Small Nonprofits Must Make Big Gains in 2012

Giving USA: The Annual Report on Philanthropy, issued recently by the Giving USA Foundation and its research partner, the Center on Philanthropy at Indiana University, is considered the most reliable and prominent resource for information about trends in charitable giving and announced that giving increased modestly last year.

Charitable giving in the United States increased in real dollars in 2011 by 4.0%, reflecting the second consecutive year of collective higher charitable support from individuals, corporations, foundations, and bequests, according to the annual landmark report that has tracked philanthropy for more than 50 years.

With the issue of the Report came some important highlights that reflect significant pressures facing the 1.1 million nonprofits and another 222,000 religious organizations across the U.S., including changes in behaviors by American donors of all types, especially individuals who collectively represent 88% of all giving.

The 2011 estimate of $298.42 billion represents growth from a re-stated figure of $286.91 billion given in 2010.

Giving USA: The Annual Report on Philanthropy has detailed annual estimated charitable contributions by Americans – and how they are used – since 1956, making it the longest-running study of its kind.

The Report does not show changes by any one organization or regions across the country; rather, it reflects total giving by 117 million households, approximately 12.4 million corporations, an estimated 99,000 estates, and approximately 76,000 foundations.

Among the highlights of the GUSA Report for 2011 are several critical observations that have likely relevance to small-to-medium-sized nonprofts. Most notably we observed the following trends and implications:

Giving to Religion

Giving to “houses of worship” in the U.S. remains the largest single category attracting donor support, but for the second consecutive year, this sector reflected a decline in both total dollars given and as a percentage of overall giving.

Giving to religion, making up 32% of all giving, declined by 1.7% in real dollars and 4.7% in inflation-adjusted dollars. This decline is attributed to a steady decline in religious affiliation across the country in all denominations.

Giving to International Issues

Giving by all sources to international organizations grew a remarkable 240% in current dollars, or 167.1% in inflation-adjusted dollars between 2001 and 2011, and 7.6% alone in 2011.

While there were no major international incidents in 2011 that garnered major support (excluding the Japanese tsunami), we suspect that very large donors, including the Gates Foundation, are still supporting international projects in substantial ways.

Giving to Education

Education, specifically support for colleges and universities, saw a 4.0% increase in giving, and it remains the second largest sector that donors support. Very large capital campaigns returned to college campus fundraising efforts in 2010 and 2011, and impacted this aspect of the nonprofit world.

Giving to Public-Society Benefit

Charitable support for traditional “umbrella organizations” increased by 4.0% in 2011. However, this category’s figures are clouded because once again GUSA included dollars attributed to donor advised funds as well as to United Ways and the Combined Federal Campaign into the overall calculation. Incoming funds to donor-advised fund administrators grew collectively 77% between 2010 and 2011.

Several other highlights from the GUSA 2011 Report include the following:

  1. Support for nonprofits via bequests increased 12.2% to an estimated $24.41 billion.
  2. Giving by foundations did increase 1.8%, however when adjusted for inflation giving by foundationsdeclined 1.3% in 2011.
  3. Giving by U.S. corporations and their foundations held steady at $14.55 billion.
  4. Giving to human services nonprofits rose an estimated 2.5% last year and is the third-highest amount ever recorded (behind 2008 and 2010)
  5. America’s charities face many challenges including increasing competition from more than 1.1 million nonprofits and an economy that is recovering far slower than we have witnessed following previous downturns.
  6. The “best” year for giving ever was 2007, when GUSA reported $309.76 billion in charitable support. The 2011 results are the closest that total giving has been to $300 billion since 2007.

The complete GUSA report as well as an executive summary is available now.

Adapted from an article featured on on June 19, 2012. 

2012 Update: Social Media and Nonprofits

You’re going to want to tweet this: in response to May’s “Question of the Month,” 24% of respondents claimed that social media was the best marketing tool for nonprofits. “Word of mouth” and the organization’s own website tied for first place, each netting 29% of respondents’ votes. surprisingly, some nonprofits are turning to social media as a means to disseminate their missions, visions, and values. The Fourth Annual Nonprofit Social Network Benchmark Report reported that in 2012, 93% of U.S. nonprofit organizations have a presence on one or more social networking websites.

However, there are still many organizations that have no social media strategy to speak of. The answers to this month’s question reflect a number of trends we’ve noticed developing over the last few years:

  1. All nonprofits do not yet understand the power of social media.
  2. The priority placed on social media as a “connection tool” is sporadic and seems to  be used primarily by very large and very small nonprofits.
  3. Creativity relating to marketing remains very traditional. Even though everyone has a website and therefore the capability to connect with users via an interactive interface, many don’t.
  4. Impersonal marketing still dominates the landscape, and nonprofits suffer for it.

Over the last five years, many nonprofits have transitioned to using Facebook and Twitter as ways to build a donor base and market themselves to supporters. However, there is still a great deal to be learned about just how effective a tool Facebook and Twitter can be.

An astounding 98% of respondents to the Report indicated they have a presence on Facebook, offering many potential opportunities for fundraising. However, 53% of respondents said that they were NOT using Facebook for fundraising at all. 

Some organizations are opting for a modified social media fundraising approach. According to Robert Strickler, the Donor Pages Product Manager at DonorPerfect Software, an increasing amount of nonprofits are turning to what he calls a “donor driven” approach.

His firm has developed Donor Pages, an online “friend to friend portal” where an organization recruits its supporters to set up a website where they can reach out to family, friends, and colleagues and personally ask them to donate.

“Using a page like this gives ownership to the online social fundraising experience,” says Strickler. “We find that this tends to be effective because it operates on a more personal level.”

Just like fundraising through direct mail, meetings or phone calls, the same rules of stewardship are just as critical to online fundraising. Connection – genuine, heartfelt, and personal – is the key to fundraising success.

Adapted from “Social Media and Jewish Nonprofits: Missing in Action?” originally published on February 15, 2012 via eJewishPhilanthropy

Putting Transparency & Accountability Into Practice

Many members of the American Jewish community have felt a strong connection to Israel. For years, they obligingly gave to Israel-based organizations consistently and heartily…but times are changing.

Time has demonstrated that trends in America’s nonprofit sector arrive in Israel only a few years later. Therefore, it is only a matter of time before Israeli donors see the logic and match their American counterparts’ demands.

Hundreds of Israel-focused nonprofit organizations represented in the U.S. seek charitable support from American donors every year. Why do some receive it…and others don’t?

Nonprofit experts Shuey Fogel and EHL Consulting’s Avrum D. Lapin will join together to discuss the “new normal” in the American fundraising arena for Israel-based organizations, highlighting generational shifts that have critical implications for nonprofit leaders as they try to raise funds in Israel and abroad.

Topics will include:

  • Transparency: How new donor expectations are changing the ways Israel-based nonprofits operate.
  • Accountability: What outcomes nonprofits must demonstrate to their supporters, and why today’s donors are more demanding than ever before.
  • Differentiation: Why nonprofits must communicate with clarity, and how best to make the mission stand out in a cluttered marketplace.

Adjusting to the “New Normal”
Putting Transparency and Accountability into Practice
Thursday, June 14th
9:15 – 11:30am
Talpiot, Jerusalem

This seminar is being offered free-of-charge.

For more information or to RSVP:

Hello, Cleveland!

Our recent article on religious denominations within the Jewish community was featured in yesterday’s edition of the Cleveland Jewish Times.

Read the article HERE.

Payments in Lieu of Taxes: Necessary Evil or Unfair Imposition?

Reposted from The Giving Institute Blog – May 23, 2012

Click HERE to download a PDF of this article. 

Today’s continued economic uncertainty has prompted bold actions by local governments as they struggle to secure necessary income while faced with substantial budget shortfalls, unpredictable tax revenues and critical services in dire need of funding. In this era of municipal belt-tightening, a rapidly growing number of local officials now look at previously untapped sources of revenue: nonprofit institutions.

Since Boston’s Mayor Thomas Menino first broached the issue several years ago, other communities – small, medium, and large – have followed suit and have turned to some of the country’s most significant nonprofits to augment the current tax base.

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This has become an unprecedented source of revenue as well as debate, especially as questions arise around the endowments and land holdings of some of the country’s largest nonprofits, with universities, museums, hospitals and other community resources being cajoled, negotiated with and sometimes even publicly assailed in the media.

This country’s 1.5 million nonprofit organizations represent and cater to a myriad of important causes and missions, and in return, they have traditionally received immunity from real estate taxes and other taxes through their federally-designated 501(c)(3) statuses. However, the notion that charitable institutions are off-limits to the tax collector has recently been cast off.

As a result, municipalities now see an opportunity to extract some much-needed revenue from nonprofit organizations. This phenomenon has been working its way across the U.S. under creatively phrased monikers such as “voluntary contributions” and “payments in lieu of taxes (PILOT).”

We first noticed the momentum towards acceptance of this new model about 15 months ago when we developed a then-controversial op-ed piece for the Giving Institute’s blog about PILOT.  Since then we have witnessed additional municipalities placing public pressures on their largest local nonprofit institutions. Most organizations are obliging, and only a few weeks ago a precedent-setting court decision undoubtedly propelled these controversial PILOT issues into the public arena.

The Mesivta Eitz Chaim of Bobov Inc. summer camp, located on 61 picturesque acres in Pike County, Pennsylvania, is operated by the Bobov Orthodox Jewish community in Brooklyn, New York. Between June and August, the camp provides classes and lectures on Orthodox Judaism as well as some recreational activities, though the camp is primarily designed as an educational institution.

Although the camp’s dining and recreational facilities are open to the public, camp representatives were unaware of neither Pike County residents using the facilities nor Pike County or Pennsylvania residents attending the camp.  As a nonprofit organization, the camp sought an exemption from real estate taxes, but Pike County and the local school district denied the camp’s request for an exemption based on the nature of the camp and its charitable status.

The Pennsylvania Supreme Court upheld two lower court rulings against the camp’s tax exemption. In order to receive an exemption, the Court held that a claimant must meet the definition of a “purely public charity” as measured in a 1985 Pennsylvania case (Hospital Utilization Project v. Commonwealth).

In Pennsylvania, an “institution of purely public charity” advances a charitable purpose, donates or renders gratuitously a substantial portion of its services, benefits a substantial and indefinite class of persons who are legitimate subjects of charity, relieves the government of some of its burden, and operates entirely free from private profit motive.

At issue in the case was whether the camp relieved the government of some burden, since the dining and recreation facilities were open to the public and the camp’s soccer fields, located outside of the camp’s gates, were used on occasion by the public. The Court affirmed that the occasional use of recreational facilities was insufficient to relieve Pike County’s government of some of its burden and made the camp’s property taxable.

This decision has the potential to be very important, especially in this challenging economic environment when many municipalities are cash-strapped. The implications from the point of view of the nonprofit are that local governments may look to charitable organizations as revenue sources. Furthermore, nonprofits that balk at payments in lieu of taxes may face a likely possibility that the municipality could challenge its nonprofit status, and possibly revoke it.

Here’s an overview of where PILOT programs are especially active:

Boston, Massachusetts

Boston has become the clear leader in implementing PILOT programs, collecting almost $17 million annually from a variety of cultural, educational and medical institutions, with annual payments ranging from a few hundred dollars from a VFW Post to millions from hospitals and universities. In 2010, 36 nonprofits provided “voluntary tax” payments to the city.

New guidelines promulgated by Mayor Menino’s PILOT Task Force increased the number of nonprofits asked to contribute and pushed nonprofit payments up by 24%. Boston University and other large landholders have “volunteered” payments for municipal services approximating 25% of what they would pay if they were a for-profit entity.

Chicago, Illinois

Chicago has slashed critical city services amounting to $417 million. Colleges, universities and hospitals are being approached, although organizations of all sizes are affected.

One prominent example is the 20-member nonprofit Austin Green Team. Since 1989, the Austin Green Team has maintained over one dozen gardens and two greenhouses in the Austin neighborhood on Chicago’s west side, providing beauty and a sense of serenity to more than 100,000 residents. Under the Mayor’s 2012 budget, the Austin Green Team’s water service fee waiver is proposed for revocation, threatening the viability and survival of the gardens. The proposed budget plan includes eliminating fee waivers for virtually every nonprofit organization in Chicago.

Worcester, Massachusetts

In 2011, Worcester Polytechnic Institute entered into a 25-year agreement with the city to annually fund $50,000 to maintain and improve a neighboring park. WPI had already been making annual PILOT contributions of $180,000, including a 2.5% increase built in annually over the next 25 years. WPI president Dennis Berkey described the payments as strengthening the quality of the relationship between the college and the city. WPI also received assurances from the city that for the next 25 years, no additional taxes would be levied on the institution. However, a more important aspect of the relationship was the positive publicity lauded on the school for its support of the city.

Syracuse, New York

In 2011, Syracuse University began making $500,000 annual payments on a 5-year, $2.5 million pledge to the city of Syracuse. Responding to the pleas from the financially strapped city, University officials agreed to be the first nonprofit in Syracuse to make a voluntary payment after the City Council began exploring taxing some aspects of the University’s newly expanded properties. According to City Council, even as the University further shifts the burden of municipal services away from taxpayers, “It’s time for the University to kick in a little more to support these services.”

Providence, Rhode Island

Due to unprecedented financial problems, the Mayor of Providence initiated a program designed to pursue tax exempt institutions for a “failure to sacrifice.” The natural target was the city’s largest landowner, Brown University, who since 1764, was “freed and exempted from all taxes.”

Recent negotiations have yielded voluntary payments from Brown in the amount of $31.5 million over 11 years. Brown owns 200 buildings in Providence valued at over $1 billion in total, and if taxed, would pay the city $38 million annually. As Providence Mayor Angel Taveras summed it up, “every organization, including tax-exempt institutions, must share part of the burden of saving our city.”

Even with a slowly advancing economic outlook, the landscape has changed and nonprofits are unlikely to continue to benefit from their open-ended special tax exemption. With this in mind, land-owning nonprofit organizations should consider the following:

  1. Be prepared. Charitable organizations should not assume that their nonprofit status creates blanket immunity from all taxation. Houses of worship, community centers of all types, camps and other agencies owning larger parcels of land may be targeted for voluntary payments.
  1. Budget now for PILOT. Nonprofits should plan on including PILOT payments that might represent “reasonable” contributions to the municipality and tailor their budgets and programming accordingly.
  1. Get out in front of the issue and use it to your advantage. Appearing as a “good citizen” is important to nonprofits, especially those that are large landowners. Tailoring the PILOT to garner positive PR can strengthen an organization’s community image as well as possibly enable special consideration from the municipality later on. Nonprofits of all sizes should expect governments to ask them to step forward and contribute voluntary payments or pay usage fees to cover municipal services, including fire and police protection and other services.

What Do Donors REALLY Want? Information!

Reposted from eJewishPhilanthropy – May 21, 2012

Nonprofit leaders face tremendous pressures today: living, operating and succeeding in a competitive marketplace of ideas, programs and services presents innumerable challenges. Donors who are guided by a passion for certain aspects of an agency’s mission and vision might be unaware, or unconcerned, about the everyday deliverables the agency must produce to achieve certain goals. Keeping both supporters and constituents happy is often a delicate dance.

Nonprofit leaders must continuously upgrade and strengthen their abilities to translate their mission into a “selling proposition” for a variety of interest groups. This selling proposition involves creating a case for support that clearly communicates what the agency does, their goals, and the methodologies used to achieve these goals.

All of these complexities must then be translated into “everyday language” and communicated in the fundraising context to donors of all shapes and sizes, from national foundations to individual givers.

In today’s economy, customers drive the marketplace, and in the philanthropic world, donors drive the discussion around sustainable funding. The essential question then becomes, “What do donors want?”

What are their motivations to give, and what do they expect from the agencies they support and the staff who run them?

How are decisions made in the current giving climate, and what are the “deal breakers” today?

We thought that it would be most helpful to address these issues through questions that are often raised during our interactions with donors across North America. Let us predicate this conversation with two basic assumptions about why people give:

  • They care about the person making the “ask.” Despite advances in technology and the way people give to agencies (text to give, online fundraising websites, etc.) the dictum “people give to people” is still as true as ever.
  • They care about the impact of their gift. The vision of the organization and the resulting impact of the contribution are critical to encouraging a donor to make a gift. The difference that the gift will make in the lives of people, the life of the community and in the life of the donor remains essential parts of the “selling proposition.”

Now, let’s move onto the top three questions we receive as fundraising consultants.

DONOR QUESTION #1: Do you have a Business Plan?

We first heard this question more than ten years ago during a meeting with a prospective major donor to a prominent Jewish arts group in New York City. Nowadays the question seems intuitive enough, yet the organization’s Artistic Director who was leading the meeting was taken aback.

“Well, we have a budget,” she responded.

“I’m not looking for a budget,” the prospect responded. “I want to know that my investment will not be swallowed up because the organization – as much as I love what you do – won’t exist five years from now. Show me that you believe and can demonstrate that you will be around and in good health and I will make the gift that you are asking for.”

SOLUTION #1: Be prepared with current facts and long-term vision.

Be ready with the facts: your nonprofit is a business with a “selling proposition” that provides demonstrable benefits within your community. Know what those benefits are and how they will change over time. Luckily for our example organization, the Director had considered the long-term viability of the mission and vision and was able to communicate it to the donor, who then made a significant gift.

It is essential for nonprofit leaders to consider the long-term vision for your nonprofit: where it is today, where it will in five years, and in ten years. This long-term vision (which will often include grand plans such as new programs, services, and resources) will inspire and motivate your donors.

DONOR QUESTION #2: Why does it take so long to understand what you do?

“It is like I have ADD sometimes: I cannot listen to long explanations,” complained a leading benefactor to a growing Israel-based organization. This individual, a successful entrepreneur and philanthropist, made a good point.

In today’s fast-paced and hyper-competitive world driven by smart-phones, tablets, and the demand for instantaneous responses and results, donors want the information now. In addition, loyalty is an almost-dying commodity; unlike in decades past when someone picked one cause and stayed with it for a lifetime, today’s donors spread themselves around.

SOLUTION #2: Make your point quickly and use varied communication channels.

Modern nonprofits needs to be deft and nimble, framing their”selling proposition” in small, understandable bites through a variety of communication channels. Create an “elevator speech,” no longer than 30 seconds, that explains your organization’s mission, vision, and deliverables, and distribute it to your executive staff, Board of Directors, and leading donors. Utilize online tools, such as Facebook and Twitter, as well as traditional media like newsletters, press releases, and direct mail.

You must always be ready to make your case quickly, because donors who notice that you are slow to respond to their interests might move on to the person or organization that best fills that philanthropic vacuum with easily digestible information.

DONOR QUESTION #3: I cannot ask my friends for money; can’t you just do it for me?

This is the question we most often receive from leading donors and Board members. For example, a committed Board member of a Jewish day school was recently approached to set up meetings with his contacts for the head of the school, who would then present the school’s “selling proposition” and hopefully engage these prospects as donors. The Board member was devoted and generous with his contacts but would not attend a prospect meeting with a contact he knew personally.

“Just tell him I said he should give,” the Board member offered. “If he hears that, and knows that I am also supportive, then he will give.”

“Come with us,” we implored him, knowing the power of personal connection. “We will help you prepare and role play for the meeting. Tell him yourself how much you support this cause, and he will be moved and surely respond.”

“I cannot ask my friends for money,” he lamented. “What if they say no?”

“He agreed to a meeting and knew why we requested the meeting. If he was going to say no, he would have done so already,” we advised.

We went to the meeting without the Board member and made our presentation.

“I really like what I am hearing and am interested in supporting the school,” the prospective donor replied, “but I really need to speak with my friend who set this up to know why he’s giving and how much before I’ll give you a final answer.”

SOLUTION #3: Conquer your fear of the “ask.”

So many leading donors do not want to ask their contacts to support their favorite charity. What drives this phenomenon? Fear! Leading donors are afraid that if they ask friends for money, these friends might then turn around and ask them for money. That sometimes happens, but is typically for a good cause, and should not be considered reason enough to NOT ask.

Secondly, leading donors fear of losing a friend when they ask for money. In our 21 years of consulting, this has never happened. Strong prospect research eliminates candidates who do not want to give, so that by the time a leading donor asks his/her friend to help support a cause, the answer is always yes. The amount varies, and sometimes it takes more than one ask, but at EHL Consulting we have never seen a friendship dissolve because of this situation.

Remember, the mission and not the market drives the donor, so know WHY your agency is in business and be clear and concise in how you communicate your “selling proposition” to your stakeholders. Use ALL of the tools that you have at your disposal … from online marketing to far-reaching contacts of your Board members and agency leadership. They all have their role in helping communicate long-term vision.

Also, don’t be afraid to ask others to support your passions. The real reason a donor supports a worthwhile cause is because he/she receives a formal request. Finally, if you want to close a major gift, take a deep breath and meet face to face.

Don’t rely on technology to do what humans do best.

21 Years…and Still Going Strong!

As The EHL Consulting Group enters our third decade as a firm, it’s encouraging to see not only how much we’ve grown, but also how much the nonprofit sector has matured and evolved as well. Both domestic and international nonprofit organizations have changed markedly since the early 1990’s . . . in terms of the numbers of agencies, the levels of sophistication, the work required to attract significant philanthropic support, and the amount of transparency that donors demand.

Helping so many different nonprofits in so many different ways has been – and continues to be – meaningful beyond expectations, and has made our work at EHL Consulting an effort that has been rewarding personally and professionally. 

As a longstanding member firm of the Giving Institute, EHL Consulting abides by a strong code of ethics that ensures our clients are treated with respect, and that their campaigns are always honest, heartfelt, and powerful. Working closely with enthusiastic and devoted men and women from all walks of life and from all parts of North America and elsewhere motivates us to keep improving our services and hopefully make a positive difference in the world at large.

We have seen the philanthropic marketplace grow and strengthen remarkably over the past 21 years. From a “slap on the back” network of unseen agreements and elite charitable circles, it has matured into a sophisticated, more scientific, accountable and increasingly transparent (though not enough) environment. Giving is now a $300+ billion dollar industry, accelerated by committed professionals with a drive to achieve substantial, measureable results.

The fact remains, however, that with all of the tools and the science, the real work is still built around relationships and connections with people. Giving is an act of passion, not a business transaction, and the connections between people are, and will always remain, the driving force.

Successful organizations know that connections are key, and always work hard to cultivate those personal bonds. Those who rely on technology and “arm’s length” communication will be forever doomed to struggle with difficulty. And besides, connecting with people is far more fun!

Our team at EHL Consulting is very optimistic about the future of philanthropy and we look forward to ever greater growth and productivity in the months and years to come. Thank you to all of our past and present clients for their hard work, enthusiasm, and dedication. For all of you who we have not worked with yet…we hope to meet you soon!

With gratitude,

Robert I. Evans, Founder & Managing Director

Avrum D. Lapin, Director & Principal