that would permanently extend three expired charitable giving incentives – the IRA charitable rollover, food inventories, and conservation easements – as well as permit charitable deductions for the previous year up to April 15 and streamline the excise tax for foundation investment income. Five separate bills will likely be combined into one piece of legislation, the Fighting Hunger Incentive Act of 2014 (H.R. 4719). As when the measures came before the House Ways and Means Committee in May, votes are expected to be cast along partisan lines, but for reasons other than the substance of the underlying provisions, which remain popular. Specifically, Democrats continue to object that the proposed permanent renewal of the expired provisions are not being paid for with offsetting revenue increases elsewhere in the tax code. 

Tax Reform Draft Proposal Reduces Tax Incentive for Charitable Giving

A much-discussed comprehensive tax reform plan contains a combination of provisions that would reduce the tax incentive to make charitable contributions, according to extensive analysis by the Tax Policy Center. In February, House Ways and Means Committee Chairman Dave Camp (R-MI) issued a “discussion draft” tax reform plan that, among other things, called for imposing a floor on how much a taxpayer must give before taking an itemized deduction, raising the standard deduction, and restricting how much individuals may deduct each year. Several of these factors and lower tax rates proposed in the draft “would reduce the tax incentive to make charitable contributions,” the Tax Policy Center concluded. The report specifically found that the after-tax cost of making charitable deductions is increased, and thus the incentives are reduced, in every tax bracket and earnings quintile. Overall, the effective cost of giving a dollar would rise under the Camp plan from 77¢ to 88¢.

State and Local Issues 

Nonprofits Facing New Regulatory, Other Changes in New (Fiscal) Year

July 1 marked the beginning of the new fiscal year for most state governments and ushered in several new laws dealing with nonprofit operations, regulations, and fundraising. Many provisions of New York’s Nonprofit Revitalization Act went into effect July 1, raising audit thresholds and simplifying the procedures for forming, dissolving, and merging nonprofits in the state. The law requires nonprofits to alter many of their governance documents; as a result, the Governor’s office has suspended for 90 days the enforcement of prequalification requirements in the New York Grants Gateway, the State’s online contracting website, to provide nonprofits more time to update their internal documents without being penalized.

Significant changes to charity registration and disclosure requirements are taking place in Florida and soon in Maine. The new law in Florida, reportedly drafted in response to the Tampa Bay Times series on “America’s worst charities,” requires all nonprofits, including those based outside of Florida and those reporting less than $25,000 in donations, to register with the state to solicit funds. Significantly, the law empowers charity regulators to revoke the sales tax exemptions of nonprofits that spend less than 25 percent on program costs for three consecutive years and creates new audit requirements for nonprofits receiving higher amounts of donations. Nonprofit regulations in Maine will change on August 1, based on revisions to the laws governing charitable solicitations. The law will eliminate registration and disclosure requirements for professional fundraising counsel and charitable organizations that solicit below stated thresholds. It also removes the requirement of IRS determination letter for licensure as well as the exemption for professional third-party solicitors soliciting on behalf of faith-based nonprofits.

Also effective July 1 is a new Maryland income tax credit that applies for donations made to a qualified permanent endowment fund at an eligible community foundation. The value of the credit that can be applied to tax year 2015 and beyond, will be equal to the lesser of 25% of the eligible donation or $50,000. The Department of Housing and Community Development may award a maximum of $250,000 in credits in each tax year. 

Taxes, Fees, PILOTs
Idaho Nonprofit Overcomes For-Profit Tax Challenge

The Boise, Idaho YMCA made its case of community impact and support before the Ada County Commissioner’s Board of Equalization, which reversed its previous decision by voting unanimously in support for the full tax-exempt status of the 122-year-old nonprofit. In May, the Commissioners decided to lower the Y’s property tax exemption rate from 100 percent to 19 percent, following a challenge brought by two for-profit fitness clubs in the area. At a July 3 hearing, the first opportunity for the Y to plead its case, more than 200 supporters from the community showed up to hear Executive Director Jim Everett explain that the vast majority of activities of the facility enhance public access to fitness and other services, especially among children, disabled individuals, homeless people, and other at-risk populations. See television news report.

Government-Nonprofit Contracting News
Detroit Nonprofits Targeted for Contract Cancelation in Bankruptcy

Questions abound in Detroit after the City filed a list of hundreds of contracts, including many with nonprofits, it does not intend to honor as a result of its bankruptcy. It is unclear how many of these contracts are still active or whether the publication of the list will simply allow the City to clean up its books. The posting of the list raises concerns among the many charitable nonprofits that are providing services on behalf of the local government that their work could be affected as the bankruptcy proceedings advance. The City’s finances remain precarious, and with the election of a new administration, nonprofits are anticipating that some longstanding contracts may not be renewed.

Virginia Facilitates Nonprofit Property Purchases

A new law in Virginia empowers nonprofits to purchase properties worth up to $100,000 from Richmond and five other cities for less-than-market rates when the nonprofits use them to create low-income housing. The previous rules allowed anyone to purchase at auction properties valued at less than $50,000, but renovations and use were not required, and rarely occurred. The reform raises expectations in the six Virginia cities that nonprofits will step in and help transform communities. “It provides homeownership opportunities to families in the areas they want to live,” said Jack Thompson with Habitat for Humanity. “We can acquire more properties and serve more families.”

Advocacy in Action 

The Many Dimensions of Nonprofit Advocacy

During the recent legislative session in Illinois, the people at Donors Forum, Illinois’ State Association of nonprofits, demonstrated that nonprofit advocacy has many dimensions and can produce multiple payoffs for the people and communities served by nonprofits. The Donors Forum approach combines an organizational culture in support of advocacy with data, new tools, and relationships.

Among other things, leaders at Donors Forum demanded greater attention for issues affecting the work of charitable nonprofits by leveraging Illinois’ poor showing in the Urban Institute survey of nonprofit contracts and grants with nonprofits. Through blogs, radio appearances, newspaper articles, and an effective data sheet, Doug Schenkelburg, Donors Forum’s Vice President of Public Policy, urged “state lawmakers to create a budget that is adequate, responsive, fair, and meets the needs of the people of Illinois.”

Donors Forum also advanced its work in improving government-nonprofit contracting through the creation of a new website: Building a Better Illinois: The Public Nonprofit Partnership Initiative. The findings on the website provide a unique, in-depth look at the size and impact of charitable nonprofits in every legislative district and census tract in the state, as well as 77 community areas around Chicago. The project highlights the relationship between nonprofits and state government and it helps to ensure that policymakers truly understand the value of the sector and the challenges it faces.

Donors Forum’s comprehensive efforts to influence and build relationships with public officials are paying off: Illinois leads the nation in adapting some of the new federal reforms on grantmaking to state policies. With the anticipated signature on legislation by the Governor this week, the new Illinois Grant Accountability and Transparency Office and the Single Audit Commission will be working with nonprofits and government officials to streamline processes, reduce administrative burdens, and update regulations. Not all advocacy efforts show such an immediate or well-defined return on the investment of time and resources. But the Donors Forum approach is showing that when you focus on the ultimate goals, many tools help clear the path.


 

Worth Reading

Who Has the Time, and Other Questions on Nonprofit Advocacy, by David L. Thompson in the Summer 2014 edition of Nonprofit Advantage (pp 3-4), a publication of CT Nonprofits, making the case for everyday advocacy using government-nonprofit contracting data and the new OMB Uniform Guidance on mandatory reimbursement of nonprofits’ indirect costs.

Changing the Conversation about Overhead, by Rick Cohen of the National Council of Nonprofits, in NTEN: Change, June 2014, making the case that old thinking about overhead or indirect costs is undermining the ability of nonprofits to be effective and demonstrating ways to communicate the connection between investments in technology and greater mission impact.

Social Impact Investing - Fad or the Future?, by Brenda Peluso, Maine Association of Nonprofits Blog, July 1, 2014, providing a compilation of articles on new investing mechanisms and posing four key questions on the minds of many nonprofits.

Costs Campaign Resource

Federal Grant & Contract News For Nonprofits – June 2014, by Venable law firm, offering interpretations of key definitions in the OMB Uniform Guidance (sometimes called the “Super Circular”) and making recommendations for actions nonprofits can take to clarify areas of ambiguity caused by the new rules. 

Nonprofit Advocacy Matters | June 30, 2014

Posted: 
June 30, 2014

Celebrating a Revolutionary Development in Paying Full Costs for Nonprofit Service Delivery 

In less than six months, new regulations governing payments to nonprofits for their actual costs will go into effect. To prepare, and to benefit all nonprofits (not just those with government contracts and grants), we'll be dedicating space in Nonprofit Advocacy Matters and on Twitter at hashtag #npfullcosts to talking about full costs and how nonprofits and governments can work together toward more effective service delivery. You can look forward to practical tips for full cost accounting, negotiation of indirect (overhead) cost rates, and updates on how the new regulations mandating payment of indirect costs are being implemented. Join us in this nationwide campaign of turning the promise of the recent OMB Uniform Guidance into the reality of nonprofits receiving reimbursement for their full costs.

Federal Issues 

The IRS Under Siege

The certainty is that the Tax Exempt Organizations unit of the Internal Revenue Service is under attack; the uncertainty is how the challenges, and any outcomes, will affect charitable nonprofits. In May 2013, news surfaced that the IRS was setting aside for extra scrutiny applications from organizations seeking tax-exempt status that had partisan words like “tea party” in their names, raising charges of a political litmus test by the federal agency that is supposed to be scrupulously apolitical. Several committees in Congress began conducting extensive investigations that continue today. The House voted in May to hold the former head of that IRS unit in contempt of Congress. It was recently revealed that the IRS has lost two years of her emails, raising accusations by some of a cover up. Several others point to staff reductions of 20 percent due to previous budget cuts as proof that the unit does not have enough personnel or technology to do its job. The current House spending bill that covers the IRS would cut funding by an additional $341 million and impose a number of policy riders aimed at restricting the IRS. One section expressly prohibits the IRS from targeting “groups for regulatory scrutiny based on their ideological beliefs.” The investigations of serious allegations and the challenges of reduced funding and policy restraints mean that the IRS is being diverted from its assigned duties of enforcing against fraud, lawfully screening applications for tax-exempt status, and providing help to the public and charities about appropriate stewardship of donor resources.

State and Local Issues 

Mixed Reports on State Fiscal Prospects

Recent reports on state revenues and spending suggest uncertainty and instability will continue. The Rockefeller Institute announced an “April surprise” of state personal income tax collections falling across the country by 7.1 percent in January-April of 2014, compared to the same period a year earlier. A downward trend had been expected, but the deep magnitude was not. The report authors observed, “States with revenue shortfalls in 2014 generally will reduce their forecasts for 2015 as well, causing a ‘double whammy’ effect on budgets currently being finalized.” Separately, results of a survey by the National Association of State Budget Officers found that spending in the states in the next fiscal year will remain lower than average. Total state expenditures are projected to increase by $750.5 billion, or 2.9 percent, which is below the average rate of spending growth since 1979 of 5.5 percent. 

Trend Spotting
Suit Challenges Tax-Exempt Status of Nonprofit Health Insurer

A lawsuit in Oregon is challenging the nonprofit status of a large nonprofit health insurer, alleging that the organization is not spending enough on advancing its charitable mission and is no longer acting like a nonprofit. The case claims that Regence BlueCross BlueShield has built up large cash reserves in excess of state minimums and pays high salaries that are indicative of the organization acting less like a nonprofit and more like a commercial company. In addition to the suit, Regence has been criticized in recent years for investing surplus funds in for-profit companies while increasing premiums and cutting benefits. Regence argues that more than 85% of the premiums collected are used to pay health care providers. Lawsuits challenging the tax-exempt status of large nonprofits are not new. Illinois’ community benefit standard for hospitals was rewritten after the Provena case and Princeton University in New Jersey is fighting a similar challenge that asserts it operates more like a for-profit business than an eleemosynary institution.

New York Governance, Contracting Rules in Transition

Nonprofits in New York are rushing to comply with a major overhaul of the nonprofit corporation law that goes into effect July 1, while also working to ensure they remain in compliance with relatively new contracting obligations imposed by the state. The Nonprofit Revitalization Act of 2013 requires nonprofits to adopt or change their conflict of interests, whistleblower, and other policies and procedures that many nonprofits have not had the time to revise. The timing raises concerns for nonprofit contractors with the state because many of the new documents are needed to prequalify for grants and contracts through the New York Grants Gateway. Recognizing the conflict, the state is suspending enforcement of prequalification requirements for 90 days to allow nonprofit grantees time to adopt new policies and adjust to the new filing requirements, while remaining eligible for State grant funding. A bill to extend the Gateway suspension until January 1, as well as a measure to require payment of late contracting interest, passed the Assembly and Senate and are awaiting action by the Governor.    

Government-Nonprofit Contracting Reforms
Nonprofits Insert Themselves in Helping Government Streamlining Efforts

A new initiative in North Carolina seeks to follow the trend in New Jersey and elsewhere of improving government operations by sharing nonprofits’ insights into a more narrowly-contemplated program that asks the regulated community for suggestions. NC GEAR, the Government Efficiency and Reform Initiative, is seeking recommendations focused on structural changes; yet, to date, it has not recognized nonprofits as a significant voice in the process. This oversight is changing as a result of the launch of a new website to collect ideas on reforming state government. The North Carolina Center for Nonprofits is urging nonprofits in the state to use the online form to submit suggestions to promote contracting reforms. The experience of New Jersey nonprofits suggests that engagement in government streamlining efforts could pay off for governments, taxpayers, and nonprofits alike. The New Jersey Center for Non-Profits, along with several other nonprofit organizations, has made multiple recommendations that have been adopted by the Governor’s Red Tape Review Commission, and numerous reforms are being implemented.

Boston Schools Seek Money from Corporations, Philanthropy for “Transformational Change”

The Boston public school system is asking corporations, foundations, and nonprofits to contribute $25 million to help fund a campaign to attract, retain, and improve its teachers and principals. Budgeting uncertainty from the Commonwealth and federal government reportedly led to the overt effort to subsidize government operations through private fundraising. “We know we can’t do it alone in order to make transformational changes,” Schools Superintendent John McDonough said after a meeting with 100 prospective contributors. The Boston effort is not unique, according to the Council of the Great City Schools, which recognizes that large city school districts have turned to private fundraising over the past five to eight years “because of the downturn in the economy and the irregular revenue streams they now have.”

Independent Nonprofit or Quasi-Governmental? Hard to Tell

At North Miami’s Museum of Contemporary Art (MOCA), it is difficult to determine whether the nonprofit’s board or the city has the final say on running the organization. The museum operates in a city-owned building and the director position is officially listed as a city employee, hired by the city but approved by the board. Currently, the MOCA has two different museum directors: one hired by and answering to the city and another hired by and answering to the board. The board has not approved the city’s hire and the city has stopped paying the salary of the board’s employee. How the dispute is resolved could have ramifications for other nonprofits i n the city and across Florida and the nation. The public policy agenda of the National Council of Nonprofits makes a strong statement in support of nonprofit independence and identifies clear lines that must be maintained in dealings between governments and nonprofits.

Maine Governor Reconsidering Opposition to Nonprofit Bonds

The Governor of Maine is considering reinstituting a bond program that offers affordable financing options to many nonprofits. Governor LePage essentially shut down the bond program three years ago when he refused to sign a pool bond package for eight colleges, hospitals, and other nonprofits, stating that he was concerned that Maine could be liable if the nonprofits defaulted on the bonds. For twenty years, Maine nonprofits were allowed to pool their major projects and issue tax-exempt bonds together through a state-affiliated entity. Although no reason has been given for a change of heart on the bond program, the Governor’s spokeswoman stressed the need to reduce the paperwork involved in the process for securing the Governor’s approval.

Advocacy in Action 

Sometimes It Is About the Numbers

The Caring Force, a campaign of Providers’ Council in Massachusetts, is a unique coalition of nonprofit service providers, their employees, and the people they serve dedicated to improving public and government support for their work. The coalition’s mission is to “advance an agenda that creates an environment in Massachusetts that protects our most vulnerable neighbors and creates a stronger economy with the pay, recognition, and respect our workers deserve.” Active advocacy efforts are key to that mission. Here are some results, by the numbers.

In April, more than 600 members of The Caring Force took to the Massachusetts State House to rally and lobby for programs and workers. Partly as a result of their advocacy, more than half of the House members co-sponsored a salary reserve amendment put forth by The Caring Force. After an email push of over 1000 members of the Caring Force, better than half the members of the Senate cosponsored their amendment as well.

As of this writing, the Legislature is on the verge of approving the salary reserve amendment and $200 million in new human services funding. The Caring Force is calling on the Governor to sign the legislation when it gets to his desk.

Advocacy success is leading to broader public success. In the last six months alone, more than 2,000 people signed up in support of The Caring Force. Now, more than 17,000 people are members of the campaign to advocate for human services across Massachusetts. In a big way, The Caring Force puts advocacy to action in support of its mission.


 

Worth Reading

Changing the Conversation about Overhead, by Rick Cohen of the National Council of Nonprofits, in NTEN: Change, June 2014, making the case that old thinking about overhead or indirect costs is undermining the ability of nonprofits to be effective and demonstrating ways to communicate the connection between investments in technology and greater mission impact.

Voting and Health: 5 Reasons It’s Good for You, Nonprofit VOTE, June 2014, highlighting the many personal benefits of voting, including improved social ties, better physical and mental health, and greater well-being and life satisfaction.

Worth Quoting

"Every day, New Yorkers rely on not-for-profits to care for their children, improve their health, get housing and much more. Simply put, the state can't provide all of these basic services without the help of not-for-profit organizations.”

- Thomas DiNapoli, New York State Comptroller in a news release announcing the publication of the 2013 Prompt Contracting Report

Data Visualization

State-by-State Tax Collections 2013, Stateline, June 9, 2014, showing that state tax collections in 26 states remain below 2008 levels. 

Nonprofit Advocacy Matters | June 16, 2014

Posted: 
June 16, 2014

Federal Issues

Hope, Uncertainty for Summer Action on Tax Reforms

Even as expectations sink for summer passage of significant nonprofit-friendly tax provisions, hope remains that bipartisan progress will be made towards producing passage of the measures by year’s end. In May, the House Ways and Means Committee approved bills to permanently extend three expired charitable giving incentives – the IRS rollover, food inventories, and conservation easements – as well as to permit charitable deductions for the previous year up to April 15 and streamline the foundation excise tax. The votes on the measures were along partisan lines, but for reasons other than the substance of the underlying bills, which remain popular. Earlier this spring, the Senate Finance Committee approved a temporary two-year extension of a package of expired tax incentives that included the three charity provisions. Action on that bill was halted, however, because of a partisan dispute over Senate floor strategy. Importantly, bipartisan support for the substantive policy of the bill remains strong. Senate leaders have vowed to work to come up with a plan to bring the bill back to the Senate floor, perhaps before the July 4 holiday.

Readers can help promote progress on the nonprofit-related bills by signing onto a nonprofit community letter to the House of Representatives urging lawmakers to vote for these key charitable provisions.

State and Local Issues

Illinois Moves to Align Grantmaking Practices with new Federal Standards

On the day before adjourning, the Illinois General Assembly passed and sent to the Governor the Grant Accountability and Transparency Act, a bill to streamline grant processes. The legislation is intended to increase the accountability and transparency in the use of grant funds from whatever source – federal and/or state – and “to reduce administrative burdens on both State agencies and grantees by adopting federal guidance and regulations applicable to such grant funds.” If signed, the bill will align some state grant processes with those recently established in the new OMB Uniform Guidance, particularly those related to auditing. It would also create a Grant Accountability and Transparency Unit within the Governor’s Office of Management and Budget to facilitate the changes. Additionally, it would reconvene the Single Audit Commission, which includes nonprofits, to advise the new Unit in drafting associated rules scheduled for completion by July 1, 2015.

Taxes, Fees, PILOTs

  • Taxes: Bellingham, Washington is considering taxing a nonprofit, Catholic-affiliated hospital to bolster city revenues. The tax would be levied on the 30% of the income the hospital receives from private insurers and would result in a $1.2 million revenue increase for the city. The hospital and its supporters claim that the city is cutting the safety net for the poor in Bellingham and trying to balance the budget on the backs of the sick.
  • Fees: Two nonprofit organizations in New Hartford, New York will not be receiving refunds from sewer maintenance fees that were assessed improperly by the local government. Although the nonprofits are listed as exempt, confusion in coding on the city’s end resulted in the improper charging of fees. Counsel for the government has recommended that a refund not be issued; the nonprofits are being forced to take legal action to recover payments termed “improper taxation” by one reporter.
  • PILOTs: Fall River, Massachusetts is developing a “uniform set of guidelines” that tax-exempt nonprofits will be asked to follow in making payments in lieu of taxes (PILOTs). The formula will likely be based on the controversial PILOT schemes imposed on some nonprofits in Boston and Providence.
  • PILOTs: In lieu of raising taxes, the Mayor of Brockton, Massachusetts is asking 21 nonprofit organizations to make payments of up to 30 percent of the tax bill they would otherwise be required to pay if Commonwealth law did not expressly prohibit taxation of nonprofit properties. Targeted nonprofits go beyond the typical list of nonprofit colleges and hospitals to include Father Bill’s & MainSpring, a homeless shelter and housing advocacy group and the Old Colony YMCA.

Governments Continue to Offload Activities onto Nonprofits

Recent developments suggest there is no let-up in the trend of governments at all levels offloading their responsibilities onto nonprofits. Henderson, Nevada is cutting $200,000 from its payments to ITN Las Vegas’s senior transportation program that provides rides for senior citizens who cannot drive or get to a bus stop to access nutrition programs and go to the City’s senior center. In Pennsylvania, reductions in government funding are forcing nonprofit cultural centers like the Carnegie Science Center, the Phipps Conservatory, and Botanical Gardens to implement new, often burdensome ways to support their normal operations and programs.

Government-Nonprofit Contracting Reform Update

  • Solutions Offered to New Jersey’s Contracting Problems
    Despite dismal rankings in contracting complexities and other problems, New Jersey can become a leader in government-nonprofit contracting reform efforts by adopting a series of common-sense recommendations offered in a new report from a coalition of nonprofits, spearheaded by New Jersey’s Center for Non-Profits. Continue reading...
  • Prompt Contracting Improvements Needed in New York
    New York State government agencies failed to live up to the state’s prompt contracting law 87 percent of the time in 2013, up from a late rate of 78 percent in 2012, according to the New York Comptroller’s 2013 Prompt Contracting Report. Continue reading...

Delaware Town Mandates Charity Events Donate at Least 60% of Proceeds

Organizations running charity fundraisers that use public facilities in Bethany Beach, Delaware must turn over at least 60 percent of gross proceeds to the nonprofit, a new city council resolution mandates. The town’s new rule aims to dissuade organizations looking to make a profit by holding events to raise money for charities. The 60 percent threshold reportedly is based on Charity Watch’s recommended percent of donations nonprofits should spend on mission-advancing programs. Interestingly, Daniel Borochoff, president of Charity Watch, encouraged the town to establish better disclosure requirements rather than regulate the percentage directed to charities, which he correctly observed is constitutionally suspect. 

“Grand Bargain” on Detroit Bankruptcy Advances

The Michigan legislature overwhelmingly approved $195 million in state aid for bankrupt Detroit, a condition of the so-called “Grand Bargain” made with private foundations. Several foundations have pledged $466 million to help Detroit emerge from bankruptcy while preserving intact the art collection of the city-owned Detroit Institute of Arts and helping pay the City’s pension obligations to retired public employees. Automakers in the state also contributed a combined $26 million. As part of the deal, the municipal assets at the Detroit Institute of Arts will be transferred to a charitable trust so that the museum’s collection will be shielded from sale.

New Tool for Accessing Information on Foundation “Democracy Funding”

Foundation Funding for U.S. Democracy is a new, interactive data platform that defines democracy funding and allows users to see which foundations are funding what and where. Developed by the Foundation Center, the platform seeks to track the more than one thousand foundations granting nearly $1.4 billion to nonprofits advocating for “American democracy” improvement. The platform breaks down democracy funding into several categories for easier use, and allows users to explore the tactics that different foundations are using to accomplish their goals in this area. 

Additional State and Local Issues

Advocacy in Action 

Declaring Victory … and Getting Back to Work

At the end of a legislative session, many advocates – at nonprofit and for-profit businesses alike – declare “victory” and go home. Not Nikki Love Kingman at the Hawai`i Alliance of Nonprofit Organizations (HANO), who combines a celebratory message with a to-do list for maintaining momentum in advancing nonprofit missions.

“Congratulations to all nonprofit advocates for surviving another legislative session,” Nikki opens in Next Steps for Summer 2014: Advocacy and Elections, noting that “[o]nce again, nonprofit leaders played important roles in shaping legislation on many topics,” ranging from the environment and education, to government transparency and countless other topics affecting the state.

But no laurel resting is in order, according to HANO’s public policy director, because important work remains. For instance, numerous bills are sitting on the Governor’s desk awaiting action; Nikki gives a short civics lesson and intel on how to make a difference. Next, the article reminds readers that policy action isn’t over for the year, pointing out that “there are many county level issues that impact nonprofits and the communities they serve, so it is important to stay informed and engaged in your county’s policy-making process.” Again, her awareness message includes links to help nonprofits stay informed.

The third item on the to-do list in “Next Steps for Summer 2014” is key: seizing the opportunity of the upcoming primary election “to strengthen our democracy with nonpartisan voter registration and other voter engagement efforts.” Using data from a 2012 Nonprofit VOTE study, she made the case for nonprofit engagement by explaining that “voters contacted by nonprofits had a higher turnout rate than the average for all registered voters, and nonprofits were especially effective at increasing turnout among those who are traditionally underrepresented in elections.” The good idea is accompanied with easy access to the great resources from Nonprofit VOTE.

Victories are good; maintaining nonprofit momentum is better. And this example of Advocacy in Action is excellent at showing what needs to be done and how to do it. 

 


 

 

Worth Reading

How Philanthropy is Changing the Culture of Full Cost Funding, Valerie S. Lies, Huffington Post, June 13, 2014, highlighting innovative approaches by private foundations to support the sustainability of nonprofit organizations and overcome the “starvation cycle” on overhead expenses. See also the Donors Forum “Commitment to Full-Cost Funding.”

5 Steps to Pay for Success, the Urban Institute, June 2014, reviewing the advantages and disadvantages of pay-for-success funding mechanisms in juvenile and criminal justice systems.

Nonprofit Quarterly series on new corporate forms and funding methods

Worth Quoting

“No doubt the Anytown Council was put off by the political risks of a new tax and by the expected pushback from nonprofit organizations.”

- June 4 editorial in the Washington Post acknowledging the advocacy clout of the nonprofit community in opposing a new tax on employees of nonprofits and other organizations proposed by a tax reform commission in Washington, DC.

“In the State Senate, I can get legislation passed while [Congress] is mired in gridlock.”

--Activist Sandra Fluke explaining her decision to run for the California State Senate rather than a seat in Congress, quoted in Governing, June 4, 2014.

Worth Watching

One in Four: America’s Housing Assistance Lottery, Erika Poethig, Urban Institute, May 28, 2014, a 3-minute video employing the fast-draw technique to visually and succinctly explain the challenges of rental assistance data and policy.

Data Visualization

S&P State Credit Ratings, 2001–2014, Pew State and Consumer Initiatives, June 9, 2014, chart showing credit rating trends and rankings for each of the states.

Nonprofit Advocacy Matters | June 2, 2014

Posted: 
June 2, 2014

Federal Issues

House Tax Committee Approves Charitable Giving Provisions

The House Ways and Means Committee approved five bills of interest to the nonprofit and foundation communities on May 29. Each of the bills received bi-partisan support in the debate, but all were approved by party-line votes due to a dispute over whether to pay for the tax provisions. Republicans voted yes to permanently extend the measures but without providing for offsetting revenue raisers to pay for the changes; Democrats voiced support for the policies but voted no on the bills because they did not include “pay fors.” The bills are listed below:

  • Make permanent the enhanced deduction for property donated for conservation easements (HR 2807).
  • Permanently extend the IRA charitable rollover (HR 4619).
  • Make permanent the enhanced charitable deductions for food inventory (HR 4719).
  • Allow individuals to claim a charitable deduction for contributions made up to the date their income tax return is due (usually April 15) (HR 3134).
  • Eliminate the upper tier excise tax and reduce the excise tax on investment income of private foundations from two to one percent (HR 4691). 

IRS to Rewrite Proposed Regulations on 501(c)(4) Election-Related Political Activities

The Internal Revenue Service announced that it is postponing a public hearing on controversial draft regulations defining political activities of 501(c)(4) social welfare organizations. The IRS is not scrapping the first draft, as reported by some organizations and news outlets, but is instead revising the proposal to reflect concerns expressed in more than 150,000 comments submitted to the agency. The IRS plans to publish a revised draft regulation before rescheduling a public hearing. Commentators predict that the revised draft will not be released until after the November elections.

IRS Proposed New Form 1023-EZ Still Pending

In March 2014, the IRS submitted a proposed Form 1023-EZ to the Office of Management and Budget (OMB) for approval under the Paperwork Reduction Act. The proposed form offers an alternative to the normal Form 1023 for those claiming to be a small group (no more than $200,000 in annual gross receipts and no more than $500,000 in total assets, with some exceptions) to use to become recognized as a charitable nonprofit: just a two-page quick checklist. The radical change could lead to chaos for any nonprofits engaged in fundraising as well as for foundations "if the field is suddenly flooded with hundreds of thousands, if not millions, of newly minted c3’s.” The National Council of Nonprofits filed formal Comments opposing the proposed form, noting that "we support efficiency and reducing burdens to applicants, but not at the expense of accountability." The National Association of State Charity Officials (NASCO) also filed official Comments in opposition, noting that its members “uniformly oppose" the proposed Form 1023-EZ because it “will increase opportunity for fraud and heighten the burden on state regulators.” The IRS recently told NASCO that, notwithstanding the serious widespread concerns, it intends to deploy the new form this summer. To date, however, OMB has not approved the proposed form. For nonprofits, donors, and foundations wanting to know more, read this op-ed by Tim Delaney, President & CEO of the National Council of Nonprofits, published today in The Hill: "An Express Lane to More Trouble for the IRS?"

State and Local Issues

States Enact Significant Registration, Voting Reforms

Several state legislatures have taken action this year to ease the voting process by, among other ways, implementing online voter registration and allowing same-day registration. More than half the states, home to over 100 million voters, will have some form of online registration by the end of the summer, reports the National Conference of State Legislatures. Other reforms enacted this year include easing absentee voting (Maryland), relaxing voter ID requirements (Oklahoma), lengthening the early voting period (Florida), authorizing automatic registration systems (Colorado, West Virginia), and removing waiting periods for nonviolent felons to regain their voting rights (Delaware). The reforms are in part a reaction to the restrictive measures many states put in place following the 2010 elections, as well as a favorable response to a bipartisan presidential elections commission report put out in January of this year. In addition to online registration and multiple opportunities for voting, that Commission called for the use of state-of-the-art techniques to assure efficient management of polling places and use of improved voting technology. Nonprofits serve a vital role in many communities by promoting democracy and civic engagement through voter registration, voting, and providing nonprofit voter information. Go to Nonprofit VOTE to learn more. 

North Carolina Modifies Sales Taxes Rules for Nonprofits

North Carolina Governor McCrory signed legislation to revise the 2013 tax reform package that replaced the 3% gross receipts tax on entertainment with a sales tax, and eliminated exemptions for arts nonprofits. The new 2014 law clarifies that the tax on “live entertainment events” will not apply to the greatest number of nonprofit activities: educational events, recreational sports, and fundraising events. In exchange, the newly enacted statute repeals three rarely-used nonprofit sales tax exemptions and adds a narrow exemption for events sponsored by volunteer-only nonprofits and an exemption for any tax-deductible contributions. The measure also exempts nonprofits from local privilege taxes. 

Government-Nonprofit Contracting Reform Update
Federal Non-Health Related Grants to States Decline

While overall federal grantmaking to the states were above pre-recession levels for federal fiscal year 2014, funding for non-health related grants has declined by five percent, according to an analysis of trends by the Pew Charitable Trusts. “Trends in Federal Grants Vary Between Health and Non-Health Programs” found that, adjusted for inflation, grants increased by one percent for income security support while grants declined nine percent for transportation, dropped 10 percent for education, and fell 13 percent for everything else outside of Medicaid and other health grants.

Reconsidering Charitable Checkoffs on California Tax Forms

The California Senate unanimously approved a bill to establish a system and standards for determining which charitable nonprofits may be designated for tax checkoffs on the California income tax form. California Volunteers, the state office that manages programs and initiatives aimed at increasing the number of Californians engaged in service and volunteering, would be tasked with working out the details by 2017, with the goal of making the system fairer and allowing more charities access to the check-off system. The latest version added a "Charitable Giving Fund," which would allow taxpayers who don't want to pick and choose among the organizations listed on the tax form to turn over their designated dollars to California Volunteers to distribute "according to the regulation established for distribution." Reforming tax-form giving appears to be an emerging trend in legislatures; we’d like to know what readers think works and doesn’t work in their states.

Massachusetts AG Supports Nonprofit Buyback Program

Federal policy that prevents qualified nonprofits from purchasing homes from lending banks at market value and then financing the resale to former homeowners conflicts with Massachusetts law, the commonwealth’s Attorney General asserted in a letter to the director of the Federal Housing Finance Agency. Attorney General Coakley urged the agency, which oversees Fannie Mae and Freddie Mac, to change its policy against such buybacks that she believes run counter to Massachusetts’s successful Act to Prevent Unnecessary and Unreasonable Foreclosures. That Act prohibits creditors that sell a property to a 501(c)(3) charitable nonprofit from conditioning that sale on an agreement that the property will not be resold or rented to the former homeowner. 

Michigan Nonprofits Return Economic Benefits

Nonprofits in Michigan were integral in stabilizing the state’s economy during the 2008 economic downturn, according to a new report commissioned by the Michigan Nonprofit Association and the Council of Michigan Foundations. The report, “Economic Benefits of Michigan’s Nonprofit Sector,” found that, since 2006, the nonprofit community has added 12,000 jobs. During this same time period, other industries in the state purged 200,000 jobs. Nonprofits in Michigan employ more than 10 percent of the state's workforce, pay about $5 billion every three months in wages to their employees, and serve as anchor institutions in communities large and small, the analysis reports. Significantly, Michigan charities spent $44 billion dollars in advancing their charitable missions in 2011 alone. Nonprofits in the state provide a “sense of stability that the community can rely upon,” said Donna Murray-Brown, President and CEO of the Michigan Nonprofit Association. She also observed that the new study “helps us inform policymakers and citizens on the great work nonprofits are doing – and can do – for the people of this state.”

Collaborating to Understand Poverty in New York City

What public programs are currently in place in New York City to help people living in poverty and to work towards real and better solutions to the problems these government programs may be trying, but failing, to address? Those are the questions three umbrella groups are asking and studying in a unique collaboration of faith-based organizations. The organizations, the Federation of Protestant Welfare Agencies, Catholic Charities of the Archdiocese of New York, and the United Jewish Appeal–Federation of New York, have tapped the Urban Institute to research various government anti-poverty programs to learn more about what is effective in stamping out poverty. They hope that the results from the study will shed light on the problem of poverty in New York City and that the solutions they decide on will be heard by City Hall.

Detroit Art, Pension Deal Advances

The Michigan legislature overwhelmingly approved $195 million in state aid for bankrupt Detroit, a condition of the so-called “Grand Bargain” made with foundations to preserve intact the art collection of the Detroit Institute of Arts and to help pay the City’s pension obligations to retired public employees. Last year, several private foundations, including the Charles Stewart Mott Foundation, Kresge Foundation, and the Ford Foundation, pledged $370 million to assist the city emerge from bankruptcy. Finding a way for Detroit to “come out of this bankruptcy and to reestablish itself as one of the greatest cities in the world … [is] very important,” said Bill White, President of the Charles Stewart Mott Foundation. 

Advocacy in Action

Changing the Culture on Costs, One Community at a Time

Most nonprofits know the problems caused when governments, funders, and the public incorrectly assume that only program costs are well spent and that overhead costs are undesirable. Some nonprofit leaders in Napa Valley, California are doing something about those attitudes, and providing inspiration for the rest of the nonprofit community.

The Napa Valley Coalition of Nonprofit Agencies recently created an Advocacy Education Committee that is dedicated to two primary goals. First, the committee seeks to promote the sustainability and growth of the nonprofit sector by providing its membership with tools and education to effectively advocate for their mission and clients. Second, the group is educating the community at large about the value of nonprofits. Core to both goals is helping people understand what overhead is and why it is so important for maintaining a vital and effective nonprofit sector.

Sara Cakebread, Co-Chair of the Committee, put it succinctly: “What we’re trying to do is to create a whole program that educates the public: What is overhead, why it is important and why we need to support our nonprofits, if we want them to thrive.” Toward this end, Committee member Becky Peterson reframes how nonprofits should be viewed, “[They] do good work in our community, often filling the gap that government or the private sector doesn’t fill… we need to think about nonprofits as service providers, not as charities.”

This subtle, but important shift supports the growing understanding that to be effective and efficient nonprofits must invest in their infrastructures and a solid base from which to operate.

Cakebread said it well when she observed:

“Donors say we want our money to go to programs, we don’t want to spend anything on overhead. As a donor you can’t do that — you can’t give somebody a lot of money and tell them they can’t pay for somebody to administer it. Or deposit the check. Or pay for an office or pay for utilities. All of those things people don’t think about.”

Jan Masaoka, CEO of CalNonprofits, calls The Napa Valley Coalition of Nonprofit Agencies “a great example of local nonprofits working together to get more funding to the communities they serve and represent, as well as working with county officials to streamline government processes."

For more information on the changing attitudes on overhead costs (also known as administrative or indirect costs), see two reports from the National Council of Nonprofits, Toward Common Sense Contracting; What Taxpayers Deserve (2014) and Investing for Impact: Indirect Costs are Essential for Success (2013).

 


 

 

Worth Studying

This week’s best state in America? Utah, for its generosity, Reid Wilson, The Washington Post, May 23, 2014, providing a chart identifying the most (Utah, Mississippi) and least (New Hampshire, Maine) generous states as measured by charitable giving as a percentage of median discretionary income.

Museums

35,144

The number of museums in the United States, up from 17,500 in 1990s, according to the Institute of Museum and Library Services. Source: Nonprofit Quarterly, May 21, 2014.

State Laws

1,175

The number of laws Minnesota repealed as part of Governor Mark Dayton's "unsession" initiative to erase obsolete laws. Source: Governing, May 29, 2014

State Parks

33 percent

The national average of state park costs covered from state general revenues in fiscal 2012, down from 59 percent in fiscal 1990. Source: Stateline, May 23, 2014.

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