The Health Of Nonprofits

Reading Between the Lines

Late last year, two Philadelphia Newspapers, The Philadelphia Buziness Journal and The Philadelphia Inquirer have posted articles taliking about the future state of nonprofits. According to Peter Key, the good news is that nonprofits in the Philadelphia region are doing better. Karen Heller waxed on eloquently about the disproportionate salary reports for National Night Out and WHYY.

Both referred to one source of the statistics, Charity Navigator, which by itself, has a very discerning process for their analyses. They choose to report on those nonprofits with demonstrated public support of over $500,000 which have submitted 990’s (nonprofit tax returns) for four years.

According to their prerequisites, the 501 (c) 3 charitable organizations listed won’t include any foundations, land trusts, universities, preserves, or religious organizations, such as the Salvation Army.

Nor will charities that receive most of their money from government grants or fees for programs and services be considered. Finally, those disclosing $0 in fundraising expenses will be excluded.

In 2007, Charity Navigator’s site contained information for 5,200 nonprofits nationwide; 138 of them within 50 miles of Philadelphia. At the same time, the IRS reported that there are more than 1.5 million nonprofits registered with their office.

The question poses itself if these results are truly representative of those nonprofits that fall below the $500,000 benchmark. How many nonprofits within 50 miles of Philadelphia attract those types of dollars that are not grant money or fees for services?

Does the fact that the Greater Philadelphia Cultural Alliance is conspicuously absent mean that they don’t deserve my money? Does the fact that 3 of the 5 United Way’s in that specified region receive only 2 stars mean they warrant less of my money than the other two that have attained 3 of the possible 4 stars?

Guidestar (another service listing 990's) alleges there are over 1.6 million nonprofits registered in the United States. If an organization raises about $25,000 in gross receipts, they must file. Which organizations truly have $0 in fundraising expenses?

The Center on Nonprofits and Philanthropy at the Urban Institute and the Center of Philanthropy at Indiana University recently stated that ¼ of 220,000 nonprofits filing 990’s reported $0 fundraising expenses generating revenues of $1 million to $5 million; 13% listed $0 management and general expenses.

The IRS changed the reporting rules for nonprofits effective January 2007. Additional staff has been added to each IRS office specifically to begin auditing new reporting strategies and old filings for these groups.

Just as the debacle at Enron was the impetus for corporate compliance with Sarbanes Oxley, the long road ahead for nonprofits begins with such shining additional local examples as the Seaport Independence Museum.

Nonprofits, largely, have declared their accountability to their donors. The imposing question: can they survive IRS or your scrutiny? Are their figures where they need to be? There are opportunities for boards to become even stronger and for financial reporting to become more transparent.

Most organizations are doing the right thing and deserve your trust. It is incumbent on every board to develop systems to finer tune their figures before the IRS comes knocking and helps them interpret what really lies between the lines.

CALL TO ACTION: Sign up now for my complimentary tips for nonprofit managers, boards, individual stakeholders and artists to keep abreast of reporting changes, grant opportunities and other management issues. www.bestprincipledsolutions.com/Contact.html

ALWAYS: Use both Guidestar and Charity Navigator for the most current tax return for your favorite grassroots and more sophisticated nonprofits . They list current data including amounts for CEO and other key salaried parties (those making more than $50,000), and amount dedicated to fundraising, general management and lobbying. You will also be able to discern how much is devoted specifically to programs and who is fulfilling their obligation to their overall mission and to you - the giving public. YOU, have a right to know.

If you want to learn more about how your 990 is advising the public on how you spend your money, if your are reporting your finances responsibly and holding themselves accountable for public trust, inquire at kayte@bestprincipledsolutions.com.
Know Where Your Money is Going