Nonprofits 2006 One Fabric, Different Threads
Study Objectives
Raise awareness of the industry and its place in Hawaii’s economy Create a “landscape map”
So organizations can “see where they fit and who their neighbors are”
Initiate discussions with different stakeholders Refine the capacity building efforts of HCF 2
Sources of Information
2006 & 2001 Hawaii Community Foundation State of the Industry surveys GuideStar/National Center for Charitable Statistics Focus groups & interviews with Executive Directors Secondary sources 3
State of the Nonprofit Industry
The nonprofit industry plays a significant role in Hawaii’s economy… Hawaii Expenses per Capita Total Expenses Percentage of GD/SP
California United States
$3,018
$5,824
$2,438
$4 billion
$84 billion
$687 billion
7.6%
6.3%
6.9%
Sources: Expenses - GuideStar 990 data Hawaii Gross State Product - US Dept of Commerce (2004) California & US GDP - SPEN Bay Area Nonprofit report California & US expenses per capita - SPEN Bay Area Nonprofit report Hawaii population - DBEDT data book
5
Also a major player in Hawaii’s workforce
The sector employs about 48,000 people
about 8% of the state’s workforce
Approximately $1.45 billion dollars in wages
about 7% of all wages paid in the state Source: 1997 & 2002 economic census, as well as bea.gov (Bureau for Economic Analysis) since census doesn’t include government and military jobs
6
Increase in number of nonprofits 6,000
5,188
5,000
27% increase
4,081 4,000 3,000
2,076 2,000
1,574 32% increase
1,000 0
2000
2001 Total Registered
2002
2003
2004
2005
Filed Tax Return (revenues greater than $25,000)
Source: National Center for Charitable Statistics
7
Increase primarily in # of organizations with revenues less than $100,000 2000 $1-5 million 13% $500,000999,999 9%
$100,000 499,999 26%
More than $5 million 7%
2005 Less than $100,000 45%
$1-5 million $500,00013% 999,999 7%
More than $5 million 6%
Less than $100,000 50%
$100,000 499,999 24%
Organizations filing a tax return, broken out by revenue levels Source: National Center for Charitable Statistics
8
The mix within the industry has stayed roughly the same
Religion Public, Related Societal 4% Benefit 10%
International, Foreign Affairs 2%
Human Services 30%
Unknown 7%
Arts, Culture, and Humanities 16%
Education 16%
Environment Health and Animals 9% 6%
Source: National Center for Charitable Statistics
9
Revenue increases‌ 5% increase
$5,000,000,000
$4,174,730,624
$4,500,000,000 $4,000,000,000 $3,500,000,000
32% increase
$3,000,000,000 $2,500,000,000 $2,000,000,000
$2,249,241,123
$1,500,000,000 $1,000,000,000 $500,000,000 $0 2000
2001
2002 Total Rev
2003
2004
2005 projected
Rev w/out largest
Source: National Center for Charitable Statistics
10
Increase in revenue has been mostly in Program Services and Contracts 70%
2001 2004
60%
60% 50%
43%
40%
34%
30% 20%
20% 16%
15% 7%
10%
4%
0% Contributions, Gifts, & Grants
Investment Income
Program Services and Contracts
Source: National Center for Charitable Statistics
Dues, Net Sales, & Other Income
11
Sources of revenue vary by size Small (<$200,000) (643 orgs) Net Special Event Revenue 3% Investment Income 1%
Dues, Assessments, Net Sales & Other Income 8%
Contributions, Gifts & Grants 63%
Medium ($200,000 - $1 million) (232 orgs) Investment Income 1% Program & Contract Revenue 32%
Dues, Net Special Event Assessments, Net Revenue Sales & Other 2% Income 2%
Contributions, Gifts & Grants 63%
Program & Contract Revenue 25%
Large ($1 to $50 million)(332 orgs) Investment Income 2%
Program & Contract Revenue 64%
Dues, Assessments, Net Sales & Other Income 3%
Extra Large (> $50 million)(only 14 orgs)
Contributions, Gifts & Grants 31% Investment Income 18%
Dues, Assessments, Net Sales & Other Income 13%
Contributions, Gifts & Grants 4%
Source: National Center for Charitable Statistics
Program & Contract Revenue 65%
12
Sources of revenue continues to vary significantly by sector Arts & Humanities (284 orgs) Contributions, Gifts, & Grants 52%
Dues, Net Sales, & Other Income * 16%
Program Services and Contracts Investment Income 2% 28%
Contributions, Gifts, & Grants 17%
Dues, Net Sales, & Other Income * 41%
Contributions, Gifts, & Grants 8%
Investment Income 12%
Program Services and Contracts 30%
Net Special Events Income 2%
Health (223 orgs) Dues, Net Sales, & Other Income * 6%
Education (274 orgs)
Investment Income 1%
Human Services (428 orgs) Program Services and Contracts 45%
Dues, Net Sales, & Other Income * 6%
Program Services and Contracts 85%
Investment Income 1%
Source: National Center for Charitable Statistics
Contributions, Gifts, & Grants 47%
Net Special Events Income 1%
13
Sources of revenue Environment & Animals (79) Program Services and Contracts 15% Investment Income 3%
Dues, Net Sales, & Other Income * 10%
Net Special Events Income 1%
(continued) Public & Societal Benefit (150) Investment Income 8%
Program Services and Contracts 12%
Dues, Net Sales, & Other Income * 2%
et Special Events Income 1%
Contributions, Gifts, & Grants 77%
Contributions, Gifts, & Grants 71%
International (36) Net Special Events Income 1%
Program Services and Contracts 9%
Dues, Net Sales, & Other Income * 1%
Religion Related (56) Contributions, Gifts, & Grants 88%
Contributions, Gifts, & Grants 51%
Dues, Net Sales, & Other Income * 28%
Investment Income 1%
Program Services and Contracts 18%
Investment Income 3%
Source: National Center for Charitable Statistics
14
Financial challenges similar to 2001 3.3 3.4
Insuffcient Funding
Cost/availability of space/offices
3.0 2.8 2.9
Cash Flow
2.7 2.9
Unable to meet demand for services
Compliance w/ regulations /best practices
2.1 1.6
Insufficient demand for services
2001
1.8 1
2
2006
3
4
average problem rating (1 = not a problem at all, 5 = a major problem)
Source: 2001 and 2006 Survey Results
15
Attracting effective board members and quality staff are still the largest human resource issues 2.6
Attracting effective board members
2.9 2.4
Difficulty attracting quality staff
2.8
Providing staff development
2.7
Difficulty attracting/retaining volunteers
2.7
Supportive, rewarding corporate culture
2.4 2001
1.9
High staff turnover
2006
2.2 1
2
average problem rating (1 = not a problem at all, 5 = a major problem)
Source: 2001 and 2006 Survey Results. Turnover is significantly higher in 2006
3
16
Use of technology has increased significantly in the past five years 72%
Easy access to the Internet
96% 54%
Com puterized accounting system
83% 38%
Operational Web site
77%
Com puterized database of contributors
33% 60% 31%
Database system s
60%
Offer online giving
23% 2001
12% 21%
MIS/Com puter technician 0%
25%
50%
75%
Source: 2001 and 2006 Survey Results. Significant increase in use of all technology
2006
100% 17
Increase in formal planning
32% 40%
Marketing, Outreach Operating agreem ents w ith other nonprofits
2001
2006
26% 45% 40% 45%
Fundraising
36%
Measurem ent of organizational progress
52% 56%
Strategic planning
69%
0%
25%
50%
Source: 2001 and 2006 Survey Results; Significant difference between 2001 and 2006 in all areas except fundraising
75%
100% 18
Three emerging themes for consideration
Diverse revenue mix of sectors create different challenges and pressures Depending on who you are, growth may not be the answer The competition for talent is heating up
19
Diverse revenue mix of sectors create different challenges and pressures Arts & Humanities
Education Contributions, Gifts, & Grants 52%
Dues, Net Sales, & Other Income * 16%
Program Services and Contracts Investment Income 2% 28%
Program Services and Contracts 85%
Investment Income 12%
Program Services and Contracts 30%
Net Special Events Income 2%
Health Dues, Net Sales, & Other Income * 6%
Contributions, Gifts, & Grants 17%
Dues, Net Sales, & Other Income * 41%
Human Services
Contributions, Gifts, & Grants 8%
Dues, Net Sales, & Other Income * 6%
Investment Income 1%
Program Services and Contracts 45%
Investment Income 1%
Source: National Center for Charitable Statistics
Contributions, Gifts, & Grants 47%
Net Special Events Income 1%
20
Revenue mix
(continued)
Environment & Animals Program Services and Contracts 15% Investment Income 3%
Public & Societal Benefit
Dues, Net Sales, & Other Income * 10%
Investment Income 8%
Net Special Events Income 1%
Dues, Net Sales, & Other Income * 2%
Contributions, Gifts, & Grants 77%
Net Special Events Income 1%
Contributions, Gifts, & Grants 71%
International Net Special Events Income 1%
Program Services and Contracts 12%
Program Services and Contracts 9%
Dues, Net Sales, & Other Income * 1%
Religion Related Contributions, Gifts, & Grants 88%
Contributions, Gifts, & Grants 51%
Dues, Net Sales, & Other Income * 28%
Investment Income 1%
Program Services and Contracts 18%
Investment Income 3%
Source: National Center for Charitable Statistics
21
Sources of revenue 70% 60% 50%
43%
40% 30% 20%
2001 2004
60%
34% 20% 16%
15% 7%
10%
4%
0% Contributions, Gifts, & Grants
Investment Income
Program Services and Contracts
Source: National Center for Charitable Statistics
Dues, Net Sales, & Other Income
22
State contracts for Health & Human Services have increased 18% between 2004 and 2006 $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $0 2004
2005
State contracts & Federal contracts issued through the State
2006 Est. Non-profit contracts
Source: State of Hawaii Office of Procurement Website Note: Not all State Contracts for Health & Human Services go to non-profits therefore SMS estimated that 80% of all contracts makes up the non-profit contracts line
23
From 2001-2004, revenue grew faster than the number of organizations except for small organizations 32% Large ($1M - $100M)
16%
47%
Medium ($250,000 to $1 M)
26% % change in revenue
Small (Less than $250,000)
0%
% change in # orgs
12% 30%
20%
40%
Source: National Center for Charitable Statistics
60%
24
Revenue challenges and opportunities
The numbers game
Many more nonprofits, largely small Growth in contributions not keeping pace Affect certain sectors more than others
Implications
Increase/diversify revenue segments Find creative means to contain expenses Are we reaching a carrying capacity issue? 25
Revenue challenges and opportunities
Revenue growth fueled by government
Program services and contracts and grants Mostly affecting the H/HS sectors
Implications
Efficiency/economies of scale important Changing mandates and short contracts make focused mission more difficult Infrastructure investment required 26
Depending on who you are, growth may not be the answer
Many organizations feel compelled to grow—Why?
Increase services and programs Strengthen financial condition Increase capacity by hiring staff Growth is an indicator of success
27
Different Organizational Characteristics
Small Organizations
Narrow mission ED – hands on Few or no paid employees Revenues more reliant on donations Outcomes easy to measure, but no funding to support
Large Organizations
Broader mission, some drift EDs more managerial Paid ED/Staff Revenues more reliant on program services & contracts Outcomes more difficult to measure, but required for funding 28
While most older organizations are large, there are still many long-lived small orgs 12%
1990-2006
33%
Year Org Established in Hawaii
54% 49%
1970-1989
41% 30% 18% 21%
1950-1969 10%
Pre 1950s
0%
Large ($1M - $49.9M)
20%
Medium ($200K - $999,999)
5% 6%
Small (under $200K)
10%
20%
30%
Source: 2006 Survey Results
40%
50%
60% 29
Financial Wellness Level
Small orgs have better indicators of financial wellness than medium size orgs High Large ($1M - $50M)
Medium ($200K-$1M)
Medium
Small (under $200K)
Low
0%
10%
20%
30%
Source: GuideStar and 2006 Survey results. Significant difference (p=0.000)
40%
50%
60%
30
Sources of revenue vary by size Small (<$200,000) (643) Net Special Event Revenue 3% Investment Income 1%
Dues, Assessments, Net Sales & Other Income 8%
Contributions, Gifts & Grants 63%
Medium ($200,000 - $1 million) (232) Investment Income 1% Program & Contract Revenue 32%
Dues, Net Special Event Assessments, Net Revenue Sales & Other 2% Income 2%
Contributions, Gifts & Grants 63%
Program & Contract Revenue 25%
Large ($1 to $50 million)(332) Investment Income 2%
Program & Contract Revenue 64%
Dues, Assessments, Net Sales & Other Income 3%
Contributions, Gifts & Grants 31%
Source: National Center for Charitable Statistics
31
Challenges of growth
Depending on the revenue source to fuel growth, it can stress organizational capacity, mission, systems, financial health, culture Implications
Be clear about benefits/outcomes Clear plan for investments and changes Think before you grow 32
The competition for talent is heating up 2.6
Attracting effective board members
2.9 2.4
Difficulty attracting quality staff
2.8
Providing staff development
2.7
Difficulty attracting/retaining volunteers
2.7
Supportive, rewarding corporate culture
2.4 2001
1.9
High staff turnover
2006
2.2 1
2
average problem rating (1 = not a problem at all, 5 = a major problem)
Source: 2001 and 2006 Survey Results. Turnover is significantly higher in 2006
3
33
Half of all nonprofit EDs are 55 years or older 12%
65 or older
38%
55-64
36%
45-54
13%
35-44
1%
25-34 18-24
0% 0%
10%
20%
Source: 2006 Survey Results
30%
40% 34
42% of Executive Directors expect to leave by the end of 2010 How long do you plan on staying in your current position? Don't know
24%
More than 5 years
35%
3-5 years
19%
1-2 years
16%
Less than one year
7%
0%
10% Source: 2006 Survey Results
20%
30%
40% 35
44% of organizations find it hard to attract effective board members Level of concern with attracting effective board members A major problem
14%
4
30%
3
17%
2
11%
Not a problem at all
28% 0%
10% Source: 2006 Survey Results
20%
30%
40% 36
The law of averages for boards
Number of board members: 13 Number of vacancies: 2-3 About half have term limits Length of term limits: 3-4 yrs Most current board members have served for 3-6 years
Source: 2006 Survey Results
37
Implications in the competition for talent
Retention as important as recruitment
Finding ways to increase tenure of leadership (staff and board)
New leadership will come from two sources
Younger, civic-minded individuals Baby boomers 38
Mahalo! Presentation available at: www.hawaiicommunityfoundation.org