Nonprofit Firsts in 2015

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One of the roles the National Council of Nonprofits plays - along with our network of State Associations of nonprofits - is to keep you up-to-date and informed about emerging trends that may affect the operations of your charitable nonprofit. We include news about trends in all our e-newsletters, on our blog, and on our website. And now this year, in celebration of the Council of Nonprofit’s first 25 years of service to the charitable nonprofit community, and as a preview of the next 25, we are shining a light on five “firsts” during 2015 that will play a role in shaping the landscape for charitable nonprofits in years to come.

Five Firsts in 2015

1. A major US foundation announces it will DOUBLE its “overhead” rate in connection with project grants.

The Ford Foundation, listed by the Foundation Center as the 9th largest US foundation by total giving, announced this summer that it will be “addressing the overhead fiction” by doubling the overhead rate the foundation uses for project grants to 20%. “All of us in the nonprofit ecosystem are party to a charade with terrible consequences – what we might call the “overhead fiction.” Simply put, because of this fiction, foundations, governments, and donors force nonprofits to submit proposals that do not include the actual costs of the projects we’re funding.”

Hallelujah. We’re glad that the Ford Foundation is speaking out about the fact that it, and other private foundations, have been ignoring the actual costs nonprofits incur. The National Council of Nonprofits has been agitating against the “overhead myth” for several years, encouraging charitable nonprofits not to downplay their costs, since that only fuels the myth that administrative/overhead costs are somehow related to a nonprofit’s effectiveness. We’ve also encouraged nonprofits to take ownership of their full costs, which is a prudent strategy for financial sustainability. Now it appears that private grantmakers are catching up and catching on that their investments won’t produce results unless their grantmaking practices acknowledge the true costs that nonprofits incur when delivering programs and services.

We look forward to more “firsts” on this topic, as other grantmakers throw aside outmoded policies that place arbitrary and artificial limits on funding the administrative functions needed by charitable nonprofits to advance their missions.

2. The federal government recognizes that nonprofits performing services on its behalf should be paid for their reasonable indirect costs.

In a related “first,” 2015 was the first year that the Uniform Guidance has been in effect, and therefore the first year that charitable nonprofits paid with federal dollars to perform services on behalf of local, state, and federal governments have had the legal right to claim reimbursement of their indirect costs. If this is “news to you” (and good news, indeed!), then we encourage you to read our overview piece, “Nonprofits and the New OMB Uniform Guidance: Know Your Rights…and How to Protect Them” and be in touch with your state association of nonprofits that is likely working on solutions in your state to raise awareness about these changes, for both government agencies and charitable nonprofits. Not only is this a historic mandate, signaling a significant change in how the federal government compensates nonprofits, but it also signals a major shift towards a relationship between nonprofits and governments that is appropriately more of an equal partnership.

While the change in federal regulations is the result of advocacy by the National Council of Nonprofits and our state association network on behalf of all charitable nonprofits, the culture shift that we hope will result will be up to the hundreds of thousands of charitable nonprofits that will need to own their full costs and claim their indirect costs with their government partners.

Nonprofit advocacy on such a scale will be another “first” that we look forward to celebrating, with your help! Please share your story about negotiating with governments over your nonprofit’s reasonable indirect costs.

3. $43 billion shifted into an LLC instead of a 501c3

In their open letter to their daughter announcing the Chan Zuckerberg Initiative, the Chan-Zuckerbergs created an expectation that shares of stock, currently worth $45 billion, will someday be deployed to “advance human potential and promote equality” for all children in coming generations. The initial areas of focus that the couple identified for the initiative are, “personalized learning, curing disease, connecting people and building strong communities,” which sound like causes traditionally identified with nonprofits that are recognized as “501(c)(3)” organizations (that the IRS calls, “public charities”). However, by placing the assets in a limited liability company, the Chan-Zuckerbergs will receive no current tax-deduction, and will face none of the regulatory considerations otherwise applicable to contributions to private foundations or public charities. While this move may not have been an actual “first” from the standpoint of how shares of stock move into LLCs, it is certainly the most widely-publicized shift of billions of dollars into an LLC that is slated to be released into the stream of commerce that impacts the “social good.” (On top of that, we’re pretty sure it’s the first time that a Facebook post caused such consternation about the future of philanthropic giving!)

We applaud the Chan-Zuckerbergs for embracing and articulating a big vision for the future that may spur other wealthy individuals to similarly pledge their wealth to address social causes. Whether using LLCs will alter the traditional routes for the transfer of wealth into social good currency is an open question. 

4. Equality firsts in 2015

The journey towards equality covered new ground when for the first time in history Saudi women were entitled to vote in local elections, and here at home POTUS mentioned transgendered persons in the State of the Union Address. That milestone was the result of years of nonprofit advocacy, as was the Supreme Court’s historic ruling in June 2015 that gay couples have a right to marry in any state they so desire. Another first on the road to equality that occurred in 2015 was the nonpartisan, national campaign, Nonprofit Votes Count, formed to encourage every eligible nonprofit staff and volunteer to register and vote.

The Council of Nonprofits encourages all nonprofits to join the Nonprofit Votes Count campaign!

5. “Mobile First” – We’re a smartphone dependent population

For the first time, more than ¼ of the global population used smartphones in 2015. 64% of Americans own a smartphone – although 7% of those still have trouble consistently accessing the internet. A few years ago it was cutting edge for a nonprofit to have a website “optimized for mobile.” Now we are so wedded to mobile devices that everything we look at on a screen must be mobile friendly. While we may decry the distraction of screens, “mobile first” technology is making it much easier for nonprofits to deliver programs and services, as well as track progress. Ride sharing services are a good example of “mobile first:” they take advantage of the GPS capability of smartphones to track consumers’ locations; think how mobile applications can be used to assist caregivers, or biologists working in the field. And for the 1 in 5 Americans living with a disability, wireless innovation is nothing short of transformational. When nonprofits shift their perspective to “mobile first,” not only for their websites, but for all their communications, they can tap into that transformational power to change lives for the better. Mobile has also transformed charitable giving. At the beginning of 2015 Blackbaud calculated that 1 in 6 donations was made from a mobile device, and that during the height of the giving season last year almost half (49%) of all emails were read on a mobile device. Given that mobile has now overtaken desktops for media consumption, and that the expectation is that 70% of the North American population will be using smartphones by 2020, it’s not a leap to assume that the majority of donations in the US will soon be made via a mobile device.

Still not used to carrying your cell phone with you everywhere? Get used to it!

Other “firsts” in 2015 (just for fun)

First time in 4 years that NASA is recruiting astronauts - and there may be a bump in applications given that this year marked the first espresso brewed and consumed in space

Canada’s first Giant Panda cubs!

First in vitro puppies born!

First year the “gig economy” has been part of our lexicon. What are the implications for nonprofits?

The Department of Labor issued interpretive guidance in July that is causing some to re-think which workers are defined as “independent contractors.” Reportedly over a third of the US workforce self-identify as independent contractors, and that number may be on the rise. Misclassifying workers is a “hot-button” issue in the nonprofit community that is sure to get pressed again in 2016, when the DOL issues new proposals defining who is entitled to overtime. Be sure to stay tuned for updates from the National Council of Nonprofits by subscribing to our other e-newsletter: Nonprofit Advocacy Matters.

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