9 posts categorized "author-Larry McGill"

The Forgotten Sector?

May 27, 2020

20180602_USP501All nonprofit organizations, large or small, have one thing in common — they exist to provide a public benefit. Although smaller nonprofits, defined provisionally as having five hundred employees or fewer, have been able to take advantage of government lending programs established in the wake of the COVID-19 outbreak — the Paycheck Protection Program (PPP) and the Main Street Lending Program (MSLP) — larger nonprofits have not. This is a major and potentially catastrophic oversight.

This oversight reflects the government's tunnel-vision tendency to view the economy and threats to the economy primarily through the lens of for-profit entities — i.e., big and small businesses. There is nothing inherently wrong with that, but it is not just our balance sheets that are at risk during this crisis. The U.S. social safety net, already threadbare, is in danger of collapse. Nonprofit organizations, especially the larger ones, are the last line of defense for millions in the fight to keep themselves from falling into abject poverty, illness, and despair.

The U.S. nonprofit sector is large, with annual expenditures of $2.5 trillion dollars. It employs 12 million people, the third-largest workforce in the country, behind retail and manufacturing. In and of itself, it is a significant part of our economy. But in the government's zeal to protect the health of the business sector, the essential role played by the nonprofit sector in safeguarding the health and safety of our most vulnerable citizens has been ignored.

A just-released analysis of the sector's financial vulnerability — Main Street Lending 2.0: A Proposal to Support Our Most Vital Nonprofits — by SeaChange Capital Partners and based on data provided by Candid, characterizes the COVID-19 crisis as "an extinction-level event" for nonprofit organizations. In other words, not only are the vital services provided by the sector at risk of being lost, so are untold numbers of nonprofit sector jobs.

Large nonprofits are a vital component of the nation's social safety net. Social services nonprofits, in particular, are providing resources to meet the needs of struggling families, including  frontline healthcare workers, such as food assistance, housing, and emergency childcare. As the SeaChange report points out, "Large nonprofits tend to be particularly important in areas like residential care (e.g., homeless shelters, foster care, homes for the developmentally disabled, etc.) where smaller organizations do not have the capacity (technology, HR, finance, compliance, etc.) or the scale to do the work."

What's more, nonprofits that provide social services operate with very slim margins. This is true not just of small nonprofits but of large ones as well. Here are some key facts from the report:

  • In the U.S., 1,548 large nonprofits provide social services.
  • Those nonprofits have annual expenses of $121 billion and total revenues of $123 billion.
  • The median social services nonprofit: operates with a margin of just 1 percent; receives just 6 percent of its revenue from philanthropy; has total financial assets equivalent to 1.9 months of expenses; and has operating reserves of less than a month of expenses.

Again, these are the large social services nonprofits, those with five hundred or more employees. And, as the analysis makes clear, many of them operate on the brink of insolvency even in normal times.

The SeaChange report argues forcefully that the eligibility requirements of the PPP and MSLP need to be modified to accommodate the crisis-related needs of both large nonprofit organizations as well as smaller ones. "PPP is already available," the report's authors write

to for-profit groups with more than 500 employees, provided they meet two conditions: (i) net income of $5.0 million or less and (ii) tangible net worth of $15 million or less. Unfortunately, the [Small Business Administration] has indicated in some of its guidance that nonprofits are not eligible under these criteria. Nonprofit ineligibility makes zero sense. Why would otherwise eligible organizations established for public purposes be less worthy of PPP assistance than those established for private gain?

Where the rules of the PPP thoughtlessly exclude many nonprofit organizations while including for-profit organizations with the same financial characteristics, the Main Street Lending Program ignores nonprofit organizations altogether.

The Federal Reserve has stated that "while nonprofit organizations are not currently eligible under the MSLP program, we acknowledge the unique needs of nonprofit organizations, many of which are on the front lines providing critical services and research to fight the pandemic...and will be evaluating the feasibility of adjusting the borrower eligibility criteria and loan eligibility metrics of the program for such organizations."

How is it that the nonprofit sector finds itself in such an absurd situation?

The U.S. federal government is good at paying attention to some things, and less to others. It is massively concerned with the financial health of the business sector, especially large businesses, as primary drivers of the U.S. economy. It honors and understands the important role of small businesses, as demonstrated by the existence of the Small Business Administration.

Because the federal government cares about the health of business, it knows a lot about the business sector and collects massive amounts of data on the sector on a continuous basis. Indeed, it knows so much about "small businesses" that it has a comprehensive 49-page document listing the specific size requirements that businesses across more than a thousand North American Industry Classification System (NAICS) categories must meet in order to qualify as "small" and be eligible for assistance from the SBA.

There is no such set of standards for defining what constitutes a large or small nonprofit organization. And the job of amassing and organizing basic data on the organizational health of the nonprofit sector has been left to the sector itself. If not for organizations such as Candid, the Urban Institute's Center on Nonprofits and Philanthropy, the Johns Hopkins Center for Civil Society Studies, and a handful of others, such data would not be available at all.

All of this means that when legislative relief packages are being considered during times like these, our government has no systematic means at its disposal for assessing and responding to the financial needs of the U.S. nonprofit sector. Hence, the sector is treated as an afterthought, with resulting legislation that looks like the PPP and MSLP.

Although I've focused on social service nonprofits in this post, the SeaChange report discusses the economic challenges currently faced by all large U.S. nonprofits, including hospitals and health care, higher education, and arts and cultural organizations. It is MUST reading.

The COVID-19 crisis has stretched the capacity and resources of many nonprofit organizations to the breaking point. Without immediate attention to the financial challenges U.S. nonprofit organizations are facing, huge holes will be ripped in the nation’s social safety net, leading to catastrophic consequences for millions of U.S. citizens.

The government has largely outsourced the job of maintaining the social safety net to the nonprofit sector. But having outsourced much of this work, it has apparently forgotten that it still bears a fundamental responsibility to ensure that the basic survival needs of the nation’s most vulnerable populations are met. Every American requires and deserves at least a minimal level of protection from the fallout created by COVID-19.

(Photo credit: Getty Images)

Headshot_Larry_McGillLarryLarry McGill is vice president of research at Candid. This post originally appeared on the Candid blog. For more from Larry, check out the PhilanTopic archive.

50 Years of Southern Philanthropy

February 11, 2020

In November, I had the pleasure of speaking at SECF50, the 50th annual meeting of the Southeastern Council of Foundations. Using Candid data, I compared philanthropy in the South fifty years ago to philanthropy in the region today. Here are some of the key points I shared with the SECF50 audience.

Philanthropy has grown tenfold

Fig1.1_secf-growth

To put these findings together, I had the distinct, old-fashioned pleasure of turning to one of our earliest editions of the Foundation Directory (published in 1971), an actual book, to research the state of institutional philanthropy in the South at the time of SECF's founding. Information was a lot sketchier back then and we had to collect everything by hand, so our totals in 1969 are probably not as accurate as those we have today. Still, I believe it's safe to say philanthropy in the South has grown tenfold after inflation.

Back in 1969, only three states in the 11-state Southeastern region had more than 75 foundations of any size (Georgia, North Carolina, and Florida), and no state had more than 107. Now, there are more than 18,000 foundations across the region, and more than half are located in just two states: Florida (6,452) and North Carolina (3,139).

Asset distribution has changed

Fig.1.2_secf-assets-by-state-800w

In 1969, two-thirds of the region’s philanthropic assets were concentrated in Georgia and North Carolina (40 percent and 26 percent, respectively). Since then, assets have grown tremendously in Arkansas, Florida, and Virginia, changing the picture quite a bit. Arkansas held 1 percent of the region's assets in 1969; it now holds 7 percent. Florida went from 8 percent to 29 percent. And Virginia increased from 6 percent to 10 percent.

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Few Large U.S. Foundations Changed Giving Priorities After 2016 Presidential Election

January 07, 2020

White_HouseIn early 2019, Candid asked 645 of the largest U.S. foundations whether they had changed their funding priorities in 2017 and 2018 as a result of the 2016 presidential election. The vast majority (88 percent) of the respondents said their organizations made "few or no changes" to their giving priorities during the two years following the election. About one in eight (12 percent) reported making "some notable changes."

These results differ slightly from a similar survey conducted by Exponent Philanthropy in early 2017. Nearly one-quarter of the participants in that survey — foundations with few or no staff, philanthropic families, and individual donors — said they expected to make some changes to their philanthropic giving as a direct result of Donald Trump's election.

Not surprisingly, foundations reporting "few or no changes to their giving priorities" in Candid’s 2019 survey felt little need to further explain why this was the case.  "Staying the course" was a common refrain.

Foundations that reported making "some notable changes" identified five causes in particular for which they felt additional support was needed, given shifts in the political environment: 1) immigration, 2) civic engagement/democracy, 3) equity/social justice/intolerance, 4) the environment, and 5) health care. In some cases, foundations also established "rapid response" funds to help grantees that might be facing new or urgent challenges in carrying out their work.

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Current Trends in Philanthropy: U.S. Foundation Support for Climate Action

November 09, 2018

IStock-470785468Released last month, the latest Intergovernmental Panel on Climate Change (IPCC) report paints a bleak picture of the disastrous consequences facing the planet if the average global temperature climbs 1.5 degrees Celsius above pre-industrial levels. The authors of the report warn that humanity will have to cut carbon emissions to almost half the 2010 level as early as 2030 in order to avoid long-lasting and potentially irreversible impacts from climate change, including the loss of many important ecosystems.

The issue of climate change and the impact of human activity on the environment has been hotly debated and has received significant attention from U.S. foundations. According to Foundation Center data, the largest one thousand U.S. foundations gave between $232 million and $261 million annually for climate-related issues between 2011 and 2015, with the exception of 2012, when a large infusion of funds into the ClimateWorks Foundation pushed the annual total to $340 million.

This represents about one percent of giving during that period but does not represent all giving that may contribute to the mitigation of climate change and its effects. Indeed, as much as another 3 percent of foundation giving over that period related to energy issues or sustainable agriculture may have supported efforts to address energy usage and current agricultural practices so as to lessen their contributions to global warming.

Fig1.1_climate action

Energy efficiency and electrification, in particular, have been a significant focus of foundation funding for climate action, with 57 percent of all climate change-related grants funded by the largest one thousand U.S. foundations between 2011-15 related to energy efficiency or renewable energy efforts. Food and agriculture, on the other hand, represented only 3 percent of climate action funding over the same period. Increasingly, however, foundations are recognizing the importance of sustainable food production in tackling climate change and are approaching the issue through an intersectional lens, as evidenced by initiatives such as Project Drawdown.

Fig. 1.2_climate action

The year 2015 also saw the adoption of the Paris Agreement, which the United States initially signed but, at the behest of the Trump administration, subsequently withdrew from. Given that the deployment of capital and funding is a critical factor in efforts to de-carbonize the global economy, the withdrawal of the U.S. from the agreement raises the question as to whether and how foundation giving has changed in response.

Detailed grantmaking data for 2016 (and subsequent years) is still being compiled, so it's difficult to draw any conclusions about the immediate response of foundations to the Trump administration’s decision. That said, several major foundations have announced significant commitments since the agreement was ratified in 2015.

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Current Trends in Philanthropy: International Giving by U.S. Foundations

November 01, 2018

Global-giving-report-coverInternational giving by large U.S. foundations reached an all-time high of $9.3 billion in 2015, up some 306 percent, from $2.1 billion, in 2002, when Foundation Center first started tracking it on an annual basis. During the same period, international giving also increased as a percent of total giving, from 13.9 percent in 2002 to 28.4 percent in 2015.

While the number of grants to international organizations and causes has stayed relatively stable, up some 31 percent (from 10,600 to 13,900) since 2002, average grant size has increased more than three-fold, from $200,900 in 2002 to $604,500 in 2015.

Much of that growth can be attributed to the Bill & Melinda Gates Foundation, which accounted for more than half (51 percent) of all international giving from 2011 to 2015. When Gates Foundation grantmaking is excluded, we see that international giving grew at a somewhat slower rate (21 percent) during the five-year period, reaching a high of nearly $4 billion in 2015.

Like foundation giving in general, international giving by U.S. foundations is largely project-focused: despite continued calls from nonprofit leaders for foundations to provide more general operating support, 65 percent of international giving by U.S. foundations from 2011 to 2015 was for specific projects or programs. (General support refers broadly to unrestricted funding and core support for day-to-day operating costs. Project support or program development refers to support for specific projects or programs as opposed to the general purpose of an organization. For more information, see https://taxonomy.foundationcenter.org/support-strategies.)

Data also show that U.S. foundations continue to fund international work primarily through intermediaries. From 2011 to 2015, 28 percent of international giving was channeled through U.S.-based intermediaries, 30 percent went through non-U.S. intermediaries, and just 12 percent went directly to organizations based in the country where programs were implemented. What’s more, just 1 percent of international giving was awarded in the form of general support grants directly to local organizations, and those grants were substantially smaller in size, averaging just under $242,000, while grants to intermediaries averaged just over $554,000.

It's important to note that these intermediaries vary in type and structure, and include:

  • International nongovernmental organizations (INGOs) operating programs in a different country than the country where they are headquartered.
  • U.S. public charities re-granting funds directly to local organizations.
  • Organizations indigenous to their geographic region but working across countries (i.e., not just in the country where they are headquartered).
  • Multilateral institutions working globally (e.g., the World Health Organization, Global Fund to Fight AIDS, Tuberculosis and Malaria).
  • Research institutions conducting public health research or vaccination programs targeted at specific countries that are not the country where they are headquartered.

Unsurprisingly, health was the top-funded subject area supported by U.S. foundations in the 2011 to 2015 period, with grants totaling $18.6 billion accounting for 53 percent of international grantmaking.

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Current Trends in Philanthropy: The Big Picture

October 29, 2018

Thebigpicture"Philanthropy" in the United States is a vast industry composed of individuals, foundations, and corporations that, in 2017, contributed $410 billion to charitable causes, an amount roughly equivalent to 2 percent of gross domestic product.

Of this total, nearly 70 percent is contributed by individuals, with more than half of that comprised of giving to congregations. The second largest source of philanthropic giving (some 24 percent) comes from grants made by private foundations like Gates, Ford, and Hewlett, which, along with a few dozen other major foundations, dominate a diverse ecosystem populated by tens of thousands of foundations of all sizes. Third is bequests, through which people designate universities, hospitals, and other tax-exempt organizations as beneficiaries in their wills. And last comes corporations — a surprise to many observers, who, given the dominant position of the private sector in the U.S. economy, no doubt assume that businesses play a far greater role in philanthropy.

My organization, Foundation Center, compiles comprehensive data on the more than 87,000 active U.S. foundations and, working with partners around the world, a growing number of foundations and foundation-like organizations in Europe, Asia, and Latin America. The center envisions a world enriched by the effective allocation of philanthropic resources, informed public discourse about philanthropy, and broad understanding of the contributions of nonprofit activity to transform lives and increase opportunity for all.

We also see U.S. philanthropy as having arrived at a critical juncture. Buoyed by a strong economy, U.S. foundations find themselves navigating a complex landscape in a volatile and highly polarized political environment. Foundations have something valuable to contribute in this environment —  namely, flexible resources free from market, electoral, and fundraising pressures. How they choose to use those resources to advance their work over the next few years is of interest to most Americans.

In a series of blog posts to be published over the next few weeks, we will look at some of the emerging issues that are getting the attention of U.S. foundations and will consider a number of frameworks (e.g., the Sustainable Development Goals) that are shaping the flow of philanthropic resources to different parts of the world. We'll also examine a variety of modalities — from traditional grant funding to experimentation with crypto-currencies — that foundations are using to advance their missions.

As many of you are aware, a growing chorus is questioning the foundation model, even as some donors are looking to experiment with new forms of philanthropy. A handful of younger philanthropists (Mark Zuckerberg, Pierre Omidyar) have opted to create limited liability corporations instead of setting up private foundations and have declared that their investments in social good will be directed to a broad spectrum of organizations and vehicles, not just tax-exempt nonprofits. Still, the predominant organizational form for U.S. philanthropy is the private grantmaking foundation, followed by corporate, operating, and community foundations. These legal structures and the regulatory framework in which they are embedded provide considerable flexibility for experimentation and innovation, and their continued popularity suggests that, for now at any rate, the "new philanthropy" is more of a rhetorical device than an actual phenomenon.

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Finally! A Global (Data) Language!

October 25, 2017

Trying to get global consensus on anything is nearly impossible. But in collaboration with a dynamic cohort of individuals and organizations, we've managed to develop a new manifesto with respect to the structure and sharing of data about global philanthropy that is valued across contexts. Meet the new Global Philanthropy Data Charter.

GDC_infographic
Philanthropy, and more broadly, civil society, play a large and increasingly visible role in solving complex societal issues around the globe. Over the last twenty years, as private wealth in countries around the world has exploded, we've seen a significant increase in giving by institutions and individuals. At the same time, technology adoption and economic populism have emerged from the shadows while foreign aid to the least developed countries has declined. Established in 2000, the Millennium Development Goals paved the way, in 2015, for the multi-stakeholder Sustainable Development Goals. Each step in this evolution was guided by data. Good data? Not always. But in our rapidly changing world, everyone must tell their own story — or risk having it told for them. The good news? Philanthropy has had to become more transparent, more accountable, and more effective. Rather than siloed efforts, maximizing impact based on smart giving and shared learning has become a collective world-wide aspiration.

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'Foundation Funding for U.S. Democracy': What Does the Data Say?

July 27, 2017

The following post is part of a year-long series here on PhilanTopic that addresses major themes related to the center's work: the use of data to understand and address important issues and challenges; the benefits of foundation transparency for donors, nonprofits/NGOs, and the broader public; the emergence of private philanthropy globally; the role of storytelling in conveying the critical work of philanthropy; and what it means, and looks like, to be an effective, high-functioning foundation, nonprofit, or changemaker in the twenty-first century. As always, we welcome your thoughts and feedback.

_____

It's no secret that many Americans are wondering whether our democracy is still working. The signs of dysfunction are everywhere — allegations of election tampering, voter suppression, and "fake news" comprise a continuous soundtrack accompanying distressingly low levels of electoral turnout, ever more bizarre examples of gerrymandering, and perpetual government gridlock.

Concerns about U.S. democracy are on the minds of America's philanthropic institutions as well. We know, of course, about the "dark money" that is being pumped into the electoral process in an attempt to influence the outcomes of U.S. elections. But what about the efforts of U.S. foundations who see the task of improving U.S. democracy as an important part of their philanthropic missions? (And which, unlike dark money vehicles, are required to disclose information about their giving in publicly available tax documents.)

In partnership with eight foundations, Foundation Center, in 2014, developed Foundation Funding for U.S. Democracy, a free online portal that tracks the efforts of foundations to improve American democracy. The tool provides detail on more than 35,000 relevant grants, with additional data added regularly. (Next week, I'll be providing a tour of this mapping platform via a free webinar. Register here.)

Since 2011, U.S. foundations have spent more than $3.7 billion on efforts to improve our democracy. Our data show that foundations are almost equally focused on the areas of encouraging civic participationimproving how government functions at the national, state, and local levels; and supporting an accountable and democratic media, with about  a third of their democracy-focused grant dollars going to each area. Campaigns and elections, the fourth major area of foundation funding for democracy, received about 10 percent of democracy-focused grant dollars. (This adds up to more than 100 percent, because some grants address multiple issues.)

US Democracy_funding by category_fb

These findings suggest that important issues need to be addressed in all four areas — civic participation, government, media, and campaigns and elections — and that focusing on any single area isn't sufficient to ensure a well-functioning democracy. Civic participation funders are focused, in particular, on encouraging issue-based participation by the public; government-focused funders prioritize grantmaking in the area of civil liberties and the rule of law; media-focused funders split their grantmaking almost equally on strengthening journalism and improving media access and policy; and those focused on campaigns and elections are primarily funding activities to educate voters and increase voter turnout.

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Do You Know?

November 04, 2013

(Larry McGill is vice president for research at the Foundation Center.)

FCStats_about_illustrationRaise your hand if you know the answer to the following question: How many grant dollars did U.S. foundations award in 2011? Anyone?

Let me ask a different question. If you needed to find the answer to that question, where would you go? Foundation Center? Good -- you're on the right track. So, you visit the Foundation Center's Web site and where do you look? Not sure? In the past, you weren't alone.

But all that has changed. Today, the Center is launching a new, free statistical tool called "Foundation Stats" at data.foundationcenter.org.

The answer to almost every basic statistical question about the collective work of U.S. foundations can be found there. You don't have to buy any publications and you don't have to dig through thousands of static data tables on the center's Web site. Plus, you can download and reuse, for free, any of the statistics you find in Foundation Stats. You can even grab these statistics using an application programming interface (API), if you're so inclined.

Usually, I'm not so shamelessly self-promotional, but I can barely contain my excitement about Foundation Stats. Let me tell you why.

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Quote of the Week

  • "[L]et me assert my firm belief that the only thing we have to fear is...fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance...."


    — Franklin D. Roosevelt, 32nd president of the United States

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