Thursday, January 30, 2014

Administrative Overhead Expenses Finally Acknowledged

Here at the Charities Review Council, we talk a lot about looking “Beyond the Overhead Ratio” to determine a nonprofit’s impact based on more than just basic financials. Today, we’re diving right into the middle of that cumbersome overhead conversation to share some good news!

The Office of Management and Business (OMB) announced changes in December that will directly affect federally-funded nonprofits, and leave a positive glow across the entire philanthropic sector. Governments will now be required to pay some of the indirect costs incurred by the organizations they fund. Essential overhead expenses are no longer being overlooked.

“The new guidance from OMB makes one point perfectly clear: that governments should pay the actual costs of the work performed under written agreements on their behalf.” -Tim Delaney, President and CEO of the National Council of Nonprofits.

Federal, state, and local governments require certain administrative processes to be completed by the charitable organizations which they fund, limiting the amount of resources that nonprofits can put directly toward pursuing their missions. These administrative expenses are necessary to maintain a healthy, transparent, and well-run nonprofit sector, and the OMB is finally acknowledging that.

A recent nationwide study by the Urban Institute found that governments subjectively limit indirect costs for necessary program and organizational expenses; one in four nonprofits reported that governments refuse to pay any indirect costs of the organization, and half of the nonprofits reported that they were limited to 7% or less. This will no longer be the case where federal funds are involved. The new guidelines require that governments pay a minimum rate of 10% or negotiate a rate with the organization.

Many nonprofits will be able to focus more on their missions with less pressure to raise additional funds to cover overhead expenses. Community-based, culturally focused organizations might especially benefit, as they often rely heavily on government funding to operate. But this momentous change positively affects the entire nonprofit community. Charities that do not receive federal funding could see less competition for scarce private philanthropic dollars.

The new guidance also raises the Single Audit, a government-mandated independent audit, threshold to $750,000. Previously, nonprofits expending $500,000 in federal funds in a year were required to conduct a Single Audit. This change, along with clarifying cost allocation rules and eliminating repetitive audit requirements, means that at least 5,000 organizations nationwide will be freed up to focus on delivering services to their communities, rather than spending time and money on complicated paperwork.

These reforms acknowledge the need for overhead funding and ease the administrative burden for nonprofits, allowing them to focus on achieving their missions and improving our communities. These changes will encourage transparency, efficiency, and increased impact in our thriving philanthropic sector. The Overhead Ratio debate is finally getting the positive attention it deserves.

Learn more about the changes for federally-funded nonprofits and how donors and nonprofits can navigate conversations about administrative overhead.

Thursday, January 23, 2014

Charitable Giving at All-Time High

Whether or not our economy has fully recovered from the great recession, one thing is for sure: charitable giving is at an all-time high. That’s right. In 2013, charitable giving was up nearly 13% in the United States for a grand total of $416.5 billion, according to Atlas of Giving.

Up from $368.8 billion in 2012, it also marks the third straight year of growth since the low point of $316.5 billion in 2009, the year the recession ended. The steady incline indicates a thriving philanthropic sector and strong culture of giving in the United States.

Giving trends to watch:
  • More donors are providing unrestricted support, allowing nonprofits to use their donation towards the area of greatest need. 
  • Designated giving days are breaking records – Giving Tuesday saw a 90% increase in online gifts compared to 2012, while 52,371 people donated $17.2 million to more than 4,000 nonprofits on Minnesota’s Give to the Max Day 2013

What do these trends mean for nonprofits?
While the overall increase in charitable giving is most-likely related to economic growth, it seems that more urgent crisis and natural disasters, myriad opportunities and platforms for giving, and the up-and-coming active millennial generation all contribute to changing the face of our philanthropic sector.

Some worry that designated giving days detract from traditional year-end appeals, but that does not generally seem to be the case. “Giving Tuesday and all of those giving activities earlier in the giving season didn’t seem to impact the total dollars or the number of donations in the last three days of the year,” says Caryn Stein, director of content strategy at Network for Good. In fact, the proportion of donations made online during the last few days of the year remained steady at 10%.

The statistics are clear: donors want to connect online. With increases across the board in online giving, it is quickly becoming the preferred method for donors to provide support. They are looking for a quick, convenient, and secure way to send their donation.

Despite increases in overall giving, Americans rank 13th in the world for percentage of people that give to charity, according to the World Giving Index. Myanmar, formerly one of the world’s least developed countries and emerging from decades of isolation, ethnic conflict, and poverty, ranked first with 85% of the population giving to charity. This illustrates a new trend in global giving, opening up the potential of developing economies and pushing the idea that giving is not just about wealth. However, when looking at the World Giving Index’s generosity trifecta of donating to charity, volunteering, and helping a stranger, the United States claims the top spot, indicating that Americans value a variety of ways of giving back.

Even as the face of giving changes, there’s no doubt that the nonprofit sector continues to be an integral piece of the fabric of our country, providing vital services supported by a generous and engaged public. How do you think these trends will affect you in 2014?

Thursday, January 16, 2014

Give With Your Time, Talent and Treasure: How Will You Honor Martin Luther King, Jr. Day in Your Giving?

Monday isn’t just another day off from school or work. It’s a day to celebrate the life and work of Dr. Martin Luther King, Jr., remember the civil rights movement, and continue to work toward equity and unity in our communities. The federal holiday presents a great opportunity to get more engaged with nonprofits fighting for racial equity in our communities, and advance our personal and financial relationships with the organizations that do this difficult work. Some such organizations include the YWCA of Minneapolis, Alliance for Metropolitan Stability, and Council on American-Islamic Relations. All of these nonprofits are committed to being strong and accountable, meeting all 27 Standards of the Charities Review Council.

There are also many events held on Monday that offer the opportunity to honor Martin Luther King, Jr. and to elevate his legacy of service in our everyday lives. Here are some ways that you can get involved next week:

  • The General Mills Foundation and the United Negro College Fund (UNCF) are pleased to present the 24th Annual Dr. Martin Luther King, Jr. Holiday Breakfast, held at the Minneapolis Convention Center. This year’s keynote speaker is Donna Brazile, a veteran political strategist, adjunct professor, author and syndicated columnist. Tickets are $30 to attend, and the event will also be broadcast live on Twin Cities Public Television at 8 am.
  • There will be a Martin Luther King, Jr. Celebration lunch prepared by Youth Farm & Market, along with entertainment featuring Aztec dancers, a youth choir, West African drumming, and hip-hop at the Powderhorn Community Center. This free event engages a diverse spectrum of community members, especially families and youth.
  • The Minneapolis Parks Board will host an evening celebration at the Reverend Dr. Martin Luther King Recreation Center, where they will present their "Living the Dream" award to Larry Fitzgerald Jr., NFL wide receiver for the Arizona Cardinals. This free event is open to the public. The Parks Board also invites the community to drop off nonperishable food items at recreation centers throughout the city for their 5th Annual "Feeding the Dream" food drive.

If you have the day off on Monday, remember that it’s not just another day to lie on the couch. Think about how you can spend your time, energy and resources to honor Dr. Martin Luther King, Jr.’s legacy of service. Even if you can’t participate in one of the organized activities above, consider taking time to reflect on the meaning of the holiday, support those working toward racial equity, and strive to live Dr. King’s values and actions each day in our homes, our communities and our world.