3 Not-for-Profit News Stories to Note (article)
Several not-for-profit developments emerged during the first part of the year that should be on your organization’s radar. An industry merger could make financial reporting and presentation more important than ever. A not-for-profit employment survey provides a closer look at how the not-for-profit economy is faring, and we have the first indications of tax reform’s impact on charitable giving. The following three stories from the first of the year may affect your 2019 strategic planning.
The Foundation Center and GuideStar announced in early February that they have joined forces to become Candid, a new 501(c)(3) organization. It’s been a deal several years in the making, beginning with the formation of a strategic partnership between the two organizations.
Candid is designed for both organizations in the industry, and the public that wants a little more insight into a not-for-profit’s financial operations. From the Candid interface, organizations will be able to access benchmarking resources, including information on grant funding opportunities, GrantSpace training, and compensation trends. Foundations can receive support to help streamline their grant-making process.
The public will get a closer look at an organization’s grants data profile (which not-for-profits can voluntarily choose to share). Foundations can also choose to share more information about what types of activities they support through Candid’s GlassPockets feature.
Much has been said about what the next generation of donors expects to see from their recipient not-for-profit organization. Candid could be seen as a response to the call for more not-for-profit transparency.
Most employment data lumps for-profit and not-for-profit data together. The Johns Hopkins Center for Civil Society Studies took a closer look at nonprofit information, and recently released its 2019 Nonprofit Employment Report.
In its introduction, the report highlights the importance of not-for-profit employment data, particularly as the sector grapples with the changes brought on by the tax reform bill, commonly known as the Tax Cuts and Jobs Act (TCJA). Although still too early to tell, several provisions in the TCJA are expected to negatively affect not-for-profits.
The 2019 Nonprofit Employment Report focuses on the period immediately before the TCJA’s effective date—between 2012 and 2016—and uses data from the Quarterly Census of Employment and Wages. It could be seen as the baseline to which future not-for-profit employment data could be compared to when assessing whether the TCJA will have an economic impact on nonprofits.
Pre-TCJA conditions paint a rosy picture of the nonprofit sector. Highlights from the Johns Hopkins report include:
- Not-for-profits employ the third largest workforce in the private employment sector and are the third largest generator of payroll income
- In most industries where not-for-profits have a concentration, including social assistance and education, nonprofits reported higher salaries than their for-profit counterparts
- Nonprofits saw a 7.6 percent growth rate between 2012 and 2016, but fell slightly behind for-profits during that same period, which had a 9.1 percent growth rate
Also notable was that for-profits are increasing their market share in subsectors that have traditionally been dominated by nonprofit business models, including, education, associations and social assistance. Not-for-profits will likely face increasing competition from for-profit groups moving forward.
Early Reports Indicate TCJA Had Minimal Impact on Donor Giving
One of the key questions not-for-profit organizations will be working through in 2019 involves tax reform’s impact on donor giving. As we have covered in previous articles, the TCJA created some barriers to the tax incentives for individual charitable contributions.
Individual donors have traditionally “itemized” their individual income tax returns in order to take advantage of a charitable contribution tax deduction. The TCJA increased the size of the deduction available for charitable contributions to 60 percent of adjusted gross income (AGI). Many in the industry were concerned that the changes to the charitable contribution deduction would not be enough of an incentive to offset the other “itemized” deduction changes, including limits on state and local tax deductions and an increased standard deduction that may make itemizing deductions less appealing.
The Association of Fundraising Professionals recently released a poll that may give the sector an indication of how tax reform affected donor giving in 2018. In its 2018 Year-End Fundraising Survey, the Association found that 54 percent of nonprofits raised more money in 2018 compared to 2017. A little more than one-third of respondents said that the tax changes negatively affected their fundraising.
Not-for-profits may want to keep monitoring the donor landscape. Respondents noted a smaller total number of donors in 2018, but reported their 2018 donors made larger contributions, which mitigated the effects of the smaller donor pool. Respondents were also optimistic that 2019 will be another strong giving year.
Our team keeps on top of the trends that affect not-for-profit strategic planning. For more information about how to prepare for 2019, please contact us.
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