2015 Trends to Watch

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To supplement our list of Nonprofit Trends to Watch in 2015, this post offers context for the top trends and shares how the National Council of Nonprofits and its state association network are responding to these trends. We will continue to highlight notable new or changing trends that affect charitable nonprofits throughout the year on the nonprofit sector trends hub on our website.

#1 The Resource Squeeze

Grantmakers for Effective Organizations (GEO) highlighted the most significant trend - limited resources - when it documented in its recent national study of philanthropic practice that:

Nonprofits still don’t have the resources they need to respond to new opportunities, leadership transitions or changes in their environment.

Most nonprofit leaders report that raising money continues to be their greatest challenge, especially when factoring in the second big trend: increasing needs in communities. While charitable giving from individuals and foundations is slowly creeping upwards, what is often overlooked is that a substantial portion of the uptick in 2014 was due to unprecedented gifts to donor advised funds and a handful of huge gifts to large institutions. Yet even with several incredibly large gifts during 2014, philanthropic giving has not returned to pre-recession levels. And it’s not just financial resources that are scarce.

The ripple effect of six years of very limited resources is taking its toll. Most charitable nonprofits have not had “slack” time, or the financial luxury, to invest in technology or leadership. And it’s rare to find a nonprofit leader who has enough hours in the day, enough well-informed and engaged board members, or employees who are experienced and successful fundraisers (see Underdeveloped: A national study of challenges facing nonprofit fundraising). As GEO’s observation reveals, there is a great need right now for most nonprofits to take stock of the infrastructure and core capacities that make their nonprofit resilient and adaptable in times of financial strain.

The good news, however, is that in that same study, GEO also reported a “marked improvement” in the frequency of grants from private foundations for multi-year support, compared to findings from its 2011 study when “multi-year support was nearly impossible for nonprofits to find.”

However, the fact that the resource squeeze tops our trends list for the second straight year signals that individuals and communities served by nonprofits are increasingly at risk.  

Nonprofit leaders’ biggest challenge for 2015 will be accessing needed resources, including raising the money needed to sustainably advance nonprofit missions.

#2 Increased Needs in Communities 

As documented by Nonprofit Finance Fund (NFF), basic needs in communities are rising. This means that demands on charitable nonprofits are steadily and significantly increasing – without the corresponding resources to relieve the pain in communities. The past 6 years of continuous strain on individual household incomes that started before the Great Recession, is now manifesting itself in many state government coffers and budgets falling short of cash.

  • Nonprofit Finance Fund’s 2014 State of the Sector Survey documented that – for the sixth year in a row – around three out of every four nonprofits (in 2014, 80% ) reported an increase in demands for their services.
  • And because all philanthropic giving, by individuals, foundations, and corporations, totals far less than money earned by nonprofits performing services for governments, the fact that demands for services are increasing but government dollars continue to be cut at all levels – federal, state, and local – further compounds the resource squeeze. 

How are nonprofits responding to the rising demands, coupled with the resource squeeze? The strain on the social safety net means nonprofits need to cast a wide net for funding, and do what our sector does best: try out new approaches (“innovate”) and increase efficiencies to soldier on – as long as possible. But in doing so, resiliency may be an elusive goal for many nonprofits.

The growing needs for services in communities, combined with cuts in government support for social programs, are outpacing our sector’s current capability to address community needs.

Some good news related to new resources in 2015 and beyond: Nonprofits signing new agreements with governments to provide services paid in whole or in part by federal funds should be able to recover more of their full costs for delivering those services. The federal Office of Management and Budget (OMB), which oversees use of federal funds, issued new rules effective in late December 2014. These new rules, called the “OMB Uniform Guidance,” require governments at all levels – local, state, and federal – that hire nonprofits to deliver services to reimburse nonprofits for the reasonable indirect costs (sometimes called “overhead” or “administrative” costs) those nonprofits incur when federal dollars are part of the funding stream.  

#3 Governments shifting their burdens to nonprofits

We have been tracking this trend for several years, and anticipate that as new lawmakers take their seats in state and local governments, the tendency of politicians to look to the limited resources of charitable nonprofits to fill government budget holes will continue. Some government officials have openly told constituents to “seek help from local charities and churches,” while those same governments are targeting nonprofits as sources of revenue. So, this shift of government financial responsibility to charitable nonprofits is happening at the same time that governments openly expect charitable nonprofits to step forward to fill the service gaps and address growing needs in communities.

Seeing that state constitutions and statutes prohibit states and cities from taxing charitable nonprofits, and hearing about vast sums donated and filling endowment coffers (at a relatively tiny number of large institutions), some lawmakers incorrectly assume that the charitable nonprofit community is a resource to tap. Yet the facts are that almost three out of every four (74%) charitable nonprofits have revenue of less than $500,000. As state and local governments invent new ways to assess fees and creatively extract payments from nonprofits, charitable nonprofits have to divert their focus away from missions to fend off the very real threats to their delicately balanced budgets.

  • Read more about taxes, fees, and PILOTs
  • Nonprofit Finance Fund’s 2014 State of the Sector Survey tells us that for the first time in the six years of its survey (a period that corresponds to the Great Recession) the majority of nonprofits surveyed reported having less than 3 months of operating cash on hand.

Some positive news: Nonprofit staff, board members, and grantmakers alike are becoming more aware of the need to engage in advocacy to remove barriers and protect and promote their missions. Plus, as described below, our state association network has successfully pushed back lawmakers’ advances to extract payments in many states, as well as to limit charitable giving incentives.

What are the National Council of Nonprofits and its state association network doing about these trends?

  • We continue to raise awareness and coordinate responses to trends that affect charitable nonprofits, explain what charitable nonprofits are, what they do, how they are funded, and promote the reasons and resources that enable nonprofits and board members to be advocates for their nonprofit’s mission.
  • By tracking trends across state borders, the National Council of Nonprofits’ network identifies how policies and practices at all levels of government – local, state, and federal – threaten or support the work of community-based nonprofits. When necessary, our network mobilizes to resist efforts by state and local governments to divert funds away from nonprofit missions. As our network monitors action in state capitals across the country, we serve as the central hub, connecting policy dots so that charitable nonprofits can see trends, craft solutions, and mobilize for action. The issues our network is tracking are described in our 2015 Public Policy Agenda.
  • Because more than a third of all revenue supporting the work of charitable nonprofits annually originates with governments, one of our top priorities for 2015 will continue to be reforming government/nonprofit contracting practices so that the hundreds of thousands of nonprofits that regularly provide services in communities on behalf of governments will be paid on time, and for the full costs of their services, with reduced inefficiencies and headaches caused by current government practices that are likely to delay, or erode payments to nonprofits. Recovering the full cost of providing services and getting paid on time, and with less hassle, will enable charitable nonprofits to serve individuals and communities more efficiently and with better results. Our network of state associations of nonprofits is working to reform contracting practices locally. Our goal will be met when the government/nonprofit contracting process is fairer to nonprofits.
  • A priority in the coming year will be to continue to draw attention to issues affecting nonprofit sustainability and the importance of financial management and governance practices that are ethical, transparent, and accountable. While keeping our eyes on regulations that help or hinder charitable nonprofits from attracting charitable donations, we are also determined to influence a shift in the culture so that nonprofits themselves, as well as those who contribute to them, understand that it costs something to deliver a nonprofit’s mission – and that donors and grantmakers should not judge a nonprofit’s effectiveness by how much it spends on administrative costs, but instead by its outcomes. See (Mis)Understanding Overhead; #OwnYourOwnCosts; ethics and accountability for nonprofits; ethical leadershipethical fundraising; good governance; and more on our website.

If you would like to keep on top of the trends, policy threats, and various reforms that our state association network is pursuing, read our network’s 2015 Public Policy Agenda and subscribe to our free e-newsletters, Nonprofit Knowledge Matters, and Nonprofit Advocacy Matters, and join the National Council of Nonprofits as an affiliate member by joining your state association of nonprofits. We are grateful to our generous supporters and mission partners for supporting our work.

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