Good and Bad Reports for the Nonprofit Sector
It is the best of times and the worst of times for the nonprofit world. The 60th annual Giving USA report showed that 2014 was a banner year for American philanthropy. But recent headlines highlighting the improper behavior of certain nonprofits has cast the whole sector in a negative light.
This op-ed originally appeared in the Philadelphia Inquirer and on www.philly.com.
Within the span of one month, the nonprofit community has received some very good news and some very bad news. The confluence of events is pure coincidence, but should be instructive and meaningful for all who care about nonprofit organizations, philanthropy, and improving our world.
First, the outstanding news: American charitable giving reached an all-time high in 2014. Americans gave a total of $358 billion to nonprofits of all sizes last year, according to Giving USA, the annual survey of American philanthropy, which published its 60th edition Tuesday<6-16>. The 7.1 percent increase in giving between 2013 and 2014 represented the fifth consecutive year that total contributions rose.
This is ample evidence that the nonprofit sector has recovered from the turbulent days of the Great Recession. In a city like Philadelphia, in which universities, hospitals, and arts organizations play a substantial role in economic and civic life, this sustained uptick is exceedingly encouraging. (Giving USA is a national study that doesn’t break out data by region. Still, there is much that we can infer about the health of our region’s nonprofit organizations.)
Unfortunately, at the very time the nonprofit sector should be taking a victory lap, there has been a recent string of damaging headlines.
On May 19, the Federal Trade Commission, all 50 states, and the District of Columbia announced legal action against four cancer charities: the Breast Cancer Society, Cancer Fund of America, Cancer Support Services, and Children’s Cancer Fund of America. The charities are accused of defrauding donors of more than $187 million.
Then, on June 4, came the results of an NPR/ProPublica investigation which found that the Red Cross had grossly mismanaged the half a billion dollars it had raised in the wake of the 2010 earthquake in Haiti. It wasn’t the first time that the Red Cross has come under serious scrutiny.
And, of course, there are all the headlines raising questions about the propriety of some of the actions of the Bill, Hillary, and Chelsea Clinton Foundation.
Taken together, these developments have magnified donor skepticism regarding the charitable sector.
Thankfully, however, these stories haven’t slowed the growth of the nonprofit sector, with its incalculable and near limitless benefit to society. Americans are a giving people — philanthropy is encoded in our national DNA — and the improved job market and S&P 500 has encouraged Americans of all economic backgrounds to give. In 2014, Americans gave 2 percent of disposable income to charity; that figure has hovered around 2 percent since 1974.
The remarkable thing about philanthropy in 2014 is that contributions to nearly all charitable sectors saw healthy increases. In our “eds and meds” town, it is important to note that the education subsector continues to employ innovative and comprehensive approaches to development that other organizations should emulate. Education received 15 percent of all 2014 contributions. Between 2009 and 2010, giving to education grew by 4.9 percent, totaling $54.6 billion. John Paulson’s recent $400 million gift to Harvard University highlights the escalating nature of higher education fund-raising.
Equally important for Philadelphia, and perhaps more surprising, is that giving to the health subsector saw a 5 percent increase, amounting to 8 percent of all giving and totaling $30.3 billion. Many, including myself, thought that the uncertainties created by the implementation of Obamacare would cool donors toward supporting the health sector. We were wrong. (Disease-specific organizations are also included in this category. The ALS Foundation, the recipient of some $200 million associated with the Ice Bucket Challenge, clearly had a good year.) Like universities, many hospitals devote an inordinate amount of time and resources to donor cultivation and research. I often tell my nonprofit clients that they may not be able to replicate the fund-raising programs of colleges, universities, and hospitals, but they certainly can learn from them.
A great deal has been written about the future of Philadelphia’s many arts organizations. Are the region’s donors willing to sustain the tremendous growth we have witnessed over the past two decades? I am happy to report that, nationally, arts giving is up in a major way. From 2013 to 2014, contributions grew 9.2 percent, totaling $17.23 billion. Does that mean all the Philadelphia Orchestra’s financial problems will be solved or that the Please Touch Museum will be able to fund-raise its way out of debt? Not necessarily.
Compared with the recession years, now is a far better time for nonprofits to launch major fund-raising initiatives and engage in big projects. But that doesn’t mean it’s simple or quick, and instances of fraud, waste, and mismanagement only complicate the work of nonprofits.
Not only must organizations develop innovative ideas and programs, they must effectively tell their own stories and inspire donors. While doing this, nonprofits must also become more transparent and put in the necessary safeguards and oversight measures to make sure that resources are used efficiently, wisely, and for their intended purpose. If donors lose trust on a massive scale, then all of the gains of the last five years may be for naught.
Sound like a tough job facing nonprofits? Of course it is. But nobody ever said making the world a better place would be easy.
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